Graduating to First Team this year is Mark Tennenhaus of Dean Witter Reynolds, a former second-teamer in the regional category. Mr. Tennenhaus specializes in analyzing state and municipal bonds across the country.

The winner was closely followed by Robin Goldston of Seattle Northwest Securities, Jim Tucker of Howard Weil, and Jeffrey Rizzo of Moody's.

"One of the most obvious observations is that the impact of the recession turned bi-coastal," Mr. Tennenhaus said. That happened when the recession that has so devastated the Northeast began to ravage the West Coast, in particular long-time economic powerhouse California.

This year, that state's politicians struggled to close a multibillion-dollar budget gap brought on by declining employment.

And Mr. Tennenhaus said Dean Witter's efforts may produce long-term fruit in the form of stronger finances; but there's still work to be done.

"The budget California put in place begins to address some of the state's structural imbalances," he said. "But it's only a beginning."

Less Short-Term Optimism

Short-term, however, Mr. Tennenhaus is less than optimistic about how the newly balanced budget will impact the state's suddenly fragile economy.

"The impact of the budget will only exacerbate the impact of the recession, causing another 10,000 to 40,000 job losses among state and local government employees," he said.

Recession Still a Concern

In general, the recession continues to be a concern in most regions as states and localities struggle to pay for increased services with less help from Washington.

In the South, Mr. Tennenhaus said he is watching state and local credits in both Florida and Texas, where an influx of younger residents is impacting traditional demographics. As these younger people move into the states, they are especially concerned about government services such as education and health care.

And neither state, so far, collects an income tax.

Local Economies May Bear the Brunt

But it's not just public opinion that pressures these governments to make changes. "The lack of an income tax limits the ability of these states to keep up with federal and court mandated service improvements," Mr. Tennenhaus said. These strains could sift through to local economies, which may bear the brunt of the demand for increased services, he added.

In the Northeast, Mr. Tennenhaus said he sees some evidence that the financial straits most municipalities have suffered in the past three years have begun to show some impact. He said the corrective measures some states, like Massachusetts and Connecticut, have taken are beginning to at least stabilize their balance sheets.

Hard Medicine

"The hard medicine is starting to cure the patient," Mr. Tennenhaus said.

Nonetheless, few analysts believe the recession is ending anytime soon in the Atlantic Coast region; and that means more budget machinations in coming years. That could mean trouble for lower government levels as the federal budget cuts that have pinched the states begin to work their way into the municipal arena, Mr. Tennenhaus said. "You see evidence of that in the growing number of New York municipalities and counties that have asked for permission to float deficit financing bonds," he said.

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