SACRAMENTO, Calif. — Deep in debt and short on cash, California on Thursday started churning out its first batch of IOUs in nearly two decades amid grumbles from bankers, growing public outrage and scant progress in negotiations to solve the state’s widening budget deficit.
The printing presses at 2 p.m. began to roll out the first of nearly 29,000 IOUs totaling more than $53 million, most of them destined for residents across the state still awaiting income-tax refunds.
The unusual press run came just hours after a panel of state finance officials set the interest rate for the IOUs at 3.75 percent for banks and other financial institutions that are willing to accept the vouchers. Some banks have agreed to honor the paper, including Bank of America and Wells Fargo, which will do so until July 10.
Wells Fargo’s agreement came with a nudge.
“We are reluctant to take this step, but are doing so to help our customers who are not at fault and with the expectation that the Legislature and governor will complete the budget within days,” Lisa Stevens, a bank executive in California, said.
The state’s three-member finance panel voted 2-to-1 to set the interest rate, with the governor’s representative on the board objecting, proposing instead a 1.5 percent rate, with a redemption date of June 2010.
Some smaller banks have not made a decision on accepting the IOUs.
Recipients who don’t have a bank that will cash them can redeem them Oct. 2, or sooner if the state fixes its broken budget.
