Government Report: Steady cashflow keeps the government sector strong

Construction spending for government buildings—excluding housing, education, and healthcare—expanded 14% in the fiscal year ending in June 2007. This is acceleration from the 4% growth in the prior fiscal year.

Spending for public safety buildings has been growing the fastest, but is projected to grow somewhat slower in the coming months. Still, spending will remain significantly higher than project cost inflation.

Government buildings are constructed when the cash for contract or bond payments is available, and cash is currently abundant. The 2006-07 fiscal year began with aggregate state government budget reserves equal to more than 9% of annual expenditures, nearly equal to the 10%-plus peak five years earlier. Budget reserves had fallen to 2-3% of spending just past the end of the last recession.

Sub-par economic growth over the last year will drop budget reserves in many states, but not by enough to cancel or delay projects already started or committed.