The bonded indebtedness was approved by the legislature and Gray Davis but the bonds have not yet been sold. Their sale is being challanged in court and thus far $3B+ have been ruled unconstitutional and another $12B may soon go the same direction (can't be sold).
Additionally there is no appetite (market) for these bonds unless California can identify a seperate revenue stream (massive budget cuts or new taxes)to secure the bonding offer.
If your from Rio Linda that means that no one is particularly intrested in buying these bonds until California can demonstrate that they can pay them back
The article referred to "Unsold bonds originally planned to cover the deficit from the end of the 2002-03 fiscal year" in the amount of $8.2 billion. To which bonds were they referring and, if to the $12 billion dollar "deficit bonds", why is the amount mentioned smaller by $4 billion?
I am not an expert in government bonds but I have heard of a distinction between "revenue" bonds and "general obligation" bonds.
I associate revenue bonds with the state authorizing the issuance of specific bonds to be paid back from a revenue stream expected to result from the proceeds of selling the bonds.
I think that Washington state may have issued revenue bonds during the WHOOPS fiasco. The utilities who were supposed to pay back the bonds ended up in bankruptcy and the bonds could not be paid. I don't know what recourse the bondholders had to the state of Washington. There may have been no recourse.
General obligation bonds I associate with improvements to the state infrastructure such as building new schools or improving highways. These bonds, at least, are issued against the "full faith and credit" of the issuing agency.
Since Davis' "deficit bonds" were not associated with any revenue stream, I assumed that they were issued against the full faith and credit of the state of Kalifornia. There is no way for Kalifornia to continue to exist without paying these bonds. Buyers will simply not buy new bonds if any of the old bonds are not being paid. I doubt that there is even any basis for choosing among various general obligation bonds, which would be paid and which not. I would be surprised if there was any way for some general obligation bonds to be in default unless they are all in default.
Years ago I remember reading about bondholders who still expected the Soviet Union to pay off bonds issued by the Czar's regime before the revolution. I don't think these bondholders made out too well but allowing nations to default on their bonds simply because of a revolution was an economically unattractive development.