Mutsy-It is best to invest in general obligation bonds with a state that is more fiscally sound. For example, a good choice would be to invest in general obligation bonds with the state of Texas.
This state is one of the few states in the union with a budget surplus and it would be relatively safe to lend money to this state.
However, the state of California is in a state of disarray and any investments to this state would not be wise because the state is essentially bankrupt.
The great thing about municipal bonds is that the income that you receive from the interest is totally tax free. So if you invested $200,000 in municipal bonds that paid an interest rate of 5%, you would receive two biannual payments of $5,000 for a grand total of $10,000 of tax free income a year.
These bonds have maturity dates from one year to thirty years and you usually need at least $10,000 to start investing in them. You have to buy these bonds from stock brokers or licensed banking sales people which is the only way to enter these investment securities.