Just what shape is California in?
Several weeks ago, credit default swaps on state bonds were at 200 basis points. Kazakhstan’s were at 170. At the end of 2009, California’s cost of debt was the treasury rate plus 310. Mexico’s was plus 185. The state is temporarily solvent thanks to a great legislative fix: they took an extra month of state income tax withholding from all state workers’ paychecks, which they get back (without interest) in their next tax refunds.
When it comes to gauging the state of California’s government, however, you can’t do better than follow the conflict between Los Angeles’ municipal electric system – the Department of Water and Power (LADWP) – and the city’s mayor and council.
Municipals are an odd American institution, a significant presence of publicly funded entities in a system that is largely private.…