State Budget Watch

On the state’s 24th day without a budget, these were the key developments in Sacramento:

THE PROBLEM

Legislators and Gov. Pete Wilson need to bridge a $10.7-billion gap between anticipated revenues and the amount it would take to continue all programs at their current levels, rebuild a reserve for emergencies and erase last year’s deficit. The state is short of cash and, without a budget for the fiscal year that began July 1, cannot borrow money to pay its bills. Instead, claims are being paid with IOUs, known as registered warrants.

IOUs

Issued Friday: 7,991, valued at $43 million.

Since July 1: 627,098 with a total value of $1.15 billion.

GOV. PETE WILSON

Took no official action on the budget. Met in his office with members of the Los Angeles City Council to discuss effort by legislators to reverse the state’s post-Proposition 13 bailout of local governments. The governor is scheduled to meet with Assembly Speaker Willie Brown (D-San Francisco) on Monday morning.

THE LEGISLATURE

Both the Senate and Assembly met but did not formally deal with budget issues. The joint conference committee on the budget met with Wilson Administration Finance Director Thomas Hayes. The houses are scheduled to reconvene Monday.

KEY DEVELOPMENTS

The Internal Revenue Service determined that interest earned on state-issued IOUs will be exempt from federal taxes, according to state Treasurer Kathleen Brown. The 5% annual interest paid to those who receive the registered warrants is tax-free for state purposes.