California to issue IOUs after missing budget deadline; muni bond rating at risk

Beginning tomorrow, California will issue IOUs to elderly, disabled and welfare recipients who are due checks because the governor and the legislature failed to agree on a spending plan before the state's budget year begins today.

Treasurer Bill Lockyer said California won't default on any bonds, which have claims second only to schools. Schwarzenegger's administration forecasts that the state will spend $4.5 billion on debt service this year, but only $16 million is due in July.