(Bloomberg News) U.S. municipal defaults fell last quarter as local governments reduced expenses instead of forgoing payments on debt, bucking banking analyst Meredith Whitney's forecast for a surge in failures.
There were 12 defaults in the period, totaling $126 million, a decline from 18 in the same quarter last year and 24 in the same three months of 2009, according to the Distressed Debt Securities Newsletter.
For the first nine months of 2011, defaults totaled $949 million, about a tenth of the amount of failures in corporate debt, according to the newsletter, published by Miami Lakes, Florida-based Income Securities Advisor Inc.
Whitney's prediction "was based on the premise that municipalities will experience a budget crunch as tax receipts declined and expenses increase," the report said. "This is happening, but instead of defaulting on bonds, municipalities are cutting expenses."
Municipalities nationwide are still dealing with fiscal strains in the wake of the 18-month recession that ended in June 2009. Central Falls, Rhode Island, sought Chapter 9 bankruptcy protection on Aug. 1, and Harrisburg, Pennsylvania, filed this month.
Whitney said on the "60 Minutes" television show in December that the next 12 months would see "hundreds of billions of dollars" of defaults.