SAN FRANCISCO (reuters) -- ( courtesy CA State Controller)
General Information about Registered Warrants (IOUs)
1. What is a registered warrant?
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. Registered warrants bear interest and are redeemable by the State Treasury only when the General Fund has sufficient money. If the Legislature and Governor fail to enact budgetary solutions that provide enough cash for the State to pay all of its bills by July 2, the Controller will begin issuing registered warrants. Assuming there is adequate cash in the Treasury, those warrants may be redeemed on October 1, 2009. Both the issue and the maturity date will be printed on the warrant.
2. How do I know if I have a “registered” warrant, instead of a “regular” warrant?
Registered warrants will be identified with the word “REGISTERED” printed on the face of the warrant. It will also contain a special endorsement stamp on the reverse side.
3. Why is the State issuing registered warrants?
Without action by the Governor and Legislature to stave off a severe cash deficit of almost $3 billion at the end of July, and more than $3.5 billion in August, the Controller will be forced to issue individual registered warrants, also called IOUs, for many payments.
4. What is the difference between a registered warrant and a regular, or “normal” warrant?
A regular warrant is redeemable by the State Treasurer after it is issued. Registered warrants are negotiable instruments, but they will not be redeemed by the State Treasurer until the warrant matures on October 1, 2009, and the State has enough cash to cover the amount of the warrants.
Receiving and Redeeming Registered Warrants
5. When will I receive my registered warrant?
The registered warrants are issued like regular, or normal, warrants, and you will receive it on the same day you would have received a regular warrant.
6. Will my financial institution honor a registered warrant?
Recipients of registered warrants should contact their financial institution to determine whether they will honor the registered warrant before the redemption date.
7. What happens if my financial institution will not accept the registered warrant?
You may decide to open an account at another financial institution that will accept registered warrants, or you will have to hold the warrant until it matures on October 1, 2009.
8. Who will continue to receive regular, or “normal,” pay warrants?
The State Constitution mandates that education and debt service have priority status, and the Controller will work to ensure there are sufficient funds to continue to make those payments with regular warrants. The State Constitution, federal law and court order also require that State payroll, CalPERS, CalSTRS, In-Home Supportive Services and Medi-Cal providers continue to be paid with regular warrants.
9. Who will receive registered warrants?
The State in July will issue registered warrants, or IOUs, for all other payments, including those to private businesses, local governments, taxpayers receiving income tax refunds and owners of unclaimed property.
10. When will the State start issuing registered warrants?
If the Legislature and the Governor do not enact budget solutions that provide adequate cash to pay the State’s bills, registered warrants will be issued for payments that are not required to be made with a regular warrant beginning July 2, 2009.
11. How long will I have to hold on to my registered warrant?
Assuming there is sufficient cash in the State Treasury, registered warrants may be redeemed on October 1, 2009, the maturity date printed on the warrant.
12. How can I redeem the warrant?
When registered warrants are eligible for redemption, they can be “cashed in” at your financial institution, or presented in person or by mail to the State Treasurer’s Office at 915 Capitol Mall, Sacramento, CA 95814.
13. Will the State pay interest on the registered warrants?
The State will pay interest on warrants presented in person or by mail to the State Treasurer’s Office for redemption. Contact your financial institution for information about their policy on paying interest.
14. How much interest will the State pay?
The State’s Pooled Money Investment Board will set the interest rate for registered warrants at an emergency meeting on July 2. The State will pay that interest from the time the warrant is issued until it matures on October 1, 2009. As soon as the rate is set, this Web site will be updated with more information.
15. How can I get the interest?
You must hold the warrant until it is redeemable and present it in person or by mail to the State Treasurer’s Office at 915 Capitol Mall, Sacramento, CA 95814. Contact your financial institution for information about their policy on paying interest.
16. Is the interest earned on registered warrants tax free?
Yes, if the warrant is redeemed within one year of its maturity date, or before October 1, 2010, you will not have to pay taxes on the interest.
17. When will the State stop issuing the registered warrants?
Registered warrants will be issued until the State has sufficient cash to cover all of its bills and redeem outstanding IOUs. The ability to restore making all payments with regular warrants depends on when the Governor and the Legislature reach real resolutions that address the State’s long-term budget deficit and provide immediate cash in the State Treasury.
18. What if the State Legislature and Governor solve the State’s budget and cash problem after IOUs have started going out?
Once there is sufficient cash in the State Treasury and the Controller determines he may stop issuing IOUs, he will begin issuing regular warrants (checks). However, current law prohibits registered warrants that bear a maturity date from being redeemed earlier than that maturity date. Recipients of any IOUs that were issued with a maturity date of October 1, 2009, will not be able to redeem them before that date, and will continue to earn interest until October 1.
19. Will the State pay for any overdraft or late payment that occurs because I was issued a registered warrant and unable to redeem it for a period of time?
No.
Information on SSI/SSP, Unclaimed Property and Other Issues
20. I receive SSI/SSP payments each month. Will I receive an IOU for the State’s share?
No. The federal Social Security Administration has notified California that it will continue to pay in full both the federal Supplemental Security Income (SSI) and the State Supplementary Payment (SSP) to recipients in July and August. State officials will continue to work with the Social Security Administration to ensure California’s 1.2 million SSI/SSP recipients are not affected by IOUs.
21. Will my unemployment benefits or my disability insurance benefits be paid with an IOU?
No. Individuals receiving unemployment or disability payments will not receive registered warrants from the State. Those payments are made by the Employment Development Department, and are paid out of special funds, not the State’s depleted General Fund. For questions regarding unemployment benefits, please call 1-866-333-4606. For questions about disability insurance, please call 1-800-480-3287.
22. I currently am retired and receive retirement benefits. Will my monthly check be a registered warrant?
No. You will continue to be paid with regular warrants.
23. If I am the owner of property that has been sent to the State as “unclaimed,” will I be paid with a registered warrant?
If the property you are claiming is cash, such as bank accounts, certificates of deposit or money orders, it will be paid with an IOU. If you are the owner of contents in a safe deposit box, you will receive those contents; if the contents have been sold, as required by law, you will receive an IOU for the net proceeds of the sale. If your property is in the form of a security, you will receive the security. If it has been sold, as required by law, you will receive an IOU for the net proceeds of the sale. For specific questions about unclaimed property please call: 1-800-992-4647.
24. If I lose my registered warrant, can I get it replaced?
You should use the normal process for reporting lost warrants, which is contacting the agency that authorized the payment.
Additional Information, Including Telephone Help Lines
25. Who can I call to complain about this?
Contact the Governor or your local representative in the Senate and Assembly. The Governor’s telephone number is (916) 445-2841. A list of the California Assembly and Senate members and their contact information is available at www.leginfo.ca.gov.
26. Where can I go for more information?
For more information, you can call the State Controller's toll-free registered warrants assistance phone line at 1-866-267-4255. More information about redeeming registered warrants is available on the State Treasurer’s Web site at www.treasurer.ca.gov, and from the Treasurer’s registered warrants toll-free phone help line at 1-888-864-2762.
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