California won't accept its own IOUs

Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors' federal class action claims the state is trying to balance its budget on their backs.

Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California "paid" her with an IOU that two banks refused to accept - yet she had to pay California sales tax on the so-called "sale" of the uniforms.

The class consists mostly of small business owners, many of whom rely on income from government contracts to keep afloat. They say California has used them as "suckers" as it looks for a way to bankroll its operations while avoiding its own financial obligations.

"Instead of seeking funds through proper channels, the State has created a nightmare," the class says. "Many of these businesses will not survive if they are required to wait until October 2009 to have these forced IOUs redeemed by the State."

The class claims the state is violating the Fifth and Fourteenth Amendments. It demands that California be ordered to honor its own IOUs, plus interest. They are represented by William Audet.

I guess the moral of the story will be, for many: Don't do business with the government. And then what? Could that mean that the Californian government will become completely non-functional?

What if no one wants to sell them anything anymore -- no office supplies, no services... how will they even keep their doors open? And what about the actual small-time government employees -- like post office employees -- are they being paid, or are they supposed to "get by" somehow until October as well? That would make some REALLY go postal, don't you think?

[edit on 7-8-2009 by sylvie]

What an awesome story... I mean what are those wacky Californians thinking... The very LEAST they could do for putting folks through the imposition of IOUs would be to accept them on a state level for Taxes and/or fines and other such governmental business transactions.

HA!

This is basically giving it in a bad way to the Californian people.

Man... I would not want to be a Californian politician right now....

ITs the Government what do you expect?????
No. 2

MessOnTheFED!

Now this should end up being a very interesting story to follow.

If the state won't take it's own IOU's as payment, then that must mean they aren't legal tender.

I wouldn't have accepted the IOU as payment I would have slapped a return to sender stamp on it and sent it back and followed right behind it another bill stating they owe this amount.

I hope these people win.

wow interesting find op. i bet arney and company are sweating bullets right now

whats next monopoly money

things are so upside down right now

If people stopped selling to the state, wouldn't the state just come in and seize what it needs? I wouldn't put it past them.