BUDGET WATCH : Cashing In an IOU

Imagine going to work every day, doing a good job and getting paid with an IOU. That is the fate of temporary and part-time state workers who are victims of the budget stalemate in Sacramento.

Some California banks plan to honor the state warrants, which are being issued in lieu of paychecks, tax refunds and other state payments for the first time since the Great Depression. The state has no choice but to pay its bills with the registered warrants until the budget crisis is resolved. But the warrants are certainly burdensome to those who must use them as a substitute for checks.

Some banks plan to cash the promissory notes only for regular customers. That restrictive policy is prompted in part by federal guidelines that require an increase in bank reserves to cover the warrants.

The federal caution derives from the savings and loan debacle, but the reserve requirement should be loosened temporarily in California. Whenever possible, banks should honor the IOUs as if they were cash--and not just for their regular or large account holders. The feds should help them do this.

State workers should not be penalized for a crisis not of their making. Most are dependent on their checks no matter how small. People can’t pay the rent or the telephone bill or for day care with an IOU.

Some banks plan to honor the warrants for the next 30 days. That should be much more than enough time for the governor and the Legislature to come to terms on a new budget, and to issue real checks.