"The offering statements for the State of California’s most recent bond issues remind me of New York City’s for the sale of general obligation bonds and notes in 1974.
Then, the City's short-term debt had no source of funding other than issuing new notes to retire the old. A few months later, the market refused to accept additional paper. That resulted in monetary default on $1.6 billion principal amount of NYC general obligation tax and revenue anticipation notes.The City’s bonds did not default because bond principal and interest is funded one year in advance and held separate and apart from all other governmental funds. Those requirements and others like them are spelled out in the State’s Constitution, as it is in most of the other states."
