Education work stalled by state/local budget deficits

Spending for educational facilities has declined 3.8% since last October after several years of double-digit increases. Most state and local governments have had to make substantial spending cuts to balance their budgets. This forced the cancellation of some budgeted FY2003 (ending June 30) spending, resulting in the decline. More cuts are likely to come for FY2004. The result is only a 0.4% rise in spending for calendar year 2003, after an 11.5% rise last year. But all is not lost. Construction spending is expected to expand 8.1% next year. This assumes that economic recovery is rapid enough to yield both the tax revenues and confidence to pay for current renovation and addition plans.

Private educational facilities have cut construction spending only 1% since October. But they began to trim spending about a year sooner than public education and will begin to increase spending before the end of the year. Their funds come from tuition that closely tracks aggregate personal income and from investment earnings. Both of these sources will improve sooner than the tax receipts that fund public education.

Note that the May annual revision of construction spending data reduced spending for education by 10%, transferring some projects to office, public safety, commercial, and lodging where the historical totals were increased. This has had little impact on forecasted trends.