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State to pay IOUs earlier than expected

POSTED August 21, 2009 9:34 p.m.
Recipients of State-issued IOUs will be able to redeem them starting Sept. 4, instead of Oct. 2, following the Pooled Money Investment Board's unanimous vote Friday to set the earlier redemption date. State Treasurer Bill Lockyer chairs the PMIB, which also is comprised of the State Controller and State Director of Finance.
To help pay off the IOUs, Lockyer will sell $1.5 billion of short-term Revenue Anticipation Notes to J.P. Morgan Chase next week, according to the State Treaurer’s office. Lockyer plans to pay off the "interim" RANs in mid-September, when he goes into the market to sell $10.5 billion of RANs.  Those notes also will be used to meet the State's cash-flow needs through the remainder of 2009-10.
State Controller John Chiang recommended the PMIB move up the redemption date. The Controller based the recommendation on his office's stress-testing of cash-flow projections developed by the Department of Finance after the Governor and Legislature adopted a plan to close a $24 billion budget shortfall last month.  
With the State facing a severe cash-flow shortage, the Controller's Office was forced to start issuing IOUs on July 2 to local governments, individuals and businesses. Through Aug. 20, the State had issued 386,000 IOUs totaling $2.15 billion, according to the Controller's Office.
Lockyer's office redeems IOUs, formally known as registered warrants.  Holders of IOUs can redeem them via mail, or in person at the State Treasurer's Office in Sacramento. The mailing address is: State Treasurer’s Office, Attn: Registered Warrant Desk, 915 Capitol Mall, Sacramento, CA 95814. The STO will redeem IOUs in person at the same address. The walk-in office hours will be 8 a.m. to 4 p.m. Monday through Friday. IOU holders who want to redeem via mail can send their IOUs to the STO before Sept. 4.
Holders who redeem IOUs in person will get their money on the spot. Those who redeem via mail can expect their check within a week to 10 days.

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