State Controller John Chiang, who oversees California’s cash flow, warned state agencies Tuesday that unless Gov. Arnold Schwarzenegger and the Legislature agree on a budget, the state will have to begin issuing IOUs to some state employees and contractors as early as Feb. 1.

"Without immediate cash solutions or the ability to borrow billions from the strained financial markets, the state controller’s office has no choice but to pursue the deferral of potentially billions of dollars in payments and/or the issuance of … IOUs," Chiang wrote in a letter to state agencies.

Tuesday, Chiang was still in the hospital where he has been since he experienced chest pains Friday while visiting family in Texas. He was in good spirits while awaiting test results, said his spokeswoman, Hallye Jordan. Chiang is 46.

His letter is the latest chapter in the state’s prolonged fiscal crisis, which is estimated to result in a $40 billion deficit by June 2010. State financial officials including Chiang warned earlier this month that the state could run out of cash by the end of February.

Chiang’s letter alerted state agencies to make necessary changes in their computer systems to be able to process IOU payments.

Those likely to be first to receive IOUs are constitutional officers (the governor, lieutenant governor, treasurer, secretary of state and controller), lawmakers, judges, politically appointed staffers and vendors that do business with the state, Jordan said.

But the state’s cash crunch could also hold up income tax refunds. Chiang’s notice also asked the Franchise Tax Board to make necessary changes in that agency’s computers to be able to send IOUs to taxpayers.

Despite the impending meltdown of the state’s finances, Schwarzenegger and the Legislature on Tuesday seemed far from a compromise to fix the budget.

"Negotiations have not really progressed with the Legislature, and until they are willing to compromise, the negotiations will not progress," said Aaron McLear, a spokesman for Schwarzenegger.

For the past two weeks, the governor and Democratic legislative leaders have tried to find middle ground by making changes on an $18 billion package of cuts and taxes that the Legislature approved on Dec. 18 in a controversial simple-majority vote that didn’t require Republican support.

Schwarzenegger has said he would veto the package because it did not cut spending enough or go far enough to ease regulations, including environmental rules on building projects.

But Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said she thinks there has been progress in budget talks, adding that she is "hopeful that (the governor) will soon sign the $18 billion package that we passed nearly two weeks ago."

Alicia Trost, a spokeswoman for Senate President Pro Tem Darrell Steinberg, D-Sacramento, said insolvency "isn’t an option that any of us should want. The cash crisis we will be faced with in the coming days is our No. 1 motivation for reaching a deal with the governor as soon as possible."

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LOS ANGELES — More than 100,000 California health care professionals – including doctors, dentists and therapists – have not been given criminal background checks by the state boards that license them, according to a report published Tuesday.

The Department of Consumer Affairs identified about 104,000 professionals from various levels of medical care that have not been through fingerprint screening, the Los Angeles Times said.

An investigation in the fall by the newspaper and ProPublica, a nonprofit news organization, determined that about 195,000 of the state’s registered and vocational nurses had not been vetted for criminal backgrounds.

Since that investigation, Department of Consumer Affairs director Carrie Lopez has ordered the 20 health care boards and bureaus she oversees for the state to collect fingerprints from any licensee who has not been screened, and to ask them if they have been convicted of a crime since their last renewal as other states do.

"I have and fully intend to make use of all resources to ensure that we remove threats to the public safety and well-being of Californians," Lopez said in a written statement.

The state’s medical boards have had inconsistent rules for screening.

The Dental Bureau of California began asking for fingerprints in 1986 but have virtually none on file for any dentists first licensed before then, according to the board’s executive officer Cathleen Poncabare.

Julianne D’Angelo Fellmeth, administrative director of the Center for Public Interest Law at the University of San Diego said citizens depend on the state "to screen out those who are incompetent or impaired or dishonest or otherwise unqualified. If the state doesn’t do that for whatever reason, we’re all in trouble."

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Via CFP:

Politico reports:

It seemed like a typical day: a trip to the gym, back home for a shower and then a press conference followed by a day in the Chicago transition office. But last Thursday, President-elect Barack Obama was interviewed for two hours by two FBI agents and two federal prosecutors investigating charges that Illinois Gov. Rod Blagojevich had tried to sell off the Senate seat Obama vacated after winning the presidency.

Obama’s interview — and those with two of his top incoming White House lieutenants, Rahm Emanuel and Valerie Jarrett — only became public Tuesday, the day before Christmas Eve, when they were mentioned in passing in the transition’s five-page report intended to demonstrate that no ethical or legal lines had been crossed in their dealings with Blagojevich. None of the three have yet spoken to the press about the investigation since the report’s release.

Obama was interviewed for two hours but much of the MSM tells us he has nothing to do with Blagojevich or Operation Board Games! Just a reminder,here is an actual court document where Tony Rezko claims Fitzgerald’s prosecutors are looking for dirt on Obama and Blagojevich.Two hours is a long time to talk to the FBI when you claim you’ve had no contact with Blagojevich.Obama is the first black President-Elect but he’s also the first President-Elect to be questioned by the FBI about a major criminal investigation.Did the FBI ask Obama about this subject or was it just about Blagojevich?