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U.S. Public Finance 2025 Outlook: Cautiously Stable For Most Sectors While Others Are Pressured

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S&P Global Ratings has published its 2025 outlooks for all key sectors of U.S. public finance. In each report, we provide insight on the key issues we're watching in the year ahead (see links to each report below). Full details of the sector views are available through our interactive dashboard, by clicking here. The below image is a preview.

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U.S. States

States' credit fundamentals have strengthened, providing financial headroom to navigate potential challenging coming budgetary conditions. In the fiscal 2026 budget cycle, states face increasing costs following a period of inflationary pressure, past wage adjustments, waning federal support, and changes in state-level tax policy. Nevertheless, we expect state credit quality to hold fast. "U.S. States 2025 Outlook: Eyes On Washington, Focus On Budgets," Jan. 7, 2025.

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U.S. Local Governments

Economic and federal policy uncertainty heightens the importance of fiscal management in preserving credit quality. Although we don't expect a significant change in the magnitude of downgrades, we do expect fiscal buffers accumulated in the past three years will erode, heightening instability in a sector that has remained remarkably steady since the pandemic. "U.S. Local Governments 2025 Outlook: A Stable Start To The Year While Prospects Look Precarious," Jan. 8, 2025.

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Not-For-Profit Acute Health Care

Good revenue and demand for services, easing of certain labor-related and inflationary expenses, and generally sound balance sheets support our stable outlook on U.S. not-for-profit acute health care providers. That said, sector uncertainty persists as a subset of providers continues to work toward improved and stable cash flow, prioritizing capital investments, and facing a new federal administration. "U.S. Not-For-Profit Acute Health Care 2025 Outlook: Stable But Shaky For Many Amid Uneven Recovery And Regulatory Challenges," Dec. 4, 2024.

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Not-For-Profit Higher Education

S&P Global Ratings' view of the higher education sector in the U.S. remains mixed for the third consecutive year. Credit quality bifurcation has widened. Strong institutions hold their market position, excel at fundraising, and have healthy balance sheets while struggling schools face enrollment declines, leading to strained operations and, often, liquidity issues. "U.S. Not-For-Profit Higher Education Outlook 2025: The Credit Quality Divide Widens," Dec. 5, 2024.

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Charter Schools

S&P Global Ratings' view of the U.S. charter school sector remains stable, supported by ongoing healthy demand and steady-to-growing per-pupil funding, for now. Many schools continue to hold their market position or expand, while maintaining healthy liquidity and operating margins. Competition for students remains elevated, but budget pressures are most pronounced at the lower end of the ratings scale. "U.S. Charter Schools 2025 Outlook: Stability For Now, With Pockets Of Pressure," Jan. 22, 2025.

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Not-For-Profit Public Power, Electric Cooperative, And Gas Utilities

Not-for-profit public power, electric cooperative, and gas utilities remain susceptible to negative rating actions because of rising operating expenses and the costs of direct and indirect capital investments. These pressures constrain rate-making flexibility and remain an obstacle to timely and adequate cost recovery. "U.S. Not-For-Profit Public Power, Electric Cooperative, And Gas Utilities 2025 Outlook: Climate Change, Energy Transition, And Load Growth Underlie Negative Trends," Jan. 14, 2025.

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Not-For-Profit Utilities

Sector-specific capital and operating costs continue to outpace broad inflation measures and, in many cases, have not been fully passed through to ratepayers. Although some costs have abated relative to recent years, payroll growth, staffing shortages, construction costs, and higher baseline interest rates will continue to drive expenditure increases. We expect higher capital investments and affordability constraints to continue pressuring the sector in 2025.  "U.S. Not-For-Profit Utilities 2025 Outlook: Rough Water Likely Will Underscore Credit Trends," Jan. 15, 2025.

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Not-For-Profit Transportation Infrastructure

S&P Global Ratings' view of business conditions and credit quality across the U.S. not-for-profit transportation infrastructure enterprise sector for 2025 is stable, as many asset class operators reach operational high watermarks, work to rein-in inflationary expenditure growth, and navigate often significantly more expensive capital improvement programs. "U.S. Not-For-Profit Transportation Infrastructure 2025 Outlook: Tariffs May Rock The Boat As The Sector Stays On An Even Keel," Jan. 9, 2025.

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Public Finance Housing

Historically, experienced management teams have pivoted to sustain stable financial performance and profitability. We believe not-for-profit lenders and developers could innovate to preserve and develop affordable housing amid rising federal policy uncertainty. "U.S. Public Finance Housing 2025 Outlook: The Stable Era Endures, Underpinned By Strong Management," Jan. 16, 2025.

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Related Research

This report does not constitute a rating action.

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geoffrey.buswick@spglobal.com
David N Bodek, New York + 1 (212) 438 7969;
david.bodek@spglobal.com

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