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Text size [+][-]  Wednesday March 17 2010GLOBAL EDITION

Considered view
09 Jun 2009 21:21

California's default option

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California governor Arnold Schwarzenegger has stopped funding for all state contracts signed since March 1, except for those related to public safety, and has placed a hold on all new contracts. The state expects the move to save $1.35bn.

California has a current budget deficit of $24.3bn, which it must close before July 1, when the new fiscal year begins.

California's credit ratings are the lowest of all 50 states.

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Neither is bankruptcy – states can’t get protection. Stiffing bondholders would only destroy California’s credit and deepen future budget woes. There may be some half-measures. But the Golden State’s only real option is to make big cuts now and balance its books.

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More stories by:  Jeff Segal






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