The budget news out of Sacramento continues to worsen.

State officials braced for the possibility of delaying tax refunds to millions of Californians, along with student grants and payments to vendors, as the latest round of budget negotiations between Gov. Arnold Schwarzenegger and Democratic legislators collapsed.

State Controller John Chiang has said that as early as Feb. 1, his office may begin issuing promissory notes if lawmakers have not resolved the budget crisis. The state has done this only once since the Great Depression -- in 1992.

Among the first to get IOUs instead of payments would be business and individual taxpayers who are expecting refunds, local governments and recipients of grants from the California Student Aid Commission. Last year, more than 10 million taxpayers received state refunds totaling $8 billion.

Read the full story here.