The parallel between California's debt problems and that of
Greece's isn't hard to notice. One thing California has going for
it, though, to the relief of California municipal bond exchange
traded fund (
) holders: the state isn't expected to default anytime soon.
On May 14, Gov, Arnold Schwarzenegger updated his rather tight
budget proposal to the legislature,
. Despite the fact that after being adjusted for inflation and
population growth, it's smaller than ever, California still faces a
budget deficit of around $17.9 billion in the current and coming
Schwarzenegger intends to reduce that amount without raising
taxes and by implementing more cuts and some federal aid. [
5 ETFs to Watch in Topsy-Turvy Markets.
The governor is now reduced to eliminating state programs such
as the welfare-to-work program, cash assistance to poor families
with children, most state-subsidized child care and more. The
governor is also castigating the over-generous state employee
pensions, which is costing California more than $6 billion this
year, or the equivalent of the programs being eliminated. [
Muni Bond ETFs With An End Date.
The pensions signal that spending could always outpace revenues
in the long-term. So, while California may not default now, it may
spell trouble later for one of the world's largest economies and
the municipal bonds it issues. For now, though, the ETFs listed
below are up year-to-date and are sitting above their long-term
trend lines (the 200-day moving average). [
Build America Bond ETFs Get Another Play.
For more information on muni bonds, visit our
municipal bonds category
PowerShares Insured California Muni Bond (NYSEArca:
SPDR Barclays Capital California Muni Bond (NYSEArca:
iShares S&P California Municipal Bond (NYSEArca:
Max Chen contributed to this article.