Even more from Sacramento...

Here's another interesting study hot off the press on the status of our state finances. There are a lot of future projects -- particularly road and levee construction -- that are dependent on the state's ability to issue bonds. Without the ability to issue bonds, tens of billions of dollars in future job generating infrastructure projects will be delayed indefinitely. Hopefully, the threat of default will force the state to get its house in order and make the same financial sacrifices that all other governments in the state of California are now making. The labor unions are likely the biggest obstacle in the way of the state staying liquid.

Here's the full story just issued by the Sac Bee:

The latest on California politics and government
December 16, 2009

Cal Lutheran forecast suggests state debt default likely
California faces at least another year of recession, and the state budget is so far upside down that it's now "more likely to default than not," on some of its debt, a new economic forecast from California Lutheran University's economists declares.

The director of Cal Lutheran's new Center for Economic Research and Forecasting, Bill Watkins, cites the state's budget problems, its high regulatory and operating costs and its deficit infrastructure as impediments to rapid recovery.

"We expect California's economy to continue to contract, slowly, through the first three quarters of 2010," the forecast says. "However, the contraction will be a bit less each quarter. By the fourth quarter, the state's gross product growth could be mildly positive. Output is then likely to slowly improve, but at an improving rate, through 2011.

"Job growth will lag economic activity. We don't expect to see California gain jobs until the second half of 2011. Consequently, unemployment will probably remain in double digits through 2011. Wages, by contrast, will likely show some gains almost immediately, but we don't expect to see California's average wage reach its pre-recession levels within the forecast horizon."

Despite the state's chronic fiscal woes and concerns about its mounting debt load, its top economic officials have consistently told investors and the public that the state is in no danger of defaulting on its bond payments, which by law have a high priority claim on the state's revenue streams.

Watkins and other members of the Cal Lutheran economic team migrated this year from the University of California, Santa Barbara's Economic Forecast Project. Data from the Cal Lutheran center can be purchased here.