A growing number of U.S. cities are choosing to fund essential services like public safety and garbage collection over making payments on their outstanding debt, as rising costs and falling revenue deplete their budgets.

So far, the bond defaults are not roiling the $3.7-trillion municipal market because insurance companies are stepping in to make payments to bond holders in some cases. But defaults on insured bonds are putting pressure on these insurers, which never fully recovered from the last decade's financial crisis.

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