Tactics in California to shore up its municipal bond rating are quite humorous. Supposedly, by delaying payments to schools, California can boost confidence in its bonds.

Please consider this sure-fire confidence booster: California Passes Bill to Guard Cash as Bond Delayed.

California’s Assembly passed a bill allowing it to delay payments to programs including schools to avoid running out of cash, a move aimed at boosting confidence in bonds sold by the most-populous U.S. state.

The passage comes a day after Treasurer Bill Lockyer told lawmakers the bill was needed to send a signal to investors that California is taking steps to adequately manage its cash as it faces budget deficits through June 2011. Lockyer postponed a $2 billion sale that was initially scheduled for next week.

Assemblywoman Noreen Evans, the Democrat who chairs the budget committee, said the bill was needed so the state can return to the bond market to finance public projects that provide a jolt to the economy.

Controller John Chiang said last month that California may be forced to issue IOUs for the second year in a row because it’s spending more than it collects in revenue. The bill is aimed at preventing cash shortages projected as soon as next month by empowering officials to delay certain payments, including those to schools, universities and local governments, to conserve money for debt service and other key expenses.

California Demands Income Tax Payments In Advance

Reader “Paul” just pinged me this news affecting business owners and self-employed contractors.

Hi Mish

I just picked up tax documents from my CPA. California require me to pay 30% of my estimated tax for the year on 04/15/10 and another 50% by 06-15-10. The balance of 20% is due on 01-15-11.

They want 80% of my annual estimate after 6 months, taxing me on money I have yet to earn for the year.

Only in La-La Land could one think these actions should impress the bond market. Then again, the stock market soared mid-day after Bernanke repeated for the 40th time that he was not hiking soon. So hey, who knows?

Mike “Mish” Shedlock
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