Participants were asked several questions on key topics affecting state and municipalities, as they enter budget season. Results found:

• Credit Ratings – 48 percent said that on average, they expect credit ratings of U.S. states to fall in the next year; 38 percent believe ratings will remain the same, and only 14 percent said they will rise;
• Municipal Bond Status – 71 percent of respondents predicted that President Barack Obama and Congress will take no action with regard to municipal bonds’ tax status in the next 12 months; 27 percent believe they will limit the tax exemption for municipal bonds, with only 2 percent expecting to see the end of tax exemption for municipal bonds;
• Defaults – With municipal bond defaults at about $1 billion so far this year, 75 percent believe the end of year total will be lower than in 2010; 17 percent believe the total will be about the same as last year, while just 8 percent expect total muni-defaults to be higher than in 2010;
• U.S. Treasury Yield – 57 percent said they expect the yield on 10-year U.S. Treasury notes to be between 2.01 and 2.5 percent on December 31, 2011; 32 percent believe it will fall between 1.5 and 2 percent; 10 percent predict this yield will be between 2.51 and 3 percent, with only 2 percent responding that it will be more that 3.01 percent; and
• AAA Municipal Securities – 35 percent said the yield on 10-year AAA municipal securities will be 105-109.9 percent of 10-year U.S. Treasury notes at the end of 2011; 33 percent believe it will fall somewhere between 110 and 114.9 percent; with only 6 percent predicting the yield will be 115 percent or more.