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California controller to suspend tax refunds, welfare checks
John Chiang announces that his office will suspend $3.7 billion in payments owed to Californians starting Feb. 1, as a result of the state's cash crisis. Student grants are also affected.

Reporting from Sacramento -- State Controller John Chiang announced today that his office would suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, as a result of the state's cash crisis.

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.

The controller said the suspended payments could be rolled into IOUs if California still lacked sufficient cash to pay its bills come March or April.

"I take this action with great reluctance," Chiang said at a news conference in his office. But he said that without action to close the deficit, "there is no way to make it through February unscathed."

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the aged, blind and disabled; and $13 million in grants for college students.