Published Online: March 17, 2004
Published in Print: March 17, 2004, as School Construction Defies Fiscal Doldrums

School Construction Defies Fiscal Doldrums

The sagging economy of recent years may have meant hard times for much of the nation's education sector, but one area has been flourishing: school construction.

To the surprise of many economists, construction and renovation of K-12 schools hit record highs beginning in 2002, according to industry analysts. And for the first time, they add, construction of new schools sharply outpaced renovations or additions to existing facilities, reversing a long-standing trend.

Last year, nearly $29.2 billion was spent on the construction and renovation of public K-12 educational facilities, a 4 percent increase from $28.1 billion in 2002, according to the National Clearinghouse on Educational Facilities, which used data from McGraw-Hill Construction Dodge.

That figure is expected to dip slightly, to about $28.5 billion, this year, then climb again to about $29.4 billion next year and to $30.7 billion in 2006.

"School construction has pretty much propped up the construction field for the past couple of years," said Thomas A. Kube, the executive director of the Council for Educational Facility Planners International, based in Scottsdale, Ariz. "There are firms in a number of different areas who have never done schools before and are now deciding to enter the market."

Experts say a host of factors have contributed to the boom.

First, the strong economy of the late 1990s spurred voters to back a tide of state and local school construction bonds, including several that were unusually large.

But policymakers were also pressured into action after several high-profile reports focused attention on decaying education infrastructure, and the struggles of some areas to build schools fast enough to keep up with swelling enrollments and efforts to lower class sizes.

Lawsuits and changes in school finance formulas also led to more money being channeled to school buildings, especially for impoverished districts. Major renovations needed to handle new technology contributed to the school construction rush.

But the boom has not reached all regions of the country. Much of the activity has been in areas with large populations and increasing enrollments, including California, Florida, New York state, and Texas.

"I see an awful lot of school districts that are not [building]," said Paul Abramson, an education and planning consultant in Larchmont, N.Y. "I see a lot of this construction coming from the same districts over and over and over." And some education advocates say schools aren't in much better shape than in 1995, when a landmark report by the General Accounting Office, the investigative arm of Congress, became the rallying point for proponents of more spending on facilities.

That study found that $112 billion was needed nationally to renovate or replace long-neglected schools to bring them up to code, and that one-third of students attended school in buildings that were in dire need of repair. ("States Do Not Spend Enough to Fix, Build Schools, Report Says," Jan. 10, 1996.)

Subsequent reports by the GAO and the National Education Association said that more than $250 billion was needed to renovate schools to use basic technology.

"It's one of those things, though, where they were so far behind that even that big boost wasn't enough to catch up," said Michael Griffith, a policy analyst with the Education Commission of the States, based in Denver. "Another report needs to be done."

Desert Boom

While rising enrollments are fueling much of the building boom nationwide, few places know the challenge better than Clark County, Nev.

Enrollment in the expansive southern Nevada district that includes Las Vegas has more than doubled in the past decade or so, from 122,000 in 1991 to more than 268,000 this year. Clark County has opened 26 new schools in the past two years and will open, on average, more than one school a month for the foreseeable future. Voters there have been generous, passing several major school construction bonds in the 1990s. The most recent, approved in 1998, was worth $3.7 billion.

Voter Approval Largest local school construction bonds passed in 2003.

School district
Wake County, N.C. $450 million
North East, Texas* 449 million
Denver 311 million
Guilford County, N.C. 300 million
Fort Bend, Texas* 230 million
San Francisco** 295 million
Fairfax County, Va. 291 million
Jordon, Utah 281 million
Phoenix Union High 205 million
Leander, Texas* 190 million
*Independent school district         *Unified school district                SOURCE: The Bond Buyer

Fred Smith, the district's director of construction management, said the growth is not expected to slow in the next decade, as thousands of new residents move to the area for its climate, low taxes, and jobs. Even if the county could build a fence and turn away new residents, he said, the schools would still see large increases in enrollments because the birthrate is high.

As with some other large school systems, Clark County has become increasingly strategic about keeping up with the dizzying pace of its building.

The district is able to build so many new schools by using an in- house staff of about 60 employees to oversee its construction projects, and by reusing architectural blueprints to create prototype school designs.

"What normally would be a five-year process from cradle to grave, we've been able to compress that down to about 30 months for elementary schools, 33 months for middle schools, and 38 to 42 months for high schools," Mr. Smith said.

Once schools are built, high-growth districts must then deal with the emotional issue of moving students from existing schools to the new ones. In a district like Clark County, those moves can happen more than once during a student's academic career. As a result, the district has a committee of parents and school officials to guide the process.

"Determining attendance boundaries and who will go to new schools is one of the most emotional and politically charged issues," Mr. Smith said. "People are moving into the valley and are crying for stability, and I look at them and say, 'You don't know what you've gotten yourself into.'"

Legal Aid

Large state bond initiatives and finance-equity lawsuits have also helped generate money for school construction projects, often in districts that had been unable to finance facilities locally.

Several states—most notably Arizona, New Jersey, and Ohio-have settled school finance lawsuits and agreed to make large contributions toward facilities. New Jersey, for one, is spending more than $6 billion over 10 years in its 30 neediest districts to settle its 1998 equity lawsuit, known as the Abbott decision.

Other states have been handing out money from bond initiatives—even as legislatures, in some cases, were cutting other education programs in their annual state budgets.

California saw its budget surpluses of the late 1990s turn into one of the most severe budget crises in the country in 2001. Yet while the education budget saw large cuts, the state doled out school construction dollars at an average rate of $35 million a day last year, thanks to a record $13.05 billion bond passed in November 2002.

On March 2 this year, California voters narrowly passed a $12.3 billion school bond measure. ("Calif. Voters OK Governor's Crisis Package," March 10, 2004.)

Supporters say the bonds are needed to accommodate swelling enrollments and the state's class-size reduction efforts.

Judy Marks, the assistant director of the National Clearinghouse for Educational Facilities in Washington, can't point to any patterns showing why some bonds pass and some fail, though she notes that many bonds in the past year have won or lost by close margins.

The results of bond elections in the coming year, she added, will likely determine whether the school building boom will continue.

Student Movement

Demographic shifts within states and districts are also affecting construction spending.

In some rural states, such as Maine, North Dakota, and West Virginia, declining populations have forced towns to close small schools and bus students to regional schools. West Virginia has been particularly active about building new schools to accommodate merged districts.

School officials in Denver have a different kind of problem.

While the 72,000-student system's population has remained fairly steady in recent years, district leaders are seeing big shifts in where students attend school within the district.

Hispanic families are trading small, brick homes in the city's northwest quadrant for larger new homes in the farthest northeast side of the city, where there are few schools. In addition, the city's former airport is being redeveloped as a massive new community in the northeast area that is drawing hundreds of families with school-age children.

Meanwhile, many young professionals are moving into the quaint northwest neighborhoods, causing enrollment to drop sharply in those schools—at least for now.

"You see a lot more people walking dogs than playing with kids," Denver schools Superintendent Jerry Wartgow said recently. But, he pointed out, many of the young professionals are having children, and when those children are of school age, they likely will boost local enrollments once again.

Although Denver has a program of public school choice in place, "what people want is neighborhood schools," Mr. Wartgow added.

In the meantime, the city is planning to use proceeds from a recent $310 million bond to build several new schools in the farthest eastern corner of the city. The new subdivisions there have resulted in overcrowding at existing schools, most of which now have brigades of portable classrooms.

Creative Financing

Districts in states that have not generated a bounty of bond revenue, or where the fiscal situation is especially tight, have gotten in on the construction boom by finding creative ways to finance their efforts.

                     Setting Records                While much of the nation's economy has sputtered in recent years, spending on school construction and renovation hit record levels beginning in 2002.  Projections call for similar spending levels over the next two years.

Dollar Value ($1,000s)  

2002 2003
Primary schools $9,936,149 $10,530,269
Middle/junior high 4,460,265 4,822,022
Senior high 13,135,402 13,343,716
Vocational 525,597 459,856
Total 28,057,413 29,155,863
Looking Ahead Totals
2004 $28,488,755
2005 29,443,567
2006

30,729,380

SOURCE: Data are presented with permission from McGraw-Hill Construction Dodge and may not be reproduced in any manner without written consent.

While such methods are not widespread, there is growing interest in finding alternative ways to pay for school construction, said Anne W. Miller, the executive director of the Association of School Business Officials International, based in Reston, Va.

Leasing facilities from other owners is one method that allows districts flexibility in case their facility needs change. In traditional lease plans, a district is usually not responsible for constructing or maintaining a building.

Other types of creative-financing methods that are on the rise include lease-purchase arrangements, in which a portion of the district's monthly rent goes toward buying the building. Then there are construct-leasebacks, in which schools are built by the private sector and then leased long term by the districts.

Increasingly, districts are partnering with other public agencies or private groups to defray the costs of new facilities: In exchange for a financial contribution, the partner may use a portion of the building for a designated purpose. For instance, some schools house community health clinics or YMCAs.

Some districts, particularly in high-growth areas, are negotiating deals with developers to donate land or money for schools. For example, in an exclusive area of Washington, a housing developer built a new, larger facility for the District of Columbia school system's 350-student Oyster Bilingual School in exchange for a portion of the land that was part of the old school's campus.

Some districts have gone so far as to ask members of the community to contribute.

In Maine, many districts are attempting to supplement state funds by raising money through local taxes and contributions from businesses, foundations, and individuals.

In the 2,190-student Falmouth district, school officials and community members wanted a larger, better-equipped high school than state money would cover. So they raised more than half the funding for the $21 million facility locally—$11 million in local bonds for the building, and $600,000 in private donations.

Jean Gulliver, the chairwoman of the Maine state board of education, who also heads the committee that oversees the Falmouth education foundation, said the $600,000 was used for such enhancements as athletic fields, an irrigation system, and an orchestra pit, lighting, and a sound system for the theater.

Districts aren't alone in rethinking how to finance schools.

In Massachusetts, Gov. Mitt Romney, a Republican, recently proposed that the state borrow money for school construction over a 40-year term, instead of the usual 20 years, because school buildings are used, on average, for 40 years.

The plan, which would result in more but smaller payments, would require approval by the legislature.

Problems in Planning

But the huge growth in enrollments and in construction expenditures has many experts raising questions about the decisions school districts are making and how well they are planning.

For example, some contend that districts tend to build larger schools than is believed to be educationally beneficial because they are cheaper and faster to build.

Districts might also reuse architectural plans in places where the buildings don't fit the needs of the school, or don't fit well on the land, other observers say.

Further, Mr. Griffith of the ECS said, some states don't undertake comprehensive surveys of their facilities to find out their exact needs before spending millions of dollars on school construction.

It is difficult, meanwhile, to predict if the construction surge will continue. While enrollments nationally are expected to rise slightly in coming years, some analysts believe the building boom may be subsiding.

Mr. Abramson, the education and planning consultant in New York, said his data show that the trend has already slowed. He thinks it will subside even more unless the economy improves further, or more reports and publicity on the issue put renewed pressure on policymakers.

Mr. Abramson analyzed data for an annual report by School Planning and Management magazine that concluded that in 2002, for the first time, school construction outpaced school renovations. "The market is still very strong," he said, "but it's being affected. ... The economy is certainly not booming the way it was in the late 1990s."

Vol. 23, Issue 27, Pages 1,28-30

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