K-12 Schools Report

High schools led the growth in K-12 construction spending during the last year with peak enrollment now in the 10th grade. Middle school construction spending fell 15%.

Surprisingly, construction spending expanded for K-5 schools at about the 13% pace recorded in the high school market. This most likely reflected delayed replacement and upgrading and is not expected to continue with K-5 enrollment flattening in the next few years.

Overall, K-12 construction spending will increase 6% this year and in 2008, which is approximately the pace of project cost inflation. Funds available for K-12 construction are less generous than in 2004-07, but still about normal. Available funding will weaken further for more than a year as local property, corporate, and income tax revenue growth slows, possibly even declining slightly in mid-2008. Expect funding cutbacks in financially stressed Arizona, Florida, and Nevada, and possibly California.