WASHINGTON — This year will be the “toughest year so far” for state and local governments since the economic plunge began in 2008, with rating downgrades expected to outnumber upgrades, according to Moody’s Investors Service.

“With all of the financial problems facing the municipal bond sector, we do expect more defaults in 2011,” said Naomi Richman, managing director of Moody’s public finance team, as the agency released its first-quarter ratings report. “We do see some very stressed credits.” 

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