Stalled K-12 Market Gets a Boost During 2006-07 Fiscal Year

August 01, 2006 |

Construction spending on K-12 public schools is expected to increase 10.9% this year, and an additional 12.1% next year. After figuring in cost inflation, real growth will be about 4% in 2006 and near 6% next year.

Education project spending typically peaks well after the end of the business cycle expansion period, so further inflation-adjusted growth is expected in 2008 and most likely in 2009. These increases follow several years of spending decreases, when figures were adjusted for inflation.

The anticipated growth in school construction spending through 2009 is very modest compared to the last building boom, which ended in 2002. The reasons: slower enrollment growth and the transfer of prospective federal school construction funds to defense and security spending.

The 2006-07 school year will see a 9th grade demographic bulge, and the mix of school projects will continue to track that grade level with the largest enrollment. High school construction spending, therefore, won't reach its peak for the next few years. Elementary schools experienced their peak inflation-adjusted spending in 2001, and the middle school peak is expected within the next year.

Overall, K-12 construction has been stalled since November due to rising construction costs that put projects over budget. Some projects have been delayed while others were redesigned with less space and fewer features in order to stay within budget. Many current projects were budgeted several years ago before construction costs began to rise sharply early in 2004. Looking ahead, slower construction cost inflation and improved public budget balances at the beginning of the 2006-07 fiscal year will kick start K-12 construction by the end of 2006.

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