Final Note on California

California managed to “balance” the Budget. We did so by cutting spending by $15 Billion and using accounting tricks and forced borrowing to come up with the other $11 Billion. Using credit to get yourself out of debt seems like folly to me…

My fear was that California would fail to make tough choices at the State level and force those tough choices down to Municipalities. This is the result of the current Budget proposal. California is taking several Billion Dollars from Municipalities and giving these cities 3-year IOUs. I feared that this would cause Municipalities to declare bankruptcy as they ran out of cash and that is what is setting up –

http://www.ocregister.com/articles/state-redevelopment-city-2505312-budget-local

“Placentia city officials are howling in effort to keep state hands out of their coffers. The plan to seize millions could bankrupt the city, they say.”

"We may have to declare bankruptcy – that's how serious this is," said City Administrator Troy Butzlaff. "This is something the system can't endure. We just avoided bankruptcy by doing all the right things; by cutting back, by getting concessions from staff, by cutting $4.5 million over last year's budget."

Each effort to kick the can down the road has more adverse consequences somewhere down the food chain. When the US prints money, the Dollar falls and the Consumer loses purchasing power. When the state fails to stop spending, the cities must foot the bill.

I wonder how Placentia Municipal Bonds are pricing today…