California Reduces One Bond Sale

File this under "news to watch anxiously."

The state of California has decided to reduce the size of a scheduled sale of tax-exempt, long-term bonds from $1.75 billion to $1 billion. The reason? State Treasurer Bill Lockyer is blaming turmoil in the municipal bond market, which has forced bond sellers to pay higher yields. Instead, the state will boost a planned sale of taxable bonds that comes with a federal subsidy.

Why should we worry? Because the state of California, with its permanently out-of-balance budget, must rely on borrowing for cash. If borrowing becomes too difficult or too costly, it could add to the state's cash difficulties -- and to its budget problems.

Tom Petruno of the LA Times explains more about all of this here.

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