States’ Financial Stress May Put Pressure on Municipal Bonds

At Vernon Litigation, we are concerned that States in distress – such as California – will push their problems down to the local level, which will, in turn, put tremendous stress on municipal bonds issued by municipalities within those states. If California’s current effort to convince its constituency to accept a tax hike to help the state get out from underneath a $15.7 billion deficit fails, then the next steps may have a large effect on municipal bonds emanating from California. Comparisons to Greece abound. A few other states may not be far behind in similarly dealing with this crisis.