Meredith Whitney generated lots of controversy last year with her hyper-bearish report on municipal bonds. It was one of the first to come from her then-new research firm.

Whitney predicted between 50 and 100 "significant" municipal bond defaults in 2011. If true, the defaults would wreak massive havok to the tune of "hundreds of billions" of dollars. This earned Whitney the disdain of many mutual funds managers, local officials and many others. But she never backed down.

Now she has come out with another report that maybe even more bearish than the first one. As the economic recovery continues to creak along, states are under massive financial pressures to boost outlays and hold the line on taxes. They have generally relied on federal aid, rainy day funds and general obligation bonds. But they have the same issues as the federal government in that they have massive future liabilities via pensions that generally do not appear on the books.

Fortune notes that revenue bonds, which back specific projects such as subsidized housing, toll roads, land acquisitions, and nursing homes, are the most at risk. These bonds "are supported by the cash flows from the projects themselves, and they aren't guaranteed by the state governments. So if the cash flows fall short of the interest payments, they need to be restructured -- at a big cost to the investors who own them. And the revenue bonds now dwarf general bonds in total dollar amount outstanding, totaling $2.7 trillion, versus $1.4 trillion for the GOs."

In Florida, as the report notes, revenue bonds account for 90 percent of municipal bonds.

For more:
- here's the article

Related Articles:
Funds look for ways to short the muni market   
Meredith Whitney faces even more criticism  
Forecaster predicts the next crisis