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Federal
construction-related expenditures, 1980 to 1986
In keeping with a practice begun early in this century,
on January 31, 1985 the President submitted to the Congress
a proposed federal budget for FY 1986 (beginning on
October 1, 1985). Although Congress will not approve
the budget exactly as submitted, the proposed budget
nevertheless offers valuable insights into future directions
in construction spending.
This year the budget proposals are of particular interest
because of the many major changes proposed for FY 1986.
A novel feature of the 1986 budget is that it contains,
in a supplement to the regular budget, 10-year projections
of federal physical investment and assessments of civilian
investment needs for selected purposes. |
This annual report is required
by legislation approved in October 1984 (Public Law
98-501). However, these projections are simply extrapolations
of past trends, and do not represent the Administration's
policies regarding future spending levels. For example,
for FY 1986 these projections indicate a level of federal
public works spending that is 9 percent greater than
the amounts that are actually proposed in the FY 1986
budget. This report will be discussed in more detail
in the May/June issue of the Construction Review.
The FY 1986 budget report also provides line-item estimates
of federal spending in the current fiscal year (1985)
and actual spending in the latest complete fiscal year
(1984). For this article, construction-related line
items have been abstracted from the President's budget
proposals for fiscal years 1982 through 1986. From these
five documents, spending estimates are available for
each line item for the fiscal years 1980 through 1986.
These line items are listed individually in Tables 6
through 13, and they are summarized in Tables 1 through
5. Definitions are given at the end of the text, and
a glossary of abbreviations and acronyms follows Table
13.
Trends in Federal Construction Expenditures
Federal construction-related expenditures are expected
to increase by $6.7 billion in FY 1985. The FY 1985
total of $50.5 billion would be the highest level of
construction spending since 1981. However, in FY 1986
construction expenditures are budgeted to decline by
$4.2 billion, or 8 percent. Major reductions or terminations
are proposed for at least 24 construction-related programs
in FY 1986, with very few significants increases. The
proposed 1986 reductions are more severe than they would
appear from these tabulations, because this analysis
of federal spending is done on an "outlays"
basis rather than on "obligations" basis.
(Definitions are in the last section of this article).
A number of programs which are budgeted for no new obligations
in FY 1986 would still have a high level of outlays
in that year, based on obligations which were incurred
in previous fiscal years.
The trends in federal spending vary widely among the
different categories of construction. Expenditures for
military construction, highways, and federal hospitals
are expected to increase in FY 1986, even after allowing
for 5 percent construction price increases in 1985 and
1986. Funding for sewage treatment facilities is budgeted
to decline slightly, and substantial declines are budgeted
for conservation and development, federal industrial,
housing, and other construction (See Tables 1 and 2).
Military construction has been the fastest-growing category
of federal construction expenditures since 1982. Between
FY 1981 and FY 1986, military construction is expected
to have increased by 121 percent in current-dollar terms,
and by 94 percent in constant dollar terms. Expenditures
for this purpose are expected to increase by 13 percent
in FY 1985 and a further 26 percent in FY 1986. In constant-dollar
terms (assuming 5 percent inflation) military construction
would increase by 8 percent in FY 1985 and 20 percent
in FY 1986.
Federal Expenditures as Percent of Total Construction
Federal construction expenditures finance virtually
all federally owned construction, plus a large amount
of nonfederal construction. Thus, the value of federal
construction-related expenditures is much greater than
the value of federally owned new construction put in
place. In FY 1984, only 25 percent of federal construction
expenditures were for federally owned construction,
while 55 percent were for structures owned by state
and local governments, and 20 percent were for privately
owned structures (see Table 3).
Most federally owned construction is done by private
construction firms under contract with federal agencies.
The only major exceptions is the TVA construction program,
which has a large in-house construction force.
Federal Expenditures
Federal construction-related expenditures accounted
for only 4.9 percent of total federal expenditures in
FY 1984, compared to 7.9 percent in FY 1980. In FY 1985,
the construction share is expected to increase slightly
to 5.1 percent, primarily because of large increases
in Federal-aid Highways grants, TVA investments, Rural
Housing Insurance loans, and Rural Electrification and
Telephone loans. The proposed budget for FY 1986 calls
for construction-related expenditures to decline to
4.6 percent of total federal expenditures (see Table
5).
Loan Guarantee Programs
In FY 1985, it is estimated that federal agencies will
guarantee a total of $47.0 billion in construction-related
loans. This would be 8 percent more than in FY 1984.
Most of the increase will be accounted for by FHA mortgage
insurance, which is expected to increase from $21.9
billion to $25.3 billion. Other large gains are estimated
for FmHA Rural Development Insurance, the Rural Electrification
Administration, the Small Business Administration, and
the U.S. Synthetic Fuels Corporation. |
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