As posted prior, our individual states are one level of Sierpinski's Triangle. California IOU's mean that "the check's in the mail".
The BBC reports:
"It is the latest sign of the fiscal crisis that is spreading across the nation as the recession has had a dramatic effect on state spending. The state of California, with a GDP larger than most countries, has been among the hardest hit. On Wednesday, it said it would start issuing IOUs rather than cash payments to its creditors after the state legislature failed to agree a budget deal."
"The 50 US states play a much more important role in the US system than local authorities do in a European context. Together they make up about one-third of all public spending, or 10% of US GDP. Detroit is to close 23 schools and lay off 600 teachers. Most spending on schools, roads and welfare support is made at the state level. And the states also have an important constraint that the Federal government does not - they have nearly all passed laws in the past 20 years requiring them to have a balanced budget, and forbidding them to borrow money to pay for current spending."
"This has hit them very hard as the US recession starts to bite. States rely on sales taxes and property taxes at the local level to fund much of their spending. These revenues have plunged as the economy has gone into freefall. At the same time, they have faced higher bills to pay for the casualties of the recession. California dreaming California, the biggest and richest state in the US, has been particularly hard-hit. It has an unemployment rate of 11.5%, well above the US average, and has been at the centre of the sub-prime mortgage crisis, with more properties foreclosed than in any other state."
"Several of its biggest banks, including IndyMac, have been taken over by the federal government, and its manufacturing sector has been hard-hit by the crisis. It also has more poor people and immigrants than other states. So California faces a $26bn (£15bn) deficit on its general budget of $96bn. But it is not alone."
"According to the Center for Budget and Policy Priorities (CBPP), a Washington think tank, 48 of the 50 states are facing budget deficits this year, with a total deficit of $166bn, or 24% of their budgets. And it projects an aggregate deficit of $311bn by 2011."