On another ugly day for the markets, this was probably the most overlooked good news.
The California deficit for the two year budget cycle will be much lower than expected, thanks to $6.6 billion more in revenue than had been anticipated.
As NYT notes, there’s still a $9.6 billion gap, and no consensus yet about how to fill it. There will be your standard California fights about budget cuts, fees, and new taxes, and they will probably go beyond the wire once again.
But that doesn’t change the fact higher revenue can only come as a result of a more active economy than previously thought.
And for the merchants of muni gloom, like Meredith Whitney, it means the challenge of meeting state and local bond payments is a bit less acute, at least in this particular basket case of a state.
Meanwhile, the MUB etf — a crude proxy for the muni market as a whole — continues to be ridiculously strong.