Battered Fleet Budgets

Sept. 28, 2010


Government fleets were divided last year between those regions with positive funding growth and those whose funding continues to shrink. The Mountain region was the only one to meet expectations from last year, although the Northern Plains came close. The national net for 2005 was flat growth.
A similar split is seen in the outlooks for 2006, and again the national trend is for flat growth. South Atlantic fleets lead the nation in expectations, and New England forecasts the most dire funding trend with a net of -31 following its 2005 net of -13.
The trend is flat, with the net hovering around 0 for 2005 and 2006's forecast. A large disparity, however, shows up between state and local fleet expectations.
Work volume will stay the same for some 60 percent of fleets, but for those expecting a change in volume, the net shows work load growth.
State fleets saw flat growth last year and expect to see some positive movement in 2006. Local fleets continue to outgrow them, however.
State fleets are replacing machines at a higher rate than their local peers, revealing one of few positive machine trends. States expect to continue at this rate, too.

For the third consecutive year, fleet funding has plummeted for many government agencies. Although the total net (the percent reporting increases minus the percent reporting decreases) was flat in 2005, state fleets continue to fight decreasing budgets. Among local fleets, 23 percent reported funding increases minus 25 percent reporting decreases for a net of -2 percent; 12 percent of state fleets reported increases and 44 percent decreases for a net of -32 percent. This follows a 2004 net for states of -17 percent.

Clearly, state fleets face challenges, and this year bodes little better. Two of every 10 state fleets expect funding increases, but 48 percent see decreases for a net of -28 percent. Local fleets expect to move ever so slightly into positive territory: 27 percent expect increases and 23 expect decreases for a net of 4 percent.

Saving many fleets is flat growth in work volume. Last year, 60 percent reported no change in volume and 68 percent don't expect 2006 levels to change. Of the remaining, 24 percent of both state and local fleets predict more work against 8 percent and 9 percent, respectively, expecting less work. Nets are 16 percent for state and 15 percent for local fleets.

Fleet expansion, understandably, has not been a priority for either of these government agencies: 56 percent of states and 73 percent of locals didn't change fleet sizes last year, as measured in number of machines. For 2006, nearly three-quarters of fleets overall will stay at the same size. Among those changing fleet size, states report a net of 8 percent (24 percent increasing minus 16 percent decreasing) and locals report a net of 13 percent (18 percent minus 5 percent).

State fleets continue to out-replace local fleets, although their 2005 rate of 9.6 percent fell below the expected level of 10.3 percent. Local fleets hit their estimate, replacing 6.1 percent in 2005.

This year, state fleet managers look to replace at a similar rate, 9.2 percent, and local fleets hope to boost their rate to 6.6 percent. State replacement rates wander historically, hovering around 10 percent. Local replacement rates, though, have been declining steadily from the 2000 peak of 8 percent.

Perhaps as a result of this replacement strategy, a far greater percentage of state fleets than local report "excellent" fleet condition: 28 percent vs. 3 percent. Overall, 47 percent of government fleet managers say their machines are in "very good" or "excellent" condition, and 13 percent report "fair" or "poor" fleet conditions.

To fill in some of the gaps in funding, about half of government fleets use short-term rental, and 21 percent of fleets have increased their use of rental.

The most-often rented equipment is light earthmoving machines (51 percent of government agencies say they rent it), followed by compaction equipment (34 percent), light equipment (31 percent), and heavy earthmoving equipment (27 percent).

As an acquisition strategy for major machines (defined as carrying a purchase price higher than $25,000), short-term rental is still second to the government fleet managers' goal of outright purchase. Some 83 percent report this acquisition strategy, 14 percent consider short-term rental, and 12 percent use lease-purchase.

Government workforce numbers also reflect the ongoing budget restraints. Seven of every 10 fleets report stagnant labor numbers, but among the rest the trend is toward downsizing. Net for total workforces is -7 percent (12 percent citing growth minus 19 reporting declines in workforce). Individual declines are most evident in the service/maintenance departments (8 percent minus 13 percent for a net of -5 percent) and among operators (10 percent minus 15 percent for a net of -5 percent).