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How do California State IOU's Work

Updated on December 26, 2014

California IOU's

Ah beloved state. The state of my birth where I have grown up, lived, worked and raised my family. Palm trees, beautiful weather, golden suns, dreamy blue beaches...also being known as the broke state now issuing IOU's.


It's true. In the first time since 1992, California started printing and issuing IOU's last week.

IOU's are registered warrants that are a “promise to pay,” which are issued by the State when there are not enough funds to pay all of its General Fund obligations"

Who can receive IOU's in California?

Q: Who will get IOU's? (from the SF Gate, home of the SF Chronicle)

A: The state would use IOUs to pay:

-- Businesses that contract with the state.

-- People and businesses getting income tax refunds.

-- The Student Aid Commission, which makes Cal Grants to college students.

-- Social service programs including CalWORKS, mental health, drug and alcohol programs.

-- The state's portion of Supplemental Security Income and State Supplementary Payment programs for blind, disabled and low-income seniors. However, the federal government will pick up the state's unpaid share and the state will reimburse the federal government.

So basically, many vendors, needy families and social services program will now receive printed IOU's saying, "I'll pay you later,k?"

It's unimaginable, really.


Will the California IOU's be good?

So I won't go into all the reasons of how we got into this economic crisis here in California. As in business, there are usually many things lead which lead to financial failure (been there and done that) What I will say however, is that there is a whole lot of difference between a business going broke and a whole state going broke. One would imagine (or at least hope) that there would be many people overseeing and preventing a whole state from collapsing, which seems to be what is happening here. Many months ago I wrote about "Is California Going Bankrupt?" which at the time seemed likely. Now months later, it's not only looking likely but inevitable due to the fact that once again we have not only failed to pass a budget (again) but are over 26 billion dollars in debt.

Yes, you heard that right, 26 billion dollars. So what's a state to do when it's broke and can't pay it's bills? Issue IOU's and hope to heck that in a few months they can be honored.

(and yes you heard me say the word "hope" here. I would not want to "assume" at this point that these "IOU's" will be good in a few months. We can hope but we all know what the word "assume" means, right?

Will my bank honor the IOU?

So "assuming" that the state of California will be able to honor these IOU's, just when will one be able to trade in their IOU for real money? According to Jon Chiang, California state controller, the IOU's will be honored Oct. 2, 2009. Some banks may even "cash out" the IOU's before this, but it is up to the individual to check this out with their financial institution.

(from the California's state controllers website:)

* Will my financial institution honor a registered warrant?
Recipients of registered warrants should contact their financial institution to determine whether they will honor the registered warrant before the redemption date.

* What happens if my financial institution will not accept the registered warrant?
You may decide to open an account at another financial institution that will accept registered warrants, or you will have to hold the warrant until it matures on October 2, 2009.

So basically, you MAY be able to get the IOU cashed out for REAL money before the Oct.2 date. MAYBE. If I were you and I could, I would. Better cash in hand, right?

At the bottom of this hub you will find the official California state website links with FAQ's for more information on the California IOU's.

In summary, the question of the day for me would be this: If California does go bankrupt, will these IOU's be any good?

(Dorsi Diaz is a freelance writer/blogger who lives in the San Francisco Bay Area)

Poll on the California IOU's

What would you do if you got paid with an IOU?

See results


Submit a Comment

  • profile image

    tz 8 years ago

    marlin that's a load of shit. i just recently received one of these iou's from calworks and im not a low life though i haven't worked in years. but that's because i have been busy raising a son and when someone leaves you and you are on your own you have to do whatever it takes to make sure your child is taken care of. its not that simple to find a job in california right now

  • bearclawmedia profile image

    bearclawmedia 8 years ago from Mining Planet Earth

    You're wrong about this. I received an IOU from San Jose, city of back in 1982. This has been going on for a while.Oh ya never got paid.

  • blondepoet profile image

    blondepoet 8 years ago from australia

    Hi beautiful how is the hot hubbers thingy going I cant wait have been peeling my eyes for it. I am down with swine flu, can't wait to get to my old self, miss you all terribly . xoxoxox

  • profile image

    marlinsmith98 8 years ago

    if their weren't so many low lifes living there that don't work and expect the government to support these people california woulgn't be in this situation if you don't like it get off your lazy butt and go out and get a job of course now it is too late bcuz you low lifes have already bankrupted california you don't work you don't pay taxes and taxes pay for things no pay taxes go broke.So you stupid people blaming Arnold it is not him it is you low lifes that don't work and I'm not talking about people that have worked all their lifes and got laid off but now you can't even get help bcuz of the low lifes that have used up the money.Wake up people and stop blaming Arnold you put yourself in this position blame the low lifes not Arnold.

  • drpastorcarlotta profile image

    Pastor Dr. Carlotta Boles 8 years ago from BREAKOUT MINISTRIES, INC. KC

    GREAT HUB! Nothing surprise me anymore. ENDTIMES!!

  • cynthiaalise profile image

    cynthiaalise 8 years ago from Los Angeles

    I am one of the many that had their income cut during the crisis. I would like to say that they are taking the money from those that have the least. My parents are worried that there will not be enough in SocSec to pay for their retirement. I don't know what to do.


  • profile image

    Nina 8 years ago

    I work at US Bank, outside of CA....we've started rejecting the warrants for deposit. It's really sad to turn people away, when a person needs their $2500 check deposited to pay the bills!

  • profile image

    Power Journeyman Lineman 8 years ago

    Came to California 2 years ago after christmas from Montana to help in the winter storm up north "Grass Valley" is where we went to restore the power to some very great people. Worked extremly long hours away from our families, and to find out one year later the money that was taken in taxes would be awarded an IOU???? WHAT!!!! Next time the answer will be NO NO on Helping out if this is what they do. Cause ya can't tell me that they didn't know something about this, a year ago??????? No offense to the citizens up in northern CA you guys were awsome.

  • SweetiePie profile image

    SweetiePie 8 years ago from Southern California, USA

    My credit union published something about accepting IOUs in place of payments for loans for the next few months.

  • Kebennett1 profile image

    Kebennett1 8 years ago from San Bernardino County, California

    Maybe we should all pay our state taxes with an IOU and see if the state likes that!

  • Kebennett1 profile image

    Kebennett1 8 years ago from San Bernardino County, California

    I am n In Home Supportive Service worker (Caretaker) for two people. Now I am wondering since it is paid by the state controller if I am going to get an IOU. I just bought a car last month. They won't take an IUO from me!

  • Eric Graudins profile image

    Eric Graudins 8 years ago from Australia

    What a great precedent.

    Everyone could just issue their own IOU's for their mortgage payments, food, petrol.

    Or offer to barter their goods and services.

    Money has always been over-rated anyway :)

  • profile image

    sunshineninja 8 years ago

    RGraf is right. Makes you wonder about graft and corruption, doesn't it???

  • RGraf profile image

    Rebecca Graf 8 years ago from Wisconsin

    Wow! With all the tourism you would think that they would have the dough. Makes you wonder where all the money is going to.

  • LondonGirl profile image

    LondonGirl 8 years ago from London

    That's bizarre. If people are on benefits, what are they supposed to do between now and October?

  • profile image

    MSTRBK 8 years ago

    We can just send SDG&E and our mortgage co./property managers IOU's as well...I mean if the government can get away with it.

  • profile image

    Patty 8 years ago

    So if people can't cash the IOU's how are they going to pay bills like rent and electric and buy food to live??

  • ethel smith profile image

    Eileen Kersey 8 years ago from Kingston-Upon-Hull

    I am amazed.

  • profile image

    Nancy's Niche 8 years ago

    I’m dumbfounded by this action and in my lifetime, I have NEVER heard of a state doing this…Our leaders (local & federal) are out of control on many fronts…Time to replace them ALL!

  • ocbill profile image

    ocbill 8 years ago from hopefully somewhere peaceful and nice

    A few other well-known states are in deep in the red too. I heard one US state recently raised their state taxes to 11%. Arizona and Nebvada both are in a financial buget crisis as well. bad for state healthcare problemsand good for criminals as they get out early. So get ready, choices and places to go are few & far.

  • Montana Farm Girl profile image

    Montana Farm Girl 8 years ago from Northwestern Montana

    wow, grew up just about my entire life in Cali, and to see this now, is really horrible!!! what next?

  • Gypsy Willow profile image

    Gypsy Willow 8 years ago from Lake Tahoe Nevada USA , Wales UK and Taupo New Zealand

    Sad sad sad!