Video Transcript:

GLORIA PENNER (Host): The state began issuing IOUs last week to businesses and agencies throughout the state and many of those businesses in San Diego are trying to figure out how they're going to pay their bills with IOUs. One area of concern for many is the impact the state's budget crisis will have on local social services and health care delivery. So we put Gary Rotto, health policy director for the Council of Community Clinics on the record about how the IOUs will affect their 102 clinics in San Diego and Imperial Counties and the people they serve.

GARY ROTTO (Council of Community Clinics): Well what they're going to have to look at if the IOUs are not accepted if they're not able to redeem those and if they do have to wait until October for full reimbursement. They're going to have to look at their financial situation is. Are there reserves that they can depend upon? The clinics work on a very narrow margin, one to two percent in most cases that goes into reserve, and as non-profits just get reinvested right back into the institution and right back into the community to provide the services. Will they have to tap lines of credit? Even if they have lines of credit, as we know right now, credit markets are very hard to penetrate if you don't have a line of credit. And they're going to have to go from there to then look at what are their management plans and services. About 70 percent of any clinic's budget is spent on direct services, direct labor. Your doctors, your nurse practitioners, your other folks that are working directly with the public and directly with patients. They have to start to evaluate. Are positions kept open longer? Are clinic hours cut back? We saw last fall with Borrego Health Group that they were on the edge of whether they had to close clinics. We believe that as this goes on, and if this goes into September, October that you're going to see other clinics around the state that are in the same situation.

PENNER: So obviously, there is a risk to having this budget crisis drag on. What do you think the greatest risk is of this political stalemate in Sacramento?

KENT DAVY (North County Times): Well, I think the biggest stalemate is that it doesn't get resolved quickly enough. Experts are saying now that  perhapsthey could have a deal as late as mid-August. The problem is that not only do vendors like health agencies and other people with state contracts have in what to do with IOUs but you have push back against the IOUs. The big banks announced the day before yesterday that they would stop accepting them as of today. That's going to create another level of uncertainty as to what happened. On the other hand there is some indication that the SEC is willing to step in consider them as securities, start to try and regulate a market because a secondary market has been created, in fact of people going on and trading these, saying "If you'll discount the IOU I will buy it from you. 

PENNER: Well this represents a struggle in Sacramento. The struggle between Republicans and Democrats, between the Legislature and the governor. What's going on? Is this struggle just par for the course?

DAVY: Well it is par for California's course. Because of the polarized nature of politics in California, with a permanent Democratic Majority that is principally - arguably - captive of the public service unions, and a minority entrenched, minority Republicans that is ideologically hard to the right, there isn't any middle ground for them to come to. Each serves its own constituency, and each is put back in office by that constituency.

PENNER: Are you experiencing the same kind of power struggle that basically paralyzes your government in Mexico, in Baja California?

VINCENTE CALDERON (TijuanaPress.com): I don't think we have seen this because the powers come directly from the political parties. They defend the interests of the political parties. We don't have the same diversity. I think it's more in the particular interests of any one of the legislators in the case of California. I think we've seen this happen quite often in California, not to this extreme that we have seen based on the economic stipulations that you are leaving here in California.

PENNER: But in this case we are talking about health care, not having too many other revenue services. Health care that helps not just the sick, but the elderly and the poor. Do you have that situation?

CALDERON: No, because we do not have as much programs as you have in this side of the border. And obviously here you are going to be affecting, those are the ones - well someone was saying, "Well, we need to take money away for the border because that is where we send our money." And that's the problem. We were dealing a situation like this.

PENNER: Well, we acknowledge the fact that the under served are not being served at all right now or will soon not be served. What about the rest of us? How are we affected by what's going on?

DAVY: Well, in a direct way, most of us probably escape. There are some sets of people who do get clipped by this. First of all, anybody with state contract is, in which they provide services or goods to the state, is getting paid in IOUs now. Secondly, the state is now coming back to those vendors and said, "Do us a deal and cut your cost by 15 percent." For those businesses who are on tight margins, 15 percent is not only all of that margin, it's a whole lot more than that.

PENNER: Yeah, it's a problem. And Kent, I want to thank you very much for being with us. Vincente, you'll stick around, we have a little bit more to talk about.

CALDERON: I will.