Government IOUs
Market Description
SecondMarket’s Government Warrant (IOU) Market facilitates transactions in registered warrants (IOUs) issued by the State of California. A number of states collectively face a $166 billion shortfall for fiscal year 2009*. As states attempt to work through budget issues, including by cutting expenses, raising taxes or issuing municipal securities to pay their bills, some are looking at issuing temporary warrants (IOUs) until sustainable funding options are reached.
On July 2, 2009, the State of California began paying local governments, tax refund recipients, vendors and others owed payments from the state with registered warrants, commonly called IOUs. Essentially, these IOUs represent a right to payment at a later date, while accruing interest at an annualized tax-free rate of 3.75%. With California IOU holders needing liquidity, SecondMarket has leveraged its technology and buyer base to create a centralized regulated marketplace, which gives holders the ability to list their IOUs in a competitive bidding environment.
*Center on Budget and Policy Priorities
Market News
Jul 29 2009
More Cuts for California Budget — www.nytimes.com
- Governor Schwarzenegger signed the new California budget into law on Tuesday morning, making a number of line-item vetoes to close the final $656 million shortfall
- As of Monday, California had issued 209,000 IOUs totaling $1.08 billion
Jul 22 2009
Calif. Budget Deal Doesn't End IOUs — www.usatoday.com
- The final details of the California budget are still being worked out and the state Treasurer and Controller both say it is too early to say whether or not the state will be able to stop issuing IOUs
- Among the issues still being debated is the potential early release of 27,000 state prisoners
Jul 20 2009
Final Details Left for Discussion in Calif. Budget — www.google.com
- California legislators appear optimistic that talks that are scheduled to resume Monday could resolve the budget deficit
- Issues still to be resolved include borrowing from local governments and repaying schools for money they lose during difficult economic times
