Back on Infrastructure Spending

U.S. cities and states are decreasing their spending on everything from highways and police stations, to sewage systems, which could have widespread effects on the economies of communities, The Wall Street Journal reports.

WSJ reports that state and local governments spent in August $248.47 billion on construction, the lowest amount since March 2014. States are curtailing investments in infrastructure and higher education in trying to spring economic growth forward, says Gabe Petek, managing director for state ratings at S&P Global Ratings.

“We’re seeing anemic [government] revenue growth and consistent austerity-oriented budgets,” says Petek.

For example, in Kansas, city officials delayed 24 road-construction projects this spring in trying to help balance the state’s budget.

Many states continue to struggle to fully recover from the Great Recession and the large declines in tax revenues that occurred from it. Pew Charitable Trusts reports that in late 2015, inflation-adjusted tax revenue was lower in 21 states compared with the peak before or during the recession.

State tax revenues continue to fall too, dropping 2.1 percent in the second quarter compared to a year earlier, according to the Rockefeller Institute of Government. Such revenue decreases are curtailing state and local municipalities’ ability to borrow money for capital projects.

The University of Connecticut has felt the affects. It had to delay a $150 million renovation of its Gant Science Complex by several months as well as a $10 million remodel of the roof at Gampel Pavilion.

“We’re trying to balance priorities,” says Scott Jordan, the university’s chief financial officer. The cuts are “forcing us to take a look at what things support our core mission and Connecticut’s economy.”

Nevertheless, analysts expect things to look up soon for municipalities. Construction of public buildings—such as courthouses, fire stations and other government facilities—are forecasted to increase in 2017, according to predictions from Dodge Data & Analytics in its recent annual outlook.

“This is expected to be the bottom of the cycle for public buildings, as government fiscal conditions have slowly mended,” the report notes.