Education construction put in place has suffered from reduced state revenues and fell 4 percent in 2011, but it is expected to recover to 3 percent growth, or $87.5 billion, in 2012. The key to this is largely from the increasing amount of tax revenues being collected by state and local governments, but also from a projected increase in the student population.
According to a report released by the Washington, D.C.–based National Governors Association and the National Association of State Budget Officers, “In fiscal 2011, the program areas where many states made mid-year general fund expenditure cuts were K–12 and higher education, as 18 states reduced K–12 education and 19 states cut higher education.”
The need to reduce the cost of school construction could lead to the use of more prefabricated construction and modular designs. Colleges and universities will see more students searching for lower tuitions and turning to online courses. Many college grads have discovered in the recent downturn that their expectations of immediately finding a good-paying job upon graduation have evaporated, and they are left with hefty, high-interest school loans and credit card bills. If incoming classes get the message, it could put downward pressure on university spending.
Many of the trends and challenges we outlined last year at this time are still affecting growth in school construction. At this point, the key variable affecting growth is the availability of funding as school boards and governors fight to balance budgets. In the meantime, teachers are being laid off and programs are being cut, so it will be difficult to justify new schools.
Panelists for the latest FMI Nonresidential Construction Index (Q1 2012) indicate that school construction is still in a low-growth mode. They have adjusted their long-term outlook so that it reflects their still-positive expectations, but they are less positive than they were a year ago.
According to a report by Ken R. Stevenson in the September 2010 National Clearinghouse for Education Facilities, school construction has increased about 50 percent since the mid 1990s when everyone realized how out-of-date and broken-down the schools built in the early baby boom days had become. Since that time, costs for school construction, teaching, and maintenance have gone up faster than revenues, and school systems are paying more interest on current debt. The growing need and lack of funding will likely drive new approaches to school use and construction. Despite estimates that the student population for public schools will grow by close to 18 million students by 2050—equivalent to 750 new schools—the current economic climate is not conducive to a building boom.