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Which State Has the Highest Default Risk?

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MUNICIPAL AND FISCAL WOES
DailyFeed
As Dr. Gary Shilling notes, states hope for tax collections to grow this year, but collectively see $136 billion in deficits in fiscal 2012 and 2013, even assuming more federal money for Medicaid.

The Pew Center found that as of June 30, 2008, states are obligated for $3.35 trillion in pension benefits owed to current and retired employees, but have only contributed $2.35 trillion, leaving $1 trillion unfunded. (HT: A. Gary Shilling & Company)

Investors are lining up to place their bets on which states now have the highest default risk.

Below is a chart highlighting default risk for sixteen states that Bespoke Investment Group has credit default swap (CDS) pricing for. The number next to each state represents the cost per year to insure $10,000 worth of state bonds for 5 years. The higher the price, the higher the default risk.



As shown, Illinois has the highest default risk of all states, followed by California, Michigan, New York, and New Jersey. As Bespoke notes, these are basically the five states in the country with the biggest fiscal problems at the moment. States that appear to be in pretty good shape include Texas, Virginia, Maryland, and Delaware.
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