Trends and Opportunities in K-12 Capital Improvement Funding: 2018-2020 & Beyond

by Jim Norwood

K-12 Solution Providers need to track school funding closely to be successful in a highly competitive business environment. Capital improvement funding for schools, however, continues to be difficult and contentious. SchoolBondFinder has found that as daunting as the funding challenges are, the good news is that educational construction spending has almost recovered from the great recession, and is on track in 2019 to finally meet or exceed levels not seen since 2009. As an election year, 2020 is poised to be a particularly large year for capital improvement dollars. The last decade has been difficult, but school districts have been scratching and clawing to find improvement funding, driven by both population growth trends and increasingly aging facilities in need of replacement, renovation, and upkeep.

SchoolBondFinder believes it is more important than ever for companies who serve schools to have timely knowledge of where “actionable” dollars will be available. Traditionally, public schools pay for ongoing operating expenses through funds raised primarily from local property taxes. Capital improvement projects, on the other hand, are often funded by the issuance of bonds to raise the dollars to build new schools, to renovate and improve existing buildings, and to acquire new physical items. These bonds are then paid back over time from an increase in local tax revenues. Early knowledge of bond dollars becoming available (or disappearing) is crucial for companies providing equipment and services to K-12 schools, especially when funding dollars may not be found where they were in the past.

Public schools, often in struggling areas, must compete for much-needed funding. In this environment, SchoolBondFinder believes there are still significant opportunities for companies supplying construction and renovation services to K-12 districts, as well as school safety, transportation, and technology upgrades, but that now more than ever companies need the most accurate, up-to-date information in order to accurately identify where those business opportunities are.

SchoolBondFinder has found public school capital expenditures are driven by two main factors, tempered by local, state, and national political pressures: 1) Aging, outdated facilities and 2) Growth and shifts in population. In the instances where new construction and/or renovation is being discussed or proposed, SchoolBondFinder tracks the availability of those “actionable” dollars and has identified trends that are affecting where those dollars will flow, in terms of both funding areas and geographical location. One such trend is that many states are dealing with years of deferred maintenance, particularly after the Great Recession of 2008-2009. The average public school building in the United States is over 45 years old. In extreme cases, such as Hawaii, 1 in 5 schools is more than 100 years old, and the average age of a school building is 61. Thus, deferred maintenance issues are driving demand for renovations and, in some cases, for new construction to replace buildings that are no longer viewed as viable.

During 2018, SchoolBondFinder tracked over $80 billion in school bond elections, of which almost $67 billion passed. This is a passing rate of 84%, a similar percentage to past years. In short, most bond issues pass, but the dollar amounts at stake vary from year to year. For instance, Presidential general election years are when the most dollars are at stake. Mid-term election years follow close behind, trailed by years in which there are no statewide or nationwide elections. Overall, K-12 capital improvement spending continues to rise. If these trends continue, 2019 will continue to be a strong year for capital funding opportunities, and 2020 may see school district capital funding greatly surpass levels last seen before the recession of 2008-2009. SchoolBondFinder is already tracking opportunities into 2021, 2022, and beyond.

Geographically, the population growth trend in states in the West and South continues, according to the U.S. Census Bureau. This growth is driving facilities needs in Texas, Florida, and California especially, but it should be noted that Nevada and Idaho are currently the fastest growing states by percentage. Utah, Arizona, Florida, and Washington also continue to see strong growth. On the other hand, New York and Illinois saw a decline in population.

All data SchoolBondFinder tracks includes links to NCES (National Center for Education Statistics) demographic information, as well as to online news sources describing in greater detail how bond issues and needs are being presented to the local public. Bond opportunities are also presented on an interactive map, giving site users the ability to select “favorite” bonds for easy access and tracking, as well as finely filter search results. Data results can be listed directly from the site, or exported in a comma separated value format (CSV) for import into spreadsheets or customer relationship management system, or exported as alerts to a user’s email or SalesForce installation.         

Public education is in the midst of a daunting shift in where state dollars may potentially flow. This shift will present many challenges but also opportunities to companies who provide services in construction, renovation, school safety, technology, and transportation. The opportunities will come from the ability to track where aging facilities, deferred maintenance, and population shifts have led to public support for construction and updating.

As more states begin to supply funding for educational choice initiatives, there may also be more bond dollars available for private and charter school construction and renovation as well.  SchoolBondFinder will continue monitoring these trends and tracking where actionable dollars will be available as capital projects move through our system, from being on our watch list, to being proposed for an actual vote, and then to eventual passage or failure.

It is important to note that “failed” opportunities almost always come back as future opportunities on our watch list. From watch list, proposed, passed or failed, the SchoolBondFinder platform provides companies with an agile tool set for staying tuned to real-time information, shifting trends, and business opportunities. Early, accurate, information is critical, now more than ever.

Jim Norwood is the Director of Innovation for The Amos Group. He performs research, development and design for both SchoolBondFinder and SchoolBondNetwork. For more information on this new EDmarket member service, please visit http://www.edmarket.org/school-bond-finder/.