Golden State won't be able to meet its obligations to taxpayers, vendors and others until a budget deal is reached.
Running short of cash, California has started delaying $3.5 billion in payments to taxpayers, contractors, counties and social service agencies.
With the governor and state lawmakers locking horns on resolving California's budget crunch, the controller Monday halted checks covering these obligations so the state could continue funding its school system and making its debt payments.
The delay will inflict more pain on the already sorry condition of the Golden State, which is facing a $40 billion budget gap. People won't have tax refund money to spend, businesses won't get paid for their services and agencies won't have funds to help the needy until the budget situation is addressed.
Nearly $2 billion in personal state income tax refunds are being held up, according to state estimates. Last year, some two million Californians received refunds in February.
"People are going to be hurt starting today," said Garin Casaleggio, a spokesman for Controller John Chiang.
