Published in March 2009

The Stimulus Package Revisited
Following the money isnít always that easy.
By David McNutt

The economy is taking hits that it has never had to take before. The unprecedented amount of job loss has unraveled every demand model constructed. The fall in demand has severely affected spending in every economic sector.

In our industry, US construction spending continues to fall. December marked the third straight month of decline and caps a 2008 yearly decline of 5% overall, the second straight year of declines. Private construction spending is down 9% and is now at a level not seen since February 2004. This, of course, is not new news, but it has begun to affect our industry directly in terms of backlogs, future projects on hold, and fewer projects coming out from architects and AV consulting firms. Most large projects are on hold and firms are faced with earning their way on smaller bread-and-butter customers and projects.

The economic stimulus plan that Congress battled through last month would shower the nation’s school districts with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget. The aid would bring crucial financial relief to the nation’s 15,000 school districts and to thousands of campuses otherwise threatened with severe cutbacks. But the question for us to ask is, does this assist our industry in any way?

In recent years, the federal government has contributed 9% of the nation’s total spending on public schools, with states and local districts financing the rest. Washington has contributed 19% of spending on higher education. The stimulus package would raise those federal proportions significantly. In fact, for the first time, with this legislation, the federal government would become significantly involved in the building and renovation of schools, which typically has been the responsibility of states and districts. Some have strongly criticized these proposals as an ill-considered expansion of the federal government’s role that traditionally has centered on aid to needy students.

The originally approved House package included $20 billion for school renovation and modernization, $14 billion for elementary and secondary schools, and $6 billion for higher education. It also included tax provisions under which the federal government would pay the interest on construction bonds issued by school districts, hoping to spur new projects.

However, negotiations between the House and the Senate versions erased this provision and significantly whittled the funds for education construction spending. The late-night compromise created a larger $54 billion state stabilization fund, of which “a portion could be spent rebuilding schools.” But that is a far cry from the $79 billion set aside to help states balance their budgets plus the $20 billion for education. And it is now much vaguer as to how it will get spent out of a general fund, and quite possibly could be used for state needs other than education construction.

Assuming states spend as the funding might have been intended, it will still be hard to determine what portion of the spending would come in the form of technology modernization, but certainly some of it would. In a typical new construction or renovation project, AV and IT would comprise a small percentage of the overall budget. On the other hand, specific projects to upgrade technology may be waiting in the wings of hundreds of school districts if they can convince their states to invest funds there.

Even industry organizations that monitor government spending will have difficulty tracking $790 billion in new spending. Although it is certain that a portion of the package will funnel directly into our industry, it will not be easy to identify where and when it will arrive. No doubt it will, and sometime over the next 18 months. For the diligent sales engineer, there is opportunity. For the alert and aggressive integrator, there is opportunity. But we may not actually know how it was spent until afterward.

As stimulus investment dollars are spent, it is hoped that jobs will be kept, new ones created and laid off individuals called back. What is not clear, just as with the banking industry bailout, is if the funds will be spent at all. Within this stimulus package is the potential to find a gold nugget. But, like in the Old West, many miners died of starvation because they panned in the wrong stream. Let’s hope some of this stimulus aid has our industry’s name on it.


A member of Sound & Communicationsí Technical Council, David McNutt has more than 35 years of experience, covering live sound engineering, marketing for well-known manufacturers, audio system design and consultation, and fixed installation contracting. McNutt holds a Masters in Telecommunications and an MBA in Marketing and Strategy. He can be reached at dmcnutt@testa.com.

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