Last week, State Controller John Chiang announced that the state will begin issuing registered warrants, commonly known as “IOUs,” on July 2 if a new state budget deal is not in place. Traditionally, the state has covered cash shortages through short-term borrowing. This year, however, a combination of the credit crunch on Wall Street and the state’s sagging credit rating has made that very difficult. Governor Schwarzenegger has also said that he will not allow any borrowing until a budget agreement is reached.

According to the controller’s office, this will not immediately affect Medi-Cal providers. Medi-Cal payments will continue until the state’s cash reserves are completely exhausted, which would come sometime in September. Healthy Families plans will also continue to receive payments from the state.

Physicians will receive IOUs, however, for services provided in the California Children’s Services, Child Health and Disability Prevention, and Genetically Handicapped Persons, and Expanded Access to Primary Care programs. Normal payments for these programs will begin after the new budget is in place.

The state will also delay payments for one week at the end of June so that those claims are paid out of the 2009-2010 fiscal year budget. This “check-write” delay will impact abortion services and Healthy Families, in addition to the programs listed above.

Contact: David Ford, 916/551-2554 or dford@cmanet.org.