State capital spending, which includes expenditures on construction, rose in fiscal 2022 by an estimated 15.3% to $149.2 billion, according to the latest annual report by the National Association of State Budget Officers, which says it is the largest annual gain since 1994.
The group's report, released Nov. 18. also says that states' capital spending is likely to continue to climb at high rates for the next several years as they continue to tap funds from the American Rescue Plan Act (ARPA) and the Infrastructure Investment and Jobs Act ( IIJA), which were signed into law in 2021.
[View full report here. See Chapter 8 for capital expenditures information.]
Some ARPA funds can be used for infrastructure, including water, sewer and broadband, while IIJA has about $550 billion in new funds for a range of infrastructure sectors, including highways, rail, transit, water and the electric grid, the report notes.
Even with funding boosts from the laws, most of the fiscal 2022 capital spending hike was due to increases in state funds, the report says, with some of that upturn in infrastructure project investment drawing on states' revenue surpluses in the past two fiscal years.
Transportation was by far the largest sector for capital spending in fiscal 2022, with the report noting a total of $93.4 billion, up 18.7% from the previous year.
Other large categories include higher education spending, with $13 billion; environmental, with $7.1 billion, and K-12 education, with $5.2 billion.
An "all other" category, which includes such items as hospitals and behavioral health facilities, parks and community and economic development projects, recorded spending of $19.7 billion, for a modest gain of 2%
Bonds were a major funding source for capital expenditures, providing 30.6% of the total.
Federal funds accounted for 25.2% and states’ general funds, 9.3%. Other state funds accounted for 35% of the funding for capital spending, according to the state budget officers report.
Capital expenditures include spending on new construction, infrastructure, major repairs and improvements, land purchases and acquiring major equipment and existing structures, the analysis says.
The group says 46 states begin their fiscal years on July 1. New York's fiscal year starts on Apr. 1, Texas on Sept. 1 and Alabama and Michigan on Oct. 1.