Tuesday, August 24, 2010

The state of California has now delayed a 2.9 billion payment to the state's schools, in order to make sure that they can make their scheduled bond payments. By law, when there isn't enough money the bondholders are paid first, but this sort of financial triage augers very ill for the fiscal health of the state. Next up will be a downgrade of the state's creditworthiness. During and because of all this, property prices are going to trend down, putting further pressure on state income due to lower property taxes. It's a spiral that will only stabilize when the state gets it's financial act together, if that's even possible.

Hang on, it's going to be a bumpy ride.


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