Public K-12 a drag on education sector

Education construction spending fell 8% from a June 2003 peak to February 2004, but expansion is expected to resume later this year with an accelerated pickup forecast for 2005.

The slowdown is on the supply side as enrollments continue to rise. The recent decline was entirely in the public K-12 sector. Middle and high school projects funded several years earlier — many before state and local government property tax and state aid revenues plunged after the recession — were completed and fewer new projects were started. Major projects now being started were likely funded in 2002-03 when public budgets were the most strained.

The public K-12 sector is expected to shrink further for contractors and materials suppliers until late this year and then not grow significantly until FY 2006 budgets are put together in July or October 2005. Designers will see the turnabout sooner.

Of late, the public higher education and the private school and college markets have been steady, with sustained, if slow, expansion expected in late 2004. These sectors have fared better than public K-12 because bigger enrollment increases have diverted some money from K-12 to colleges at the state legislative level. Also, the tuition, stock market returns, and income tax and donation funding sources are more current with the economy than the property taxes that finance K-12 projects. Expect a small pickup with the FY 2005 budgets and more in 2006.