Ready for more state IOUs?

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Remember Calif. IOUs? Other states are play to grappling budget realities as well. Reliance on cushy credit and credit related set income created a outlay strength (bordering on criminal) that's about to hit a wall. Debt maturities are looming.

NY Times: Without a budget deal, New York module be mitt with just $36 meg in the slope by the end of December, according to underway projections.

The land muni CDS markets are play to widen, as reality sets in. In the interpret below we exclude Calif. and Michigan, as their problems have already been substantially publicized.





State financing is relatively simple. Many states can not separate deficits by law, and modify those who can module end up paying increasingly wider spreads. The digit remaining choices are upbringing taxes or cutting budgets. Raising taxes only works on the so-called "wealthy" (as NY did in April), otherwise there module be a revolt in this environment. The "wealthy" in states same NY have enough mobility to simply advise to other states, reducing set receipts to the land further. And modify if they don't, the impact of such set hikes is mostly insufficient to advise the needle. Tax hikes also alteration businesses and turn hiring.

That leaves outlay cuts. But employees of many states have significant impact over land politics, including impact over governors and land legislators. Those politicians who revilement budgets - specially if they revilement land jobs - module simply not see another term. New York's metropolis for example knows he module not intend reelected, so he has the guts to do the correct thing and compel the cuts. The legislators however module fisticuffs him on this to the terminal minute. Other states module hit this surround soon as well, and more land IOUs (instead of cash) are sure to follow.




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