How Safe Are Municipal and State Bonds?

The safety of municipal and state bonds, often referred to as tax-exempts, these days of pension problems and budget deficits, will depend to a great extent on the type of bond involved.

This is not so much a major problem for general obligation bonds issued by those entities, as it is for revenue bonds, where the payment of interest and principal must come from revenues backing the bonds. 

Sooner or later, general obligation bonds will have to be paid by higher taxes or from savings of cutting expenses. (See the Earl J. Weinreb NewsHole® comments.)