The California IOUs are coming...

We're back in California for a couple of days and, having caught a few minutes of the local news from Sacramento a short time ago, there appears to be little progress being made in the effort to avoid state issuance of IOUs in the days ahead.

The local paper carries news that the last day of the fiscal year should be quite an interesting one in the state capital, with each passing hour the odds increasing that the IOU man cometh.

Both houses likely will be in session all day and into the evening, but look for the real action at the negotiating table in the Governor's Office.

A key issue is $3.3 billion in budget savings that have to be approved by midnight -- in the current fiscal year -- or will be lost forever. Democrats are pushing the cuts to schools and redevelopment agencies to be approved by midnight, but the GOP and the governor want a full package before signing off.

The 1992 version of this melodrama ended badly, with drunken shouting, a fistfight, and a mysteriously stopped clock in the Assembly. Ultimately, the production ran all summer, with IOUs, court fights and rock-bottom performance ratings for politicians of all stripes.

Maybe someone will do the state a favor and roll a hand-grenade into the governor's office and a new group of "leaders" can begin the budget process anew.

Too harsh? Probably.

But, it seems clear that nearly all lawmakers in California are hopelessly out of touch with reality these days, many of them likely viewing the recent economic downturn as being just a temporary setback in what is seen as a birthright of ever-rising real estate prices, the absence of which makes the state, basically, ungovernable.

The idea that an Obama bailout might also materialize, despite recent assurances to the contrary, is no doubt making the sense of urgency a bit less than it might otherwise be.

The San Francisco Chronicle files this report of no progress being made in the stalemate.

Despite a deadline looming tonight, Gov. Arnold Schwarzenegger and the Legislature were at a loss Monday over how to close the state's massive deficit, and there were no signs a compromise would be reached soon.

If no plan is adopted by 12:01 a.m. Wednesday, the state plans to issue IOUs to contractors, vendors, local governments and taxpayers expecting refunds beginning Thursday. The governor plans to force 220,000 state workers to take a third unpaid day off beginning in July; and the state will forfeit more than $3 billion in budget savings through cuts to education that had to be made in the fiscal year ending today.

Before the Legislature adjourned late Monday, Democratic leaders had scrambled to pass a plan to solve the impending insolvency of the Golden State, but the governor fired back, insisting he would not support their budget bills because they included taxes and not enough spending reductions to close the $24.3 billion deficit through June 2010.

"I will veto any majority-vote tax increase bill that punishes taxpayers for Sacramento's failure to live within its means," Schwarzenegger said Monday.

Since the state has had to issue IOUs before (during the 1990s housing bust, by no small coincidence), it seems unlikely that the embarrassment of having to do so again will be any deterrent this time around.