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Criteria I Governments I U.S. Public Finance: U.S. Local Governments General Obligation Ratings:Methodology And Assumptions Table 16 Government Of •tal Governmental Units By Type Of • • 1870-1879 1.9 0.3 0.3 0 0 1880-1889 1 0.2 0.2 0 0 1890-1899 3.1 0.5 0.3 0 0.1 1900-1909 1.4 0.3 0.2 0 0.1 1910-1919 0.2 0.1 0 0 0 1920-1929 0.5 0.2 0.1 0 0.6 1930-1939 13.7 8 0.5 3.6 8.7 1940-1949 0.2 0.2 0 0 0.2 1950-1959 0.4 0.2 0 0.1 0.2 1960-1965 0.6 0.4 0.1 0.1 0.2 To derive the percentages,the table uses the study's total number of governments in 1963 for the total number of governments in all periods because this statistic is not available for all periods and the number of governments did not vary dramatically over these periods.The percentages above will overestimate annual default rates in many cases due to the multiyear nature of the periods. VIII. APPENDIX II: Relationship To The State Rating 86. Local governments have a number of connections to their state governments. State governments may change the levels of funding provided to local governments. State legislatures may also change laws on local government funding, debt issuance, or even expenditure responsibilities. In smaller or more concentrated states,the nature of the economic bases may also be similar. 87. Given the historical record and ongoing localized nature of local government finance,the criteria measure the impact of additional stress by state governments through the standard scores.Were a state to alter local government funding statutes or mechanisms for its own fiscal purposes, such decisions could result in changes to the predictability,revenue and expenditure balance, and system support scores for all related local governments(see paragraphs 37-40).As the direct impact on a local government's fiscal balance becomes clear, changes to the budgetary flexibility and budgetary stress scores could occur. 88. Probably due to the historical trends of ongoing local control described in subsection A,there is limited data to show that state credit stress directly brings local government stress.Where correlation does exist,there is little evidence to suggest causation. Hempel notes that following the panic of 1837,nine states defaulted,namely Arkansas, Florida, Illinois, Indiana, Louisiana, Maryland, Michigan, Mississippi, and Pennsylvania. He cites only two municipal defaults following the panic, only one of which was in these states(Mobile,Ala. and Detroit, Mich.). The low level of municipal debt outstanding at the time,however, also likely limited defaults. 89. By the time of the depression of 1873 through 1879,local government debt had also significantly increased,in part because of prior restrictions on state debt issuance following the 1837 experience. Based on statements from Hempel and Scott, 12 states appear to have defaulted on or repudiated their debt during this period. Exact numbers of local government defaults by state during this period are elusive. Hillhouse's "Defaulted Municipal Bonds(1830-1930)" provides perhaps the best source. The author does not provide dates for the more-than 860 defaults cited,but instead provides citations for pieces that provide further information on these defaults. Using these citations as a proxy for the WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 12,2013 32 1190266 1300881696