NFMA 2026: The Top 5 Themes Across Municipal Finance

Isabela Fleischmann, Municipals Reporter

Atlanta received the National Federation of Municipal Analysts conference in May and discussions were around how federal funding is less reliable, more politically contingent and harder to forecast than it was a cycle ago. The institutions drawing least concern are the ones that stopped waiting for Washington to stabilize. These were the key themes discussed at the conference:

1. Federal uncertainty is now a structural credit variable.

This theme ran through higher education, public power, not-for-profit healthcare and state and local government credit, sectors that together account for a substantial share of the $4 trillion municipal bond market.

The panel discussed that fiscal pressure forces local governments to improve their own fundamentals and framed political polarization not as a backdrop but as an active credit variable.

Justin Marlowe, director of the Center for Municipal Finance at the University of Chicago’s Harris Public Policy school, argued that federalism itself has become a source of credit risk. One underappreciated dimension, he said, is how people perceive the economy, not just how it performs, feeds into credit conditions in ways analysts often overlook.

The panel also flagged the Environmental Protection Agency, or EPA, reduction of water and sewer system funding as a concrete near-term credit concern. Federal Emergency Management Agency, or FEMA, changes and federal grant cuts to universities were cited as additional pressure points, with states better positioned than cities to absorb the shock given stronger fiscal tools.

On immigration as a credit variable, Marlowe noted that population inflow figures for Florida and Texas can be misleading. The composition of that inflow – domestic versus international migration – matters significantly for fiscal capacity. The two populations behave very differently in terms of tax base contribution.

The panel’s broad consensus on the “is it worse now?” question was that conditions are more noisy and uncertain than definitively worse, as social media amplifies the signal problem for analysts trying to separate real fiscal risk from political rhetoric.

2. Higher ed: the crisis that didn’t fully arrive, and the one that might.

Universities spent much of 2025 in crisis mode. But the fiscal year 2026 budget outcome was a positive surprise to them, according to Liz Clark, vice president of policy and research at the National Association of College and University Business Officers.

Pell Grant funding was level-funded at $7,395 for the fourth consecutive year. Federal work study and Supplemental Educational Opportunity Grants, or SEOG, were preserved despite elimination proposals and courts repeatedly blocked attempts to cap indirect cost rates.

The Department of Education, despite persistent speculation about its closure, is not going anywhere, Clark said. The administration needs the agency to pursue its own rulemaking agenda on accreditation, loan limits and institutional accountability. The fiscal year 2027 White House budget request, which proposed a 90% cut to federal work study, elimination of SEOG and a move of career and technical education programs to the Labor Department, is largely a positioning document ahead of midterms, Clark said, not necessarily enacted policy.

Republicans may also attempt a second reconciliation bill this year. The more immediate risk, she argued, is quieter. New graduate loan caps enacted in last year’s tax legislation will force affordability conversations at kitchen tables over the next two months. But the enrollment impact will not be known until fall, a lag that makes the risk difficult to price now.

Universities were not passive during the uncertainty. Issuance in the first half of 2025 reached $25 billion, the panel noted, driven by precautionary market access preservation rather than genuine capital need. Universities expanded commercial paper programs, set up facilities and built scenario-based allocation models. Most of that capacity went unused, the panel said.

The longer-term strategic response is structural. Private equity and athletics capital structures represent an emerging frontier, with conference media rights deals opening financing doors that did not exist five years ago.

3. Public power: the load is real, the grid is not ready

Public power CFOs at the conference described a sector dealing with a version of the same problem from a different angle. Demand is accelerating faster than infrastructure can respond, and the federal policy environment is adding cost and complexity to an already difficult capital build.

Santee Cooper, the South Carolina Public Service Authority, described an organization projecting roughly 18% load growth in the near term and 33% longer-term, with a $6 billion capital plan over the next decade.

Still, physical system constraints come first, as the panelists discussed that data centers can interconnect far faster than generation can be built. Santee Cooper implemented a high-impact load rate for customers over 20 megawatts that requires upfront capital payment for transmission upgrades, a 15-year contract and a security deposit or letter of credit.

4. Healthcare: the second wave is coming

Not-for-profit healthcare panelists opened with an audience poll: the majority of attendees said their outlook on the sector is negative. The panel did not push back hard on that read.

The structural pressures are familiar: expense inflation outpacing reimbursement growth, persistent labor cost elevation, workforce shortages, Medicare Advantage plans paying roughly 62 cents on the dollar through upfront denials and prior authorization.

Panelists framed it as a skills-mixture problem requiring ongoing adaptation. The more acute near-term concern is the loss of Affordable Care Act subsidies. The hit is expected to reach 5 to 7 percentage points of payroll impact for affected systems, with a second wave of uninsured patients showing up in emergency departments expected to materialize in the second calendar quarter of 2026, according to the panel.

Southern states face the sharpest exposure, Georgia saw a 13% enrollment increase during the subsidy years, North Carolina 22%. Florida has 19% of its population on exchange plans. New York is at roughly 1%, according to the panel. The takeaway was that stronger systems are using the current environment to optimize debt structure, expanding revolving credit facilities as a liquidity buffer and issuing shorter-term flexible paper. Weaker systems are seeking stronger partners, accelerating consolidation.

5. AI: infrastructure, not a solution

Artificial intelligence came up across different panels and the tone was that real use cases exist, early deployment is underway, but the technology is being built into infrastructure rather than deployed as a finished product, and MSRB expects to have a new version of EMMA this year.

In healthcare, physician documentation burden was the highest-priority target. Ambient scribing tools that reduce a 14-to-15-hour charting day to something more manageable were cited as a leading near-term deployment case. In public power, the Lower Colorado River Authority described a 30-person cybersecurity department using AI-assisted monitoring for threat detection.

A panelist captured what many members are asking for in a single phrase: a “big red button” for financial statement production, the ability to automate report generation entirely.