Friday, February 5, 2010

California cannot afford bond insurance

Says Bloomberg:

"Debt Payments

Debt payments are forecast to cost $6.2 billion during the 2011 fiscal year, about 7 percent of California’s revenue. The payments are the state’s second-highest obligation under the law after schools, according to the state’s bond documents."

With tax revenue still 25% below normal, insurance on the debt is 3%. It takes years to build income back up and each year the government will allocate some 2% of tax receipts to bond insurance. To avoid bankruptcy, California will have to show 2% economic growth above the national average, absent a technology boom out here, that is impossible.


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