The state of California has joined the ranks of retailers and new-car buyers struggling to borrow in the tight credit market... Chiang estimated that cash-strapped California will need to borrow $7 billion through this fiscal year – credit that's growing harder to find and more expensive.

Note that in the article it says the state is refusing to borrow for some projects because it believes "interest rates are too high". So in other words, the urgency of this crisis is as much because California wants subsidized low interest rates as anything else.

The days of states borrowing cheaply at the trough, in greater and greater quantities, are over. They will have to balance their budgets, possibly after a painful period of cutbacks and/or Federal government subsidies.

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