California is paying bills in IOUs now. Fox News showed a woman today talking about her business supplying food to California prisons. She was paid by the State of California in an IOU, but, unfortunately for her, she can’t turn around and buy more food with those same IOUs. She can’t not provide food for the prisons because that would be a breach of contract and it could cause her to lose her business.
You can read more about California’s IOU program, as well as about how other states are having similar problems (including NY, PA and AZ) on Yahoo!