California enters fiscal year without budget deal

SAN FRANCISCO, July 1 (Reuters) - California's lawmakers failed to agree on a balanced budget by the start of its new fiscal year on Wednesday morning, clearing the way to suspend payments owed to the state's vendors and local agencies, who instead will get "IOU" notes promising payment.

Democrats who control the legislature could not convince Republicans late on Tuesday night to back their plans to tackle a $24.3 billion budget shortfall or a stopgap effort to avoid issuing the IOUs. The two sides agree on the need for spending cuts but are split over whether to raise taxes. (Reporting by Jim Christie; Editing by Eric Walsh)