Concerns linger over large state debt as a new report released today, by the Kellogg School of Management, estimates an additional $574 billion is unfunded liabilities from pension plans at the city and county levels.
“The municipal market, much like the rest of the financial markets over the last few years are getting a huge amount of scrutiny. And things that have always been the case are being questioned," Alexandra Lebenthal, president and CEO of Lebenthal and Co., told CNBC's "The Strategy Session"on Tuesday.
“We are seeing a lot of pressure—whether its pensions, whether its municipal budgets—and it can’t just be politics as usual," Lebenthal said, adding, "overall I don’t have a deep concern of default."
Take the New York City crisis in the mid-1970's: "The courts said hardship is no defense. You have to pay your bonds ahead of police, ahead of firemen. That actually set the president," she said.
For that reason Lebenthal thinks there misconceptions about how a municipality can actually default. "States can’t declare bankruptcy. Not allowed too. And other municipalities if they do have to continue paying their debt service,” Lebenthal said.
"I think the politicians within the state and local levels are looking at a lot right now is reorganizing—whether it’s the pension or whether it’s the existing debt," she said.