Office of Planning and Budgeting

Additional Near- and Long-Term Cuts Expected as State’s Revenue Forecast Worsens

After the November 18, 2010 release of the state’s November revenue forecast, Vice Provost of Planning and Budgeting Paul Jenny released the following information to UW leadership:

As most of you are aware, the November revenue forecast for the state was released yesterday, and it was not good news.  The forecast projects a shortfall of $385 million in the current fiscal year budget and a deficit for the upcoming 2011-13 biennium (FY12 and FY13) of $5.7 billion. There are many factors for the continuing lack of improvement in state revenues:  the real estate market remains weak, expected revenue increases will not materialize due to voter rejection of the soda and candy sales tax measure, case loads continue to increase, and so forth.The most immediate concern is the reduction in revenue of $385 million for the current fiscal year.  To bring the budget back into balance, there are three options available:

  • The governor could impose across the board reductions as she did following the September revenue forecast.
  • The governor could call a special session of the legislature to balance the budget.
  • The legislature could take up this issue in passing a final supplemental budget for FY11 that addresses this shortfall as the beginning agenda item in the normal legislative session that commences on January 10, 2011.

While we do not know what course of action will ultimately be taken, we need to anticipate another mid-year reduction as a result of any of these options. As a point of reference, the shortfall in the September revenue forecast of $520 million resulted in a cut to the UW of $17.1 million.  If the response to the current shortfall of $385 million is consistent with the September actions, we may see a reduction of approximately $10 million -$13 million.  Again, this is just our best guess at this point. My office will provide greater detail as it becomes known to us.

Longer term, we need to understand that the solution to a $5.7 billion deficit in the 2011-13 biennium will not be pleasant. We don’t know what our share of the cut will be.  What we do know is that only 30 percent of the budget can be touched at this point – the rest considered ‘off-limits’. We can safely assume that because higher education is the biggest part of the discretionary budget, we will be hit very hard. While we had to model a 10% reduction in a response to a request by OFM, we should anticipate that our cut may be higher than 10%.  Cuts of these magnitudes will inevitably place more pressure on the discussion surrounding tuition increases as a mitigating factor to these cuts.

While this is distressing news, the Offices of Planning & Budgeting, External Affairs, and State Relations will be working with our elected officials to consider different solutions that can stave off some of the impact these cuts, if not mitigated, would create.


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