With Covid cash gone, public schools swarm muni bond market

The pandemic-era pause on borrowing is over. Public schools are flooding the municipal-bond market to fund long-delayed upgrades as federal aid runs out and enrollment pressures mount.

Bond issuance from school districts has reached nearly $45 billion so far this year, up more than 35% from the same period in 2024, data compiled by Bloomberg shows. That’s greater than the roughly 20% jump in bond sales overall in the muni market.

There’s a sense among muni analysts that most districts are, for now, in healthy enough financial shape to absorb the jump in debt levels. Yet the bond rush still signals a turning point.

“Those federal funds were a windfall for many school districts and did cause a decline in K-12 issuance that I think was artificial or temporary, so that’s come to an end,” said Anne Noble, a managing director at Stifel Public Finance focusing on the K-12 and higher education finance. “We’re just seeing some normalization, honestly, of K-12 volume.”

A mix of elevated construction costs and pent-up demand for projects is also fueling the surge in bonds. But bankers say the push to upgrade campuses is increasingly about competition; public schools are trying to keep up in the national race as they compete for a dwindling pool of students after a declining birth rate has caused a dip in school-aged children. 

Noble called the “keeping up with the Joneses” element a “real factor” in driving the current volume of public school bonds, and added that athletic facilities are often at the nexus of these comparisons.

“Even in a state where we don’t see high private or charter school numbers, districts are still competing with each other to get families to choose to live there,” Noble said. “Facilities are very tangible. People can see them, people can tour the facilities and choose a district based on nicer facilities.”

Arms Race

Northwest Independent School District, which services more than 29,000 students outside of Dallas and Fort Worth in Texas, sold $783 million of debt earlier this month. Voters approved a $2 billion bonding package in 2023 to build new schools, finance upgrades and fund three new football stadiums. And Denver’s school district sold debt in January for voter-approved projects including adding air conditioning and technology upgrades to classrooms. 

That arms race echoes trends seen in higher education and elite private schools, where top-tier K-12 campuses issued more than $800 million in debt last year alone.

The 2025 spike in school bond deals is also tied to the election last November. Because districts typically need voter approval to issue debt — and raise property taxes to repay it — referendums on the ballot during presidential election years tend to be the most successful due to high turnout.

“Education is a community issue,” said Dustin Avey, co-head of public finance at Piper Sandler. “They’re making decisions in terms of what they want education to look like in their community, and that includes facility needs and facility improvements.” 

California voters approved the issuance of over $50 billion of muni bonds for schools and community college districts last year. So far, the public school districts have issued about $9.5 billion in 2025, up about 43% from last year, according to data compiled by Bloomberg.

Oregon, North Carolina, New York, Ohio, Michigan and Wisconsin are among the other states where school bond volume has already surpassed 2024 levels, according to an analysis by Stifel. 

Katherine Jacobson, a managing director and co-head of RBC Capital Markets California education group, said the first six-months of this year has already made 2025 the busiest stretch of her 21-year career. 

“There’s been this backlog of need to fund improvements in schools that go back to the beginning of the Covid era. I think that is why we saw this cycle be as dramatic as it was,” she said. “The majority of the funds that I’m helping raise are to modernize data facilities and bring them up to the 21st century.” 

Investors have largely absorbed the influx of school paper without issue, but the crowded market means bankers must work harder to stand out. 

“To get investor attention, it requires a little bit of something else,” said Alexzis Fuke, a managing director at Raymond James Financial. She said larger issuers with name recognition tend to receive warmer investor reception. “Ultimately liquidity is huge right now in the market.”