This guest post previously appeared at the author's blog, Credit Writedowns

Tax revenue at state and local governments has plummeted. With house prices in California down substantially, it is even more dire for municipalities there. The result will be widespread budget cuts and, where possible, income tax hikes. Budget cuts alone won’t get you there.

Below is one specific example in Fresno, California. They are taking money from their reserve fund to make ends meet. That is not sustainable. They are an example of the fiscal emergency coming to a local municipality near you.

I guarantee you this will have a negative impact on the economy and on house prices and foreclosures, a major reason I still give a double dip even odds.