"All other general fund payments will be paid with IOUs. These include payments to local governments for social services, private contractors, state vendors, income and corporate tax refunds, and payments for State operations including legislative per diem."
http://www.sco.ca.gov/eo_pressrel_5940.html
The state legislature is a joke and Arnold is worthless(for all those people who don't live here). Arnold was elected to not allow the legislature to pass these budgets year after year that rely on huge amounts of borrowing and tax increases. Yet, Arnold has been a HUGE failure, pretty much bending over to the democrats who have controlled the legislature for decades. The state just passed a $16 Billion tax increase a couple months ago and now their only solution to fix their overspending year after year is to raise more taxes. They don't seem to get it. CA is already the highest taxed state in the nation. The middle class and small business is moving out. The only people that are going to be remaining are the illegals and the rich.
The democrats who control the legislature know the law and that they need a 2/3 vote to pass a tax increase. They knew they wouldn't get it, yet the passed a budget with a simple majority vote basically violating the law. They also knew ahead of time that the governor would veto the budget, yet they wasted everyone's time and broke the law with their simple majority vote. They have one option and that is to live with their means and not spend more money than they have, but the problem is to do that they have to screw the unions that got them elected. That is why they will not cut spending, the budget has yet to be passed, and now people are getting IOU's.