At least the state constitution says the priority of payments is:
From the Los Angeles Times' Money&Co blog:
California launches $1.8-billion muni bond offering
California on Monday offered tax-free yields as high as 4.87% on long-term general obligation bonds, hoping to attract substantial demand from individual investors.
The state is trying to raise $1.8 billion in the bond sale, its second offering in less than a month. The proceeds will be used to finance a backlog of voter-approved infrastructure projects.
Treasurer Bill Lockyer set preliminary yields on the bonds at levels above what the state paid in the last sale -- reflecting the rebound in market interest rates in recent weeks as U.S. economic data have pointed to slow growth but not recession. Higher yields are good for investors but more costly for taxpayers....MORE