Keating Report: Government Budgets & Spending Outlook, 2nd half 2009, PART 2
Back in January, the Government Product News forecast on government budgets and spending was delivered amid a backdrop of bailouts and proposed stimulus packages, and unprecedented pressure on the government to resuscitate the nation’s critically wounded economy.
Six months later, some of the problems remain, such as high unemployment, sluggish credit markets and a teetering domestic automotive industry. A surging stock market, modest gains in home sales and growing consumer confidence, however, are signs that the worst may be over.
What’s more, the American Recovery and Reinvestment Act (ARRA), that President Obama signed into law on February 17, is giving a needed shot in the arm to the U.S. economy.
Local governments, meanwhile, are facing huge challenges. The decline in auto dealerships around the country, coupled with the drop in car sales, is costing municipalities millions of dollars in lost sales taxes, reduced income and property taxes as well as drops in important fee revenue.
The National League of Cities’ latest City Fiscal Conditions report concludes that the financial health of U.S. municipalities is at its worst since before 1985. In response to the economic downturn, cities are implementing hiring freezes and layoffs, delaying capital expenditures and instituting service cuts.
Mayors of U.S. cities, however, are encouraged by the Obama administration’s fiscal year 2010 budget, and are pleased to see investments in the areas of community development and housing, education, community-oriented policing and high-speed intercity passenger rail — all key priorities for the Washington-based U.S. Conference of Mayors.
Some growth in public construction
The public buildings construction category should remain steady for the remainder of 2009, with some 48 million square feet of construction under way, and the value of construction rising 12 percent over 2008 levels, predicts McGraw-Hill’s “Construction Outlook 2009-Spring Update.” The category includes detention facilities, courthouses, military and federal civilian buildings, transportation terminals and other public sector buildings. McGraw-Hill Construction is based in New York.
Upgrades and replacements in local government fleets
Local government fleet managers will be shopping for new vehicles in the coming months, predicts Stephen Latin-Kasper, market data and research director for the National Truck Equipment Association, a trade group based in Farmington Hills, Mich.
“The anecdotal feedback that we are getting is that cities and counties will use federal stimulus dollars for things like hybrid upfits to existing trucks, where the conventional vehicle is converted to a hybrid vehicle. Local governments will also be replacing old equipment, like all the snowplows that they burned out in the northern half of the U.S. this past winter.” Highway and street construction contractors also will be adding to their fleets, says Latin-Kasper.
Technology in government
Governments continue to be major buyers of many products and services — and their appetites are growing for some products. Government demand for non-rechargeable batteries, for instance, is expected to increase 3.9 percent annually by 2012, with the value of government purchases of those batteries exceeding $520 million, estimates the Freedonia Group, a Cleveland, Ohio, market research firm.
Another federal stimulus package on its way?
“We are starting to hear some rumblings about the potential for another so-called federal stimulus package or bailout,” said Tad DeHaven, a budget analyst at the Cato Institute, a libertarian think tank based in the nation’s capital. “Although there is bailout fatigue in Washington, D.C., and across the U.S., I think revenues for state budgets and local budgets as well, are going to continue to underwhelm. So, I suspect there will be a move, probably with California taking the lead on this, to get Washington to put together another bailout package for the states, and of course, it’s all contingent on the economy.”