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Municipal bonds are a foundational element in Nuveen’s proud heritage of investing to support public purpose – and an asset class that touches the everyday lives of all Americans. Munis fund essential facilities and functions such as state and local governments, K-12 schools, colleges and universities, roads and airports, hospitals, water and sewer utilities, housing, and more.
Nuveen’s muni credit analyst team – one of the industry’s largest and longest tenured – constantly assesses the impact of the trends that influence muni credit quality across all market sectors.
Our research identifies what we believe are attractive investment opportunities, and much more. It also yields practical insights into what individuals can expect when it comes to the availability, operation and cost of services used daily – things like the price of an airline ticket or a hospital visit, the health of their regional transportation options, the quality of their local school system, or the dependability of critical utilities.
The Nuveen munis in your community scorecard presents a broad range of such insights and explores the connections with effective muni investment as well as Americans’ lived experience.
We also dive deep into various sectors as we update the scorecard.
Our sector focus: sales taxes
- Did you know your holiday shopping helps state and local governments build infrastructure? Many governments issue bonds secured by sales taxes — which are bolstered by seasonal gift purchases — to finance infrastructure investments.
- While tariff-driven price increases create uncertainty about consumer behavior this year, sales tax bonds feature strong security provisions and reserves that have proven resilient through economic cycles.
Overall sector views
Our broad sector views are below. We look forward to commenting on our insights in future editions as our views evolve.
Nuveen Muni Monitor informs our discussions
| Positive | Neutral | Negative |
| Sector | Factors | Assessment | Sector Momentum | Data Source |
|---|---|---|---|---|
| State and local governments (cities/counties/school districts) |
State and local tax collections: Total tax revenues up 5.1% in 1H25 vs 1H24. Governments are budgeting conservatively as they anticipate slower revenue growth. | Credit quality expected to remain stable despite anticipated revenue and economic slowdown. Most states revised revenue projections down for FY26 and budgeted conservatively. Balance sheets and liquidity remain strong and reserves are projected to remain stable. Many governments had budget gaps to close and some will use fund balance in the coming year. Nearly half of states have cut expenditures. All states will navigate through upcoming federal Medicaid changes and other benefit cuts. State budgets may be pressured depending on their policy response. Stable property tax collections are positive for most local governments and school districts. →Budget stability should temper tax increases. |
Neutral | US Census NASBO; Fall Fiscal Survey of the States https://www.nasbo.org/reports-data/fiscal-survey-of-states BLS.gov; national unemployment rate and payroll employment data Nuveen Macro and Market Forecasts Moody's (over 80% of rating changes are in tax-backed sector making this a relevant metric here) |
| State rainy day funds: Median rainy day fund balances projected to reach 12.9% at end of FY26 up from prepandemic 9%. |
||||
| Unemployment: The U.S. unemployment rate was 4.3% in August 2025 but Fed cautious about labor market weakness. |
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| Economy: 1.5% GDP growth projected for 2025. 1.8% growth projected for 2026. | ||||
| Rating changes: Rating upgrades vs downgrades normalizing. Apart from downgrades linked to U.S. sovereign rating downgrade, 1:1 ratio in Q2 2025. Uptick in negative outlooks and downgrades for public K-12 school districts. | ||||
| Federal policy: Though federal aid is not a primary source of operating revenues for most issuers, the recent pullback in federal support for state and local governments across multiple fronts including Medicaid, transportation, disaster aid, SNAP and school funding will require greater independence and resiliency at the local level. | ||||
| Higher education | Enrollment: Fall 2024 enrollment grew 4.5% YOY, with total enrollment now exceeding pre-pandemic levels. Demographic challenges ahead as the number of high school graduates projected to decline. Targeted pressure on elite institutions has not seemed to negatively impact enrollment as applications continued to soar for fall 2025. | The countercyclicality of enrollment and strength of endowments bolster resiliency but higher education is facing pressures that may accelerate the gap between the haves and have nots. Modifications to federal support for institutions, in the form of grants and student loans, are a key risk that could impact revenue streams and heighten affordability concerns. Alhough enrollment was up in 2024, student visa disruptions could pressure enrollment at institutions that serve higher numbers of international students. The expected decline of high school graduates across the nation threatens institutions with already weak demand. Furthermore, state funding for public institutions could be limited due states facing their own budgetary presures. Institutions with the resources to withstand current pressures are expected to remain resilient while others may struggle. →School closures and consolidation of smaller regional schools expected to become more common. |
Negative | National Student Clearinghouse Research Center WICHE – Western Instate Commission for Higher Ed – Knocking on the College Door, 2020 State Higher Education Finance; SHEEO.org; Grapevine Report; https://shef.sheeo.org/grapevine/#about-grapevine; NATIONAL TABLE 1. STATE FISCAL SUPPORT FOR HIGHER EDUCATION, FY 2019-2024 Inside Higher Ed article https://www.insidehighered.com/news/business/financial-health/2023/11/21/universities-see-sluggish-endowment-returns-fy23; Various news articles |
| Demographic trends: National decline in high school graduates projected to accelerate beginning in 2026. | ||||
| State funding: State fiscal stress precipitated by tariffs, waning pandemic aid, and future Medicaid cuts could leave less money for higher education. |
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| Endowment returns: 16.8% return on S&P for the 12 months ended 6/30/2025 should provide another favorable boost to endowments, following 11.2% average endowment return for FYE 6/30/2024. |
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| Federal policy: Changes to U.S. Department of Education and curtailment of federal loans will further heighten affordability concerns. Fewer federal grants threaten a secondary source of revenue to higher education. International student visa disruptions are more likely to negatively impact lower tier institutions that are already struggling financially and are heavily dependent on foreign students to pay full tuition. |
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| Water and sewer utilities | Liquidity: 541 days cash on hand (DCOH) median higher than pre-pandemic. Debt service coverage median rate holding steady at over 2.0x. |
Stability expected given the monopolistic nature and rate setting ability of most systems. Strong liquidity exceeding pre-pandemic levels should lead to outperformance over the next credit cycle. Capital investment required for PFAS mitigation and lead pipe removal will require significant capital investment. However, relaxed environmental regulations and enforcement may alleviate near-term cost pressures. →Upward pressure on utility rates may impact homeowners. |
Neutral | Merritt data US EPA |
| Regulatory framework: Environmental regulation enforcement and implementation timelines have eased under the new administration. Systems have a few more years to comply with EPA regulations for PFAS and lead and copper levels, providing temporary capital relief. However, delaying implementation will likely result in higher costs which will eventually be passed onto consumers through higher rates and could pressure communities with limited resources. |
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| Housing | Strong demand: Need for more affordable housing in expensive markets supports ongoing construction. |
Housing financing, construction and rehabilitation will continue to benefit from strong political support at both federal and state levels. → Strong housing demand supports household balance sheets but high interest rates keep homeowners in place. |
Neutral | |
| Increasing supply chain and labor costs: Tariffs anticipated to increase construction material costs. Builders are confident supply chains should hold up in the near-term, though at higher costs. Increased labor costs and shortages also expected due to immigration policy shifts. May result in project delays. | ||||
| Interest rates: Higher rates slow movement as current homeowners are reluctant to give up low cost mortgages though additional Fed cuts could change this dynamic in 2026. |
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| Healthcare | Staffing shortages: Demand for nurses during and right after the pandemic led to a spike in labor costs, leading to steep expense growth. Pace of labor inflation began to subside in 2023 and 2024, and margins have started to recover. |
Healthcare expenses (labor and supplies) are elevated but beginning to normalize. The main headwind for the industry will be on the revenue side as federal budget changes are implemented over the coming years. → Upward healthcare cost trajectory will continue as providers struggle to meet demands of aging population. |
Neutral | |
| Material cuts to Medicaid: Federal policy changes will reduce Medicaid payments to states. Medicaid is administered (and partially funded) by the individual states so the impact on individual providers is likely to vary widely. Small rural hospitals are considered more vulnerable to funding changes. |
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| Demographic trends: Aging population guarantees demand for services will grow. Sector will struggle to serve older, rural populations. |
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| Transportation (planes, trains & automobiles) |
Airport strained capacity: passenger travel growth expected to be constrained by slowdown in the economy, staffing issues for air traffic controls and geopolitical tensions. |
Airport cash balances remain robust and passenger demand remains well above pre-pandemic peak levels. Capital investment needed to expand capacity will drive infrastructure borrowing. → Air travelers should expect higher ticket prices and airport construction to be the norm. |
Neutral | Transportation Security Administration (www.tsa.gov) Federal Aviation Administration (faa.gov) |
| Airport passenger volume: Air travel demand softened in 2025 given economic uncertainty, but an acceleration in demand in 4Q may continue into 2026. | ||||
| Toll road traffic and revenue growth normalizes: Traffic demand is stable-to-improving, possibly helped by lower gas prices and more employees returning to office. Higher toll rates have been a significant driver of revenue growth. |
Toll hikes have helped offset higher operating costs, although tariff changes are further increasing the cost of construction materials. Most toll roads have strong financial positions to weather additional cost pressures in the near term. → Drivers could become more sensitive to toll rate increases heading into 2026. |
Neutral | ||
| New tax revenue for mass transit: Ridership not expected to return to prepandmic levels. New financial support will likely need to come from state and local governments facing their own budgetary pressures. |
Well functioning public transit systems are essential for urban areas. Facing a fiscal cliff as federal support potentially wanes, systems are seeing increased support and tax subsidies from local and state sponsors. Systems may see stronger oversight from government partners. → Fare increases should be less common, but new dedicated taxes will support transit. |
Neutral | Federal Transit Administration (transit.dot.gov) |
| Positive | Neutral | Negative |
Related articles
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Find out what is driving opportunities for taxable municipal bonds as we near the tail end of 2025.
The city is well-positioned to preserve its financial stability while adapting to evolving economic and policy conditions.
Data sources: US Census; NASBO; Fall Fiscal Survey of the States https://www.nasbo.org/reports-data/fiscal-survey-of-states; BLS.gov; national unemployment rate and payroll employment data; Moody's (over 80% of rating changes are in tax-backed sector making this a relevant metric here); https://www.bea.gov/news/2025/gross-domestic-product-1st-quarter-2025-third-estimate-gdp-industry-and-corporate-profits; National Student Clearinghouse Research Center; WICHE – Western Instate Commission for Higher Ed – Knocking on the College Door, 2020; State Higher Education Finance; SHEEO.org; Grapevine Report; https://shef.sheeo.org/grapevine/#about-grapevine; NATIONAL TABLE 1. STATE FISCAL SUPPORT FOR HIGHER EDUCATION, FY 2019-2024; Inside Higher Ed article https://www.insidehighered.com/news/business/financial-health/2023/11/21/universities-see-sluggish-endowment-returns-fy23; Various news articles; Merritt data; US EPA; Transportation Security Administration (www.tsa.gov); Federal Aviation Administration (faa.gov); Federal Transit Administration (transit.dot.gov)
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