Cash-Squeezed States Warn of Collapsing Infrastructure

Fed stimulus eyed as municipal bonds wither
By Rob Quinn,  Newser Staff
Posted Dec 23, 2008 6:57 AM CST
Gov. Arnold Schwarzenegger warned yesterday that California is on "a track toward disaster" as infrastructure projects grind to a halt.    (AP Photo/Rich Pedroncelli)
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(Newser) – Thousands of infrastructure projects across the country are on hold as states wrestle with budget crises, the New York Times reports. Gov. Arnold Schwarzenegger warned yesterday that California was “on a track toward disaster" as school, bridge, and road construction projects ceased, the victims of the credit squeeze and institutional investors' declining faith in municipal bonds.

More than 40 states are struggling with budget shortfalls and some projects have been halted midway through. Many state officials are hoping Barack Obama's plan for a huge stimulus package will revive stalled projects. But analysts warn that in crying wolf to woo federal funds, governments may be spooking the individual buyers who are now often the only takers for municipal bonds.