SANTA MONICA, Calif. - A restructuring of the fiscal relationship between California and its localities should be favored by the securities industry as a step toward ensuring issuers' financial integrity, a state policy analyst said here yesterday.

California's existing system of state and local government "has become completely dysfunctional," and one outgrowth of that problem is "more and more creative bookkeeping techniques and cost shifting," said Peter Schaafsma, director of the state and local finance section for the California Legislative Analyst's Office.

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