California cities are pressured by rising compensation costs and a housing crash-related decline in revenue exacerbated by revenue raising restrictions, according to a Fitch Ratings report.

"Even as the broader economy shows signs of stabilization, California cities face state specific uncertainties based on their diverse economic profiles, and revenue raising environment," said Karen Ribble, senior director in Fitch's Public Finance group. "California cities facing the most fiscal stress are those with limited options to address budget imbalance, reinforcing the divide between the strong and the weak."

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