Office of Planning and Budgeting

After considering numerous floor amendments last Friday evening, the House passed their operating budget on Saturday afternoon. The House budget appropriates $32.2 billion in general fund state operating funds and makes significant cuts to health and human services, K-12 education, and higher education.

Like the House Ways & Means chair budget, the engrossed budget cuts $204 million from the UW’s state general fund appropriation over two fiscal years. However, that reduction is somewhat mitigated by the fact that all UW units took part of these cuts in November 2010 permanently. As a result, our brief outlined the approximate cut (before tuition revenue) that would be implemented in Seattle should the House budget ultimately pass after negotiations between the chambers.

The engrossed budget contained an extremely important amendment which exempts university and college employees from individual salary reductions of 3%. However, institutions will still need to come up with requisite “savings” (read: cuts) of 3% from all appropriated funds, which for the UW, are general fund state and the medical aid and accident accounts.

The Senate is expected to release operating and capital budgets this evening. After the Senate passes its budget, leadership in each chamber will begin negotiations toward a conference budget.

The House released operating and capital budgets yesterday for the upcoming biennium (FY12 & FY13). This budget is an important next step in the budget development process in Olympia but we are far from having a final compromise budget.

The House operating budget proposal:

  • Cuts state funding for the UW by $204 million over two years (32% reduction)
  • Authorizes resident undergraduate tuition rate increases of 13% for both years
  • Eliminates the State Work Study Program
  • Increases the State Need Grant to adjust for increased tuition rates
  • Mandates reductions equivalent to a 3% salary reduction

The House capital budget:

  • Authorizes state funds for the Odegaard Undergraduate Learning Center renovation
  • Provides some state funds for some minor capital repairs, the House of Knowledge, UW Seattle’s High Voltage Infrastructure Improvement project, and design-phase funding for Anderson Hall

Please read our comprehensive brief about the budgets and please post any questions or comments to the blog.

When the revenue forecast was released on March 17, House fiscal leadership indicated that their operating budget would be delayed. We hoped to see a budget on March 21st and then on March 29th. Tomorrow is April 1 and your analysts at OPBlog anticipate having neither budget drafts to write about nor fantastic prank ideas to implement.

Some news outlets indicate that we may see the House Ways and Means Operating Budget next week. Meanwhile, Senate Ways and Means chair Ed Murray, D-Seattle, is on record saying that the Senate will not release its budget until the House releases theirs.

We’ll offer full analysis of the budgets as they are released. Stay tuned!

Be sure to check out the latest OPB brief on the use of differential tuition at public universities. The brief primarily focuses on differential tuition by major or class standing, which is now in effect at over 50 percent of all public research institutions in the US.

You might notice links for a new website, UW Budget Watch, popping up on UW homepages (including OPB and right here on the blog).

OPB worked with Web Communications staff to develop one website that would consolidate many sources of information relating to the state budget and how it has and is expected to continue affecting the University. You will find links to blogs (the absolute best way to get the most up to the date and timely notices) and other UW and non-UW websites, as well as many educational documents, messages about the budget from UW leadership, videos about the current funding situation, and information about related UW initiatives.

We have found sites such as this very helpful in keeping up to date with our peer institutions, and we hope that our page will be as useful for anyone interested in keeping up on the latest developments.

So, visit the page often and we will work hard to keep it updated!

State Economic Forecast Council Director Dr. Arun Raha released the March revenue forecast today. This forecast serves as the revenue basis for the Legislature’s general fund budget in the 2011-13 biennium (FY12 and FY13).

2009-11 Biennium (FY10 & FY11)

While many economic indicators used in his analysis show tentative growth in 2011, revenue collections through March 10, 2011 were $85 million below expectations and growth through the next quarter will continue to lag expectations, contributing to an additional $80 million deficit in the 2009-11 biennium. Legislative leadership confirmed that an additional (fourth) supplemental budget will be needed to reconcile the new FY11 shortfall. The timing of that budget is unknown.

2011-13 (FY12 & FY13)

Weaker growth in several key sectors over the last three months prompted Dr. Raha to increase the projected deficit for the 2011-13 biennium by $698 million.  The Legislature will use a $31.9 billion revenue base for the General Fund State. For comparison, the Governor’s December budget was based on a $32.1 billion general fund state budget.  

While we anticipate the House will release their operating budget proposal next week, House leadership did not commit to a date.

The March forecast includes new data about the downside risks to our economy including the earthquake, tsunami, and risk of nuclear meltdown in Japan. Further, Dr. Raha states that the most significant threat to economic growth is the energy market.  He fears escalating gas prices will continue to erode consumer confidence, regardless of job growth. These downside risk factors overwhelm any upside risks (employment growth, consumer confidence, and commodity prices) by 10 percent.

Please check this blog regularly for state budget updates as they become available.

Were you surprised to learn in the Chronicle of Higher Education this week that, in 2008, the UW received over $19,500 in state appropriations per student, the second highest rate in the country? Well, so were we!

Office of Planning Budgeting staff worked with the Chronicle to clarify that they were not reporting state appropriations per student, but what the Delta Cost Project calls the overall educational ‘subsidy’ enjoyed by students, which includes state appropriations but also other revenues such as gifts and endowment income.

The Chronicle agreed to revise the text of their chart to match the measure they were actually reporting, and they also wrote up an accompanying article to explain why the revision was important, using the UW as an example. Please read our brief for more detail and links to the revised publications.

We don’t think the overall ‘subsidy’ figure that DELTA produces by looking at IPEDS finance survey data is a very useful one when comparing institutions on education related funding per student, nor do we think that 2008 funding levels tell us much about where public flagship institutions are now, but it is very important that the Chronicle narrative now matches the data and the chart is no longer misleading.

US Secretary of Education Arne Duncan joined Governor Chris Gregoire and legislative leadership today for an education roundtable. Duncan congratulated state lawmakers on discussing the issue of education reform, even through tough budget times. He further drew attention to the grave problems troubling education in the United States—a 25% national dropout rate, poor STEM education, the large number of students taking remedial courses, and gaping budget gaps, which challenge the adequate funding of education.

Of particular interest, Duncan commented on the current system of education governance in Washington, claiming: “Washington has eight different agencies with different strategic plans working in Washington and it’s very difficult for me to understand how having different agencies handling education…will transform education.”

Governor Gregoire has bills in both chambers to consolidate education governance into one Department of Education headed by the Governor. The plan would also consolidate many existing state education agencies into four primary education divisions: Early Years Division, K-12 Division, Community College and Technical Education Division, and the University Programs Division. All units would report to a new Department of Education Secretary.

Secretary Duncan reiterated President Obama’s commitment to investing in education despite the economic downturn, and gave examples of strategic programs and innovations the administration is working towards:

-Investing in Early Learning programs like Head Start, which studies have shown to improve achievement especially for disadvantaged students who do not have many educational opportunities at home

-Continuing the Race to the Top program which rewards schools for outstanding innovation and improvement in education (if approved by Congress)

Lastly, Governor Gregoire distributed a document describing how much it costs taxpayers when students “fall through the cracks” of the education system– by dropping out, taking remedial courses, or repeating grades–a number her advisers estimate at around $ 100 million a year. Though the problems facing education in Washington state and in the nation are indeed grave, it was encouraging to see lawmakers pause during a critical week to discuss education. As Secretary Duncan asserted, “our children cannot wait for the economy to bounce back”—education must remain a priority, despite the dire budget situation.

OPB published a new brief yesterday discussing expectations for the upcoming Washington State revenue and caseload/entitlement forecasts, and how both are likely to affect UW state funding levels.

**EDITED TO ADD: Note that after we released this information, the new caseload forecast was released and lowered the expected growth of caseloads for K-12, Medicaid, and Corrections. In particular, the anticipated impacts of federal healthcare reform lowered the predicted caseload for state-supported medical programs by $117 million in the long-term and $70 million in the short-term.**

Nationally, the Center on Budget and Policy Priorities (CBPP) updated their analysis of state budget shortfalls this week. They summarize the challenges faced by states via their blog:

  • For fiscal year 2012, one of the most difficult budget years on record. Some 44 states are projecting shortfalls totaling $112 billion for the year, which begins July 1 in most states. (See chart below.)  This figure is somewhat lower than in our previous version of this analysis, largely because of actions that Illinois took in its last legislative session that reduced the size of its 2012 shortfall.
  • The loss of emergency federal assistance. Assistance through the 2009 Recovery Act and the August 2010 jobs bill has been a huge help to states, allowing them to balance their budgets with smaller budget cuts and tax increases than they would otherwise need to make.  But that aid will largely be gone by the end of fiscal year 2011.
  • A long road to recovery. Already, 26 states are projecting shortfalls totaling $75 billion for fiscal year 2013, which begins in 16 months.  This number will likely grow once all states have prepared estimates.

Last week, Senate and House Fiscal and Higher Education Committee leadership asked all public baccalaureate institutions and the community and technical colleges to identify specific budget reductions at three levels for 2011-13. For the UW, those cut intervals were:  The Governor’s proposed $189.8 million cut, a $218 million cut (Governor’s cut + 15%), and a $246 million cut (Governor’s cut + 30%). For scale, the UW received $627 million in state funds for the 2009-11 biennium (Fiscal Years 2010 and 2011).

Potential reductions identified by the UW and submitted by President Wise to the Legislature yesterday were sobering, although President Wise pointed out in correspondence to campus leadership that some of the examples in the letter,  “…may come to pass, but only as a result of the strategic budget process currently underway, not because of reference in the letter.”

Neither the House nor the Senate Fiscal Committee has submitted their budget proposal for the 2011-13 biennium yet and we do not know how each committee will ultimately handle the UW’s state appropriation. While we have the Governor’s proposed budget in hand, the appropriations process is far from being over. We will continue to post state budget updates to this blog as they develop.

Media coverage of our submission to the Legislature is available here, here, and here.

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