Quick SEC disclaimer... I'm not an investment professional; I'm just sharing my personal experience.
"Default" doesn't always mean that the principal won't get paid back. In almost all cases, it means that timely interest payments won't be made. Even in the most recent bond crisis in Puerto Rico, the "risk of default" was somewhat mitigated by the threat of shutting down the government offices (i.e. put the employees on unpaid furlough) just so the Puerto Rico could make their bond payments.
IMHO, it would be political suicide for a municipality or state to let bonds default. Here's an interesting article on this subject:
"Default" doesn't always mean that the principal won't get paid back. In almost all cases, it means that timely interest payments won't be made. Even in the most recent bond crisis in Puerto Rico, the "risk of default" was somewhat mitigated by the threat of shutting down the government offices (i.e. put the employees on unpaid furlough) just so the Puerto Rico could make their bond payments.
IMHO, it would be political suicide for a municipality or state to let bonds default. Here's an interesting article on this subject:
http://www.publicbonds.org/public_fin/default.htm
The default in the 1975 New York case was for revenue bonds. I don't know the exact details, but they sounded like LTX bonds.