Calif. may use promissory notes

SACRAMENTO, Jan. 7 (UPI) -- California taxpayers may have to wait for their state tax refunds as Gov. Arnold Schwarzenegger and legislative Democrats continue to wrangle over the budget.

Democratic leaders announced Tuesday that negotiations with the governor were stalled, the Los Angeles Times reported. They were trying to reach agreement on how to deal with a $41.6 billion shortfall.

The state treasury has enough cash on hand to keep going for less than a month.

John Chiang, the state comptroller, said that California might have to start issuing promissory notes to pay its bills and to those expecting student grants and tax refunds. That could begin Feb. 1.

"We have not made any decision about deferring payments or using IOUs, but they are possibilities if the governor and Legislature don't come to some agreement soon," Hallye Jordan, a spokeswoman for the comptroller, said Tuesday.

California has used promissory notes once since the 1930s, in 1992 when Republican Gov. Pete Wilson and Democrats in the Legislature battled over the budget for almost three months.