Local municipal bankruptcies in California and Michigan have shown that pension income benefits are senior to bonded debt in federal bankruptcy court. The same is true for healthcare liabilities. Supporting this argument is that in both the City of San Bernardino and the City of Detroit bankruptcy cases, retirement health benefits were eliminated. Across the country, retiree health benefits are large underfunded liabilities, which means there are few assets set aside to pay for future benefits. It was argued that, because retiree health benefits were eliminated, pensioners had made significant sacrifices and that bondholders needed to share in the pain. However, in the new world of the Affordable Care Act, the healthcare liability did not magically disappear, but, through the implementation of state healthcare exchanges, “shifted” from the local tax base to state taxpayers. Over time, we expect an acceleration in the growth of state Medicaid costs, which will in turn limit the resources available to distribute back to the local authorities for K-12 education or infrastructure upgrades. There are no easy solutions to the problem of future liability mismanagement in the state and local municipal bond market. But the value proposition that SNW Asset Management offers is that we collect a mosaic of information about a credit, map its relationship with other sectors of the market, identify positive and negative trends and price the risk. Our top down and bottom up credit process structures our analysis so we can identify the risks and rewards in our information mosaic and buy or sell credits that will appropriately reward our clients for the inherent risks in fixed income investing.