Florida school districts are borrowing at a record pace to cover everyday costs as bills arrive before tax dollars do. So far in 2026, they have issued $1.4 billion of tax-anticipation notes, or TANs, a 62% jump from all of 2025, according to LSEG data through Oct. 2. TANs are the short-term IOUs governments use to span the gap between outflows and incoming tax collections, and districts are tapping the municipal market to fund operating expenses.
Credit watchers see what that can imply. According to Fitch Ratings senior director Michael Rinaldi, "Issuing tax anticipation notes in large or increasing amounts can indicate underlying liquidity or credit stress." "This reliance may signal a structural budget gap or lower year-end cash balances."
Fewer students and more alternatives are pressuring revenue. With the national birth rate down, public school enrollment has been slipping broadly, and in Florida, the swift expansion of school choice programs has intensified the pressure. The state allocated almost $4 billion during the 2024-2025 school year for private or other nontraditional education across several programs, which temporarily left public schools with a $47 million funding gap, according to the latest Florida Department of Education audit. For 2025-2026, the department reported approximately $4.41 billion in school choice scholarship funding.
The hit is showing up in credit metrics. In a report published in September, S&P Global Ratings noted that over the past year, downgrades and other negative actions affecting school districts outpaced upgrades by roughly three to one. In May, S&P shifted the outlooks for the state's two biggest districts, Miami-Dade and Broward, to negative, pointing to the financial impact of falling enrollment. Both districts are frequent TAN issuers and sold notes earlier this year.
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Governor Ron DeSantis broadened access to school choice in 2023. Where eligibility once depended on income or disability status, all families can now use public funds for private schools and other nontraditional options. "Florida recently expanded its school choice program, and many districts are making operational adjustments to account for lower student counts, such as staff reductions and school closures," analysts at S&P led by Michael Parker wrote in June. In a related move, Fitch analyst Tammy Ou said in lowering Hillsborough's outlook that "traditional enrollment has declined, driven by growth in school choice participation that has diverted state aid."
Timing also hurts cash flow. Florida does not collect property or income tax at the state level, and most school money comes from local property taxes that are largely paid between November and March while expenses run year round. Voters will decide in November whether to mostly eliminate local property taxes, though school-related levies would be exempt.
To bridge the seasonal gap, Hillsborough County Public Schools, which serves Tampa, issued TANs in July for the first time as a "cash flow management tool" until most local tax revenue arrives, said district communications chief Tanya Arja. In September, Fitch revised Hillsborough's outlook to negative, citing a drop in reserves driven by "continued operating pressure from enrollment-related revenue losses" alongside rising costs.
Pandemic-era federal aid has ended just as Florida's overall population has surged since the pandemic while public school enrollment has been falling since 2023, cutting per-pupil funding. The pressures are playing out most in South Florida, where President Donald Trump's immigration crackdown has also added strain. "It's this cumulative effect of vouchers and so many alternative choices for K-12 education that school districts are shrinking. Student population in public schools, particularly in South Florida, is shrinking," said Robert Gang, a Miami-based lawyer who works with districts on TANs. Or as he put it more broadly: "It's a combination of factors that have been building up over the past several years, but have really reached a significant level this year."
If you hold muni funds or individual school bonds in Florida, this mix matters. More short-term borrowing, negative outlook shifts, and enrollment declines all make the budget math harder. Watch how districts manage cash through the year, how the November tax vote shakes out, and whether student counts stabilize, because that trio will influence yields and volatility in school-related muni debt into 2026.
When schools lean on debt, budgets are tighter than they look. Join Market Briefs free and follow the numbers.
