If the stigma of issuing IOUs triggers a budget deal in the coming days, Gov. Arnold Schwarzenegger might find redemption in his strategy of quashing a stopgap solution that would have avoided those non-cash payments.

But if no budget deal emerges soon, Schwarzenegger will have helped saddle the state with a lower credit rating and have nothing to show for it.

The state plans to begin paying local governments, businesses and taxpayers with IOUs formally called registered warrants. The move will hurt the state’s already dismal credit rating and incur high interest costs, all the while highlighting California’s fiscal failure.

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