Today's non-events comes on the heels of a serious attempt yesterday to give the state some breathing room from having to issue IOUs. As we noted last night Assembly Republicans joined with majority party Democrats to pass four measures but the Governor intervened with Senate Republicans who then blocked the measures on the Senate floor.

The Controller has stated that he will issue IOUs to schools counties and vendors on July 2nd if the Legislature and Governor don't pass the deferrals. Numerous press reports have suggested that this may impact CalWORKs and SSI grants. While it is true that the Controller may issue IOUs, the lack of payments should not affect the ability of counties or the federal government to make the payments.

In February, the Legislature suspended the requirement that the Controller issue state General Fund payments to counties for CalWORKs (AB 3X, Section 25) in July and August. The state took the same action last year and all CalWORKs payments were made by counties in a timely fashion. The suspension of the CalWORKs payments only relates to the state's portion of the funds but does not delay the payment of federal TANF blcok grant funds which provide the bulk of the funds for CalWORKs.

SSI payments are not suspended by AB 3X but in February, the Controller took a similar action on his own accord. Rather than issue an IOU, the state simply did not send a check to the Social Security Administration. SSA charges the state interest for failure to make the payment by the first of the month but still issues the full SSI check to recipients.

Though the state may face unprecedented fiscal challenges if it can not fix its cash flow problems, it does not appear that this will impact the payment of benefits.