California’s high-profile budget crisis and the fiscal woes of states throughout the US are taking their toll on the public finance markets, sending borrowing costs higher for states, cities, counties and other municipal issuers.

The Golden State and its gaping $26bn deficit have caught the headlines, but a handful of other states have also failed to agree on balanced budgets, even after federal stimulus. Even the states that have passed budgets have been forced to make dramatic cuts such as closing schools and laying off staff to compensate for plunging tax receipts.