Muni Monitor

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 precise impact of the many factors and trends that shape the prospects of the underlying “assets” within each muni category.

The assessment aims to identify superior investment opportunities – and much more. It also yields practical insights into what individuals can expect going forward 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.

Each edition of The Nuveen Muni Monitor will present a broad range of such insights and explore the connections with effective muni investment as well as Americans’ lived experience.

In this inaugural “back-to-school” edition of the Nuveen Muni Monitor, we take a look at the investment implications of the trending increase in charter school enrollments and the outlook for continued growth of this education sector, which currently represents $33 billion within the roughly $580 billion K-12 muni bond market.

Sector focus: Back to school

As we update the tracker, we’ll dive deeper into our views on various sectors. We’ll begin with our thoughts on elementary and secondary education.

• K-12 enrollment trends are showing a growing preference for charter schools as opposed to traditional public schools. 
• The school choice movement, which seeks to promote alternatives to traditional public schools, has been around for decades, but the Covid-19 pandemic and legislative drives in multiple states have served to accelerate the related enrollment trend.
• Public school enrollment fell across the county in the wake of the pandemic, and student count has not fully or evenly recovered. Between 2019 and 2023, enrollment for traditional K-12 public schools declined by over 1.5 million students, a 3.5% drop, while charter schools gained close to 300,000 students, a 9.0% increase.
• In general, charter school investors can expect to receive a higher interest rate on those bonds compared with public school districts bonds, as most charter schools bonds are issued into the market on a non-rated basis, or carry low or below-investment grade ratings.
• For public schools generally, enrollment is a key revenue determinant. Increased competition for students puts pressure on districts to stay competitive to attract students, exacerbating a challenging financial situation
• Expiring federal pandemic fiscal aid and stagnant state funding both impact finances and educational outcomes. And growing support for charter schools and voucher programs have altered resource distribution and disrupted funding norms