Currently, the refunds are only being delayed, meaning, the State is not issuing IOUs instead of refunds. Yet. After the initial 30-day delay, the State Controller will determine whether the State will need to issue IOUs instead of refunds. If IOUs are to be issued, the State will issue paper IOU warrants to taxpayers, even if a taxpayer requested a direct deposit of the refund. The state typically cuts checks as it processes returns, but under state law, tax refunds don't have to be issued until May 30. This all comes down to the fact that the California tax payer has to wait and see if and when they will get the money owed to them.

Financial woes are in no way new to the golden state. California has had no money in its general fund for the past 17 months, and has been paying bills by borrowing from Wall Street and special internal funds. Some 257,400 jobs in California were lost in 2008, pushing the unemployment rate up to 9.3% in December, the fourth highest nationwide.

The state's fiscal troubles are derived largely from its heavy dependence on personal income taxes. This revenue stream dries up when recessions hit and unemployment soars. California also never fully recovered from the dot-com bust earlier this decade, which led to big budget problems at the time. So the state didn't have large reserves to fall back on when the bottom fell out of the economy.

So for now, there is nothing to do but wait...