Tax receipts return education to growth

August 01, 2004 |

Except for a few short weather-related deviations, construction spending for educational facilities has been stuck at a $75 billion annual rate for a year. Now a new period of expansion is expected to begin at the end of the year and extend at least into 2006.

The two-year spending pause began when the recession reduced the amount of construction funds available from taxes, donations, and investment earnings. Now that restraint is being lifted in a rapidly expanding economy.

This increased spending will be a gradual process over several years. However, there is a large increment of new money at the beginning of each fiscal year, July or October for most states and cities.

State and local tax receipts have been rising faster than inflation for a year. Spring collections were 5.5%, after inflation, above the previous year. But very little of the initial rise in tax collections was used for school construction. The extra money was used to repay debt, fund Medicaid, and restore critical public services that had been cancelled a few years earlier. Now most states and cities are in better fiscal health and are adding to construction funding for the first time in two or three years.

The 9.6% year-to-year rise in real tax receipts in the Pacific Coast so far this year suggests growth in added capacity for schools. By contrast the 5.9% gain in New England and the 7.3% gain in the Mid-Atlantic states suggest growth in renovation and replacement since enrollment is nearly steady in these regions. The enrollment bulge moves into high school this fall, so the mix of projects will tilt to grades 9–12 from K-8.

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