SACRAMENTO, Calif. – More than two dozen credit unions announced they will accept the registered warrants, or IOUs, being issued by the state which continues at impasse on reaching a spending plan.
The state has announced that they will be issuing Registered Warrants for payment to private businesses (vendors), local governments, taxpayers receiving income tax refunds, and owners of unclaimed property. A registered warrant is a promise to pay, or an IOU, that is issued by the state when there are not enough funds to pay all of its general fund obligations.
"While we do not know what steps the state will need to take to meet its obligations, we want to reassure our Members that the credit union is here to help them get through this difficult time," said Rudy Hanley, president of SchoolsFirst FCU, which will honor and accept warrants for immediate credit to members’ accounts.
Among the other credit union participants are: The Golden 1 CU, Travis CU, Yolo FCU, San Francisco FCU, Community First CU, Provident CY, SRI FCU, Kaiperm Diablo FCU, Contra Costa FCU and Chabot FCU.
The state will pay an annualized 3.75% tax-free rate of interest on the IOUs until it redeems them.
The 3.75% is comparable to what California paid when it issued short-term notes in mid-October, near the height of the global financial crisis. It sold notes maturing in May 2009 at 3.75 percent and in June 2009 at 4.25 percent.
The first batch of 27,000 IOUs worth $53 million were mailed Thursday, mostly to residents owed tax refunds, the Controller’s Office said. By the end of July, Controller John Chiang estimates he will have issued more than $3 billion worth of IOUs, paying at least $20 million of interest that is exempt from federal and state income taxes.
