Aid ‘RAN‘ Out

Research evidence excerpt

Aid ‘RAN‘ Out

Idea

July 20, 2026 03:25 PM GMT

Morgan Stanley & Co. LLCMMunicipal Strategy | North America Mark T Schmidt, CFA

Strategist

Aid 'RAN' Out Mark.Schmidt1@morganstanley.comMorgan Stanley India Company Private Limited+ +1 212 296-8702

Gowtami P Pyla

School districts may rely more on short-term notes to bridge StrategistGowtami.Pyla@morganstanley.com +91 22 6995-2290

cash flow in the years ahead. Schools are essential; investors Samyuktha Gopal

who understand this may find value in upcoming sales by Strategist

Samyuktha.Gopal@morganstanley.com +91 22 6995-2022

Chicago and elsewhere. If RAN volumes pick up, don't run away.

Key Takeaways

Chicago schools' upcoming Tax Anticipation Note (TAN) issuance could mark a

rise in short-term borrowing (RANs, or Revenue Anticipation Notes) by school

districts.

Shrinking reserves nationwide create modest ratings pressure, given that revenue

for most school districts could dip next year too.

Extending short-term credit often makes sense, given schools' essential nature

and the highly predictable nature of tax collections and state aid.

Investors often conflate short- and long-term challenges. But with pension

funding in a better spot, long-term challenges appear manageable.

State funding formulas generally slow school aid declines, reducing roll and

repayment risks on short-term school financing.

Is the ESSER endgame finally here? Fears of large budget cuts didn't pan out, but

2027 could mark a turning point. Districts face budget shortfalls for the 2nd or 3rd

straight year. Many have chosen to spend down reserves instead of cut staff.

Go see The Odyssey, but please don't fight the last war. Why have veteran muni

investors long cast a wary eye on short-term borrowing? As often the case, New

York looms large.