updated: 1/27/2009 1:34:43 PM
A new report from the Indiana Business Research Center (IBRC) at the Indiana University Kelley School of Business suggests the slowdown in new housing construction could be felt at schools throughout the state. Researcher Chris Linn says school systems with steady growth over the past decade may want to reconsider enrollment projections. School districts receive most of their funding on a per student basis using enrollment figures from September of each year. Linn says the "financial consequences could be dire" if the projected number of students is significantly different from the actual enrollment.
Source: Inside INdiana Business
BLOOMINGTON, Ind. -- In addition to being felt on Wall Street and Main Street, the severe slowdown in housing starts soon could be noticeable on school playgrounds in Indiana, according to a report produced by the Indiana Business Research Center at Indiana University's Kelley School of Business.
IBRC researcher Chris Linn, writing in the latest issue of InContext, suggests that school systems that have experienced steady growth over the past decade may want to reconsider their enrollment projections.
"Recent planning for facilities and teachers has been predicated on expanding school enrollments. Given the current contraction in the housing market and the steep drop in new construction, these districts will likely re-evaluate their enrollment projections," Linn said. "Most school districts recognize that the primary driver for rising enrollment has been residential housing growth."
Districts receive the majority of their state funding on a per-student basis, based upon official enrollment counts taken in September of each year. According to the Indiana Department of Education, most school districts spend about $10,000 per student each year. Most school projection models use building permits and forecasted residential construction as key inputs.
"If the budgeted -- or forecast -- enrollment significantly diverges from actual enrollment, then the financial consequences can be dire," Linn said.
Housing construction data from the Census Bureau revealed that there were more than 30 percent fewer permits issued in the Midwest in October than in the same month a year earlier. The number of housing starts was 38 percent lower.
Linn uses school districts in three Indianapolis suburban counties -- Boone County's Zionsville Community Schools, Johnson County's Franklin Community Schools and Hamilton County's Hamilton Southeastern Schools -- to illustrate the issue.
Each of the three sample districts had enrollment growth linked to the expansion of the housing stock in their respective areas.
Enrollment for the Franklin Community Schools showed the same trendline as that of housing permits between 2003 and 2008. Likewise, enrollment growth over the same time period at Hamilton Southeastern has slowed, as has the number of building permits.
Housing construction permits issued in Hamilton County -- one of Indiana's fastest growing counties -- during the first nine months of 2008 show a slow but steady decline.
Zionsville's change in enrollment followed the trend of building permits with the exception of 2006, when enrollment growth slowed but building permits climbed.
Linn said other factors deserve consideration as well. Forecasted school-aged population growth resulting from families moving into an area can be estimated by the type and price-point of the new housing. Increased enrollment growth from new construction differs among school districts based on the type of new housing and the types of households targeted for that housing.
Two new housing units in the average district in Indiana are estimated to produce one new student. This is the case for Franklin Community Schools, which averaged 0.48 students per new housing unit from 2003 to 2008.
Conversely, new construction in some school systems -- including Zionsville and Hamilton Southeastern -- have a significantly greater number of students per new housing unit. Both Hamilton Southeastern and Zionsville averaged in the range of 0.75 students per new housing unit from 2003 to 2008.
"Because of their higher student-to-new-housing-unit ratio, these two school districts are at greater risk of missing their enrollment projections, which were calculated prior to the slowdown in housing construction," Linn said.
Also in the latest issue of INContext is a cover story about job churning -- the voluntary movement of workers from one job to another in Indiana -- by Andy Zehner, director of research at the Indianapolis Private Industry Council. Other articles focus on American Community Survey data for areas in Indiana with more than 20,000 people and the Anderson metro area. The issue is available online at http://www.incontext.indiana.edu/, starting today (Jan. 26).
Established in 1925, the IBRC is an information outreach service of the Kelley School. It provides and interprets economic, demographic and social information needed by business, government, educational and other nonprofit organizations, and individual data users in the state and throughout the nation. Its research can be found online at http://www.ibrc.indiana.edu/.