Because the definition of the "municipal bond" is somewhat loose, other non-municipal organizations like colleges and hospitals can also issue them. Many of these non-municipal entities have not weathered the recession well.
"Defaults on municipal debt increased dramatically from $329 million in 2007 to nearly $7.8 billion in 2008, according to Richard Lehmann, publisher of a newsletter that tracks defaults. Municipal defaults are once again in the billions of dollars this year. However, if you haven't heard about the wave of cities and counties that are defaulting on their financial obligations, there's a good reason why: The wave doesn't exist, at least not yet."