Fitch Ratings said it expects the financial pressures that local governments have experienced over the course of the economic downturn will continue into the next year.

In a new report, the rating agency forecasts that slow revenue growth and increased spending will result in more downgrades than upgrades for municipalities in 2014. The agency also cited some municipal bankruptcy cases as potentially being precedent setting.

"Willingness to repay debts has been a hallmark of the municipal credit market, but evidence of management's failure to prioritize debt service payments in a limited number of bankruptcy cases is troubling," Amy Laskey, Managing Director of Fitch's Public Finance Group, said in a press release. "Fitch expects the current bankruptcy cases to set important precedents for other distressed municipalities."

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