No surprise either. State lawmakers from both parties turned down each others' budget proposals, which means that California is at an impasse on how to close a $19.1 billion deficit. Same old story: Republicans want to slash $12.4 billion in spending. Democrats propose $5.9 billion in higher levies combined with spending cuts. From Bloomberg:

"Why they put them up for a vote, nobody knows," Schwarzenegger said today at a meeting of the San Francisco Chamber of Commerce. "After they go through this Kabuki, they, the Democrats and Republicans, will come back into the office and the negotiations will continue." The extra yield investors demand to own 10-year California bonds stood at 123 basis points above those of AAA rated municipal securities today, a one-month high, according to Bloomberg Fair Value Index data. That's still less than the 171 basis-point spread the bonds reached on July 1, 2009, just before the state began issuing IOUs amid a similar budget standoff. A basis point is 0.01 percentage point.

Barring some unexpected breakthrough, it's looking like we'll see IOUs once again.