• The Golden Age of Public Finance is now over.
• A temporary upswing in municipal bond credit quality began in 2021 boosted by Federal fiscal policy. Four years later, municipal credit is now returning to normal levels.
• A more positive macro-economic backdrop exists to begin 2025 compared to last year.
• The potential impact of the new administration and 2025 fiscal policy remains a significant uncertainty as we begin the year.
• Specifically, we are concerned about the now imminent threat to the municipal bond tax-exemption.
• Our State Government sector outlook remains “Stable” with healthy total balances projected for fiscal year 2025, despite the ongoing normalization of municipal credit.
• Our Local Government sector outlook also remains “Stable” due the housing market's role as an economic stabilizer, and despite potential fiscal policy changes and immigration challenges.
• We lowered our School District sector outlook to "Cautious" from "Stable" due to factors like declining enrollment, expenditure pressures, and potential reductions in state aid.
• We kept our outlook for the Community Facilities District sector “Stable” due to robust housing demand, increasing residential property values, and stable commercial property values in California.
• U.S. airports are expected to see continued growth in passenger traffic and infrastructure improvements, supported by strong liquidity and solid balance sheets, leading to a “Stable” Airport sector outlook.
• Charter school enrollment continues to grow, creating opportunities and increasing issuance, leading to a “Stable” Charter School sector outlook for 2025.
• Entities in the Health Care sector are showing improved profit margins, robust patient volumes, and a more stable labor market, highlighting the sector's flexibility and adaptability causing us to raise our sector outlook to “Cautious” from “Negative.”
• We lowered our sector outlooks for both the “Public” and the “Private” Higher Education sector to "Negative" due to severe systemic pressures, including declining enrollment, rising costs, and reduced government support, which are leading to significant credit stresses, especially for smaller private institutions.
• State Housing Finance Agencies are expected to maintain strong balance sheets and credit fundamentals in 2025 leading to a “Stable” Housing sector outlook.
• Rising energy and data center demand, and natural disaster risks and are key pressures for the Public Power sector, however we kept our “Stable” sector outlook.
• We raised our Senior Living sector outlook to "Stable" from "Cautious" due to increased occupancy, higher revenue, and stabilizing expenses, amid growing sector issuance and an aging population.
• The U.S. cigarette smoking rate hit an 80-year low in 2024, with regulatory risks and declining consumption helping to reinforce our "Negative" outlook on the Tobacco sector.
• Our Toll Facilities sector outlook remains “Stable” due to rebounded vehicle-miles, steady economic growth, minimal impact from federal actions, and the ability of toll road systems to adapt to post-pandemic patterns and inflationary pressures.
• We lowered our outlook on the Water and Sewer sector to "Cautious" from "Stable" due to ongoing budget pressures, regulatory compliance costs, and workforce challenges.

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