Office of Planning and Budgeting

A proposed state capital budget, SB 6090, passed out of the Senate Committee on Ways & Means with substitutes and may be voted on soon.  Last session, lawmakers came to a compromise on a proposed capital budget, but it was ultimately not passed due to a disagreement over a rural water rights issue. This proposal is the same as that proposed compromise, except it includes language proposed by the Governor before this session that would allow the UW and other agencies to be reimbursed for capital expenditures that occurred on or after July 1, 2017 in the absence of an approved capital budget last year.  A similar process is occurring in the House with HB 1075.  OPB will monitor any changes that occur on the House or Senate floor on passage of the budget(s).

Stay tuned to the OPBlog for updates on the legislative session, including the capital budget.

Governor Jay Inslee released supplemental operating and capital budget proposals on Thursday. For more information, please see OPB’s brief. The Governor’s operating budget proposal includes technical corrections and minor appropriation changes to the current 2017-19 biennial budget (fiscal years 2018 and 2019). Because the legislature did not pass a capital budget in 2017, the Governor’s capital budget is a two-year budget covering the entire biennium.

Despite moderate growth predicted in the November Revenue Forecast, lawmakers in Olympia face significant challenges. Most notably, the Washington State Supreme Court recently ruled that the legislature has still not met its obligations to fully fund K-12 education required by their ruling in McCleary v. State of Washington. Governor Inslee’s proposal reflects this budgetary reality, proposing increases for K-12 education but only minor changes in overall funding for higher education institutions compared to the enacted 2017-19 biennial budget. New investments directed at the UW include additional funding for computer science enrollments.

On the capital side, the Governor’s proposal is similar to the proposed final capital budget that was negotiated, but ultimately not approved, in the 2017 session. That budget was not passed due to a disagreement over a fix to a different Washington Supreme Court decision regarding water rights (Whatcom County v. Hirst).

The Governor’s budget release marks the first step of the 2018 legislative session – set to begin on Monday, January 8, 2018. As a reminder, the House and the Senate will propose their own budgets throughout this short 60-day session as they work toward compromise supplemental budgets.

Stay tuned to the OPBlog for updates during the 2018 legislative session.

OPB has released a new brief that provides an overview of Activity Based Budgeting (ABB) distribution principles and trends at the UW in Seattle. This brief updates last year’s overview, adding the most recent year’s data. It compares the ABB budgets of Seattle academic units to those of Seattle administrative units over the last seven years (FY12-FY18). The brief also describes a change in the distribution methodology of net tuition operating fee revenue that became effective in FY18.

A few noteworthy trends described in the brief include:

  • Every academic unit’s ABB budget has increased since FY12.
  • Academic units continue to experience more budget growth than administrative units, both in terms of real dollars and in terms of proportionate growth.
  • Of the 34 percent total combined ABB budget growth for Seattle academic and administrative units, 73 percent occurred in academic units, while the remaining 27 percent occurred in administrative units.

The brief also touches on ABB’s future at UW. OPB is working with stakeholders to address emergent issues identified since ABB’s implementation, such as potentially duplicative courses and degrees, the distribution of supplement funds (e.g. permanent base budgets), and summer quarter revenue from programs run by the Continuum College.

Leadership in the House and Senate released a 2017-19 compromise state operating budget on June 30, 2017 in the form of Substitute Senate Bill 5883. The Governor signed the budget less than an hour before midnight, narrowly avoiding a partial state government shutdown. Lawmakers also passed a partial capital budget that reappropriates unspent capital funding from the 2015-17 biennium, which allows previously authorized projects to continue into the new biennium, but does not make new appropriations for 2017-19.

brief from the Office of Planning & Budgeting provides a detailed overview of the final compromise operating budget and partial capital budget. We expect that a compromise 2017-19 capital budget will be released within a couple weeks, and will update the brief at that time.

The final compromise operating budget represents a middle ground between budget proposals released by the Governor, House and Senate earlier this session. The budget maintains current tuition policy, allowing for a 2.2 percent resident undergraduate tuition increase in FY18. Lawmakers made significant investments to maintain and expand state programs, especially in K-12 education. As a reminder, this budget cycle largely focused on meeting the state’s K-12 funding obligations, due to the state Supreme Court’s ruling in McCleary v. State of Washington.

Investments directed at the UW include funding for employee compensation, medical education, STEM enrollments, and several research initiatives across academic disciplines. However, lawmakers also reduced the UW’s state funding and assumed an offsetting reduction in tuition waived for graduate students. They also instituted a new charge to state agencies for services provided by the Governor’s Office of Financial Management (OFM), which will result in the UW having to use $3 million in student tuition revenue over the biennium to support OFM instead of the University’s academic mission.

 

Please contact Jed Bradley if you have any questions.

On Monday, leadership in the House Appropriations Committee released their initial operating budget proposal. This proposal follows last week’s release of the Senate operating proposal and December’s release of the Governor’s operating and capital proposals.

See the new OPB brief here for information regarding the House proposal, as well as a full comparison between current budget proposals.

Some noteworthy items in the House Appropriations operating budget proposal include:

  • Compensation: Partially funds a 2 percent increase in FY18 and two 2 percent increases in FY19 for non-represented employees, and partially funds collective bargaining agreements for represented employees.
  • Tuition Policy: Like the Governor’s proposal, the House would freeze resident undergraduate tuition across all public higher education institutions for two years, and would provide funding to cover the difference between the tuition freeze and incremental revenue expected under current policy.
  • Undergraduate Enrollment: Adds $6 million to the UW over the biennium to increase degree production in the Department of Computer Science and Engineering.
  • Financial Aid: Appropriates $49.2 million to the State Need Grant to reduce the number of unserved, eligible students, by 25 percent (around 6000 students).
  • Provisos: Adds new funding for several targeted efforts, including funding for the Regional Initiatives in Dental Education (RIDE Program)

In addition, the Senate Ways & Means committee released its proposed capital budget on Tuesday, and the OPB brief on the Senate’s proposals has been updated. Some highlights include:

  • Funding to complete the Burke Museum ($24.2 million)
  • Minor Works and Preventative Maintenance ($70.8 million from the UW Building Account)
  • Major Infrastructure – Seismic Upgrades ($10 million)
  • Population Health Sciences Building ($15 million)
  • Health Sciences Education – T-wing Renovation ($10 million)
  • Center for Advanced Materials and Clean Energy ($10 million)
  • Evans School – Parrington Hall Renovation ($10 million)

The House has not released a capital budget as of the time of this posting, but that brief will be updated once that information is available.

 

Stay tuned to the OPBlog for updates on proposed budgets.

On Tuesday, leadership in the Senate Ways & Means Committee released their initial 2017-19 operating budget proposal. This proposal is the first from a legislative body following the release of Governor Inslee’s operating and capital budget proposals from December. See OPB’s brief here for a full comparison. Unlike the Governor’s budget proposal, the Senate does not propose significant new revenue, and therefore would provide far fewer new investments in new and existing programs.

Some noteworthy items in the Senate budget proposal include:

  • Tuition Policy: Maintains current tuition policy allowing a 2.2 percent increase in resident undergraduate tuition in FY18 and a 2.0 percent increase in FY19. The Governor proposed freezing tuition for two years, and provided funds to backfill that freeze.
  • Undergraduate Enrollment: Adds $10.5 million to the UW over the biennium to increase resident undergraduate enrollments in STEM and other fields.
  • Financial Aid: Reduces the UW’s state appropriation by $5.2 million over the biennium and assume that the University would offset the reduction by reducing tuition waivers provided to students.
  • Compensation: Partially funds $500 wage increases per year for faculty, staff, and represented employees. The budget would also reject tentative collective bargaining agreements between the UW and represented employees.
  • New “Central Service”: Reinstates a charge for central services provided by the Governor’s Office of Financial Management, which would divert $7.5 million in tuition revenue over the biennium.

The Senate did not release a capital budget as of the time of this posting, but the brief will be updated once that information is available. We expect to review proposals from the House Appropriations Committee early next week, and will post additional information at that time.

Stay tuned to the OPBlog for updates on proposed budgets.

Yesterday, the Economic and Revenue Forecast Council (ERFC) released its September revenue forecast, which increased projected General Fund-State (GF-S) collections by $334 million for the current 2015-17 biennium and by $125 million for the upcoming 2017-19 biennium. As a reminder, there will be one more revenue forecast in November before Governor Inslee releases his proposed 2017-19 biennial budget in anticipation of the 2017 legislative session.

Here is a quick summary of the total projected GF-S revenue for each biennium:

  • $37.765 billion for the 2015-17 biennium, 12.2 percent more than 2013-15
  • $40.377 billion for the 2017-19 biennium, 6.9 percent more than 2015-17
  • $43.630 billion for the 2019-21 biennium, 8.1 percent more than 2017-19

Behind the numbers:

  • Revenue collections from June to September were $225 million higher than forecasted in June, but over half of that increase was attributed to several large (and one-time) audit-related payments of past-due taxes.
  • This forecast noted slightly stronger personal income and employment compared to the June forecast.
  • Strong retail sales, housing construction, and real estate excise tax (REET) collections continue to create positive revenue trends.
  • Risks to the revenue forecast include weak labor productivity and slow economic growth (both in the U.S. and globally).

Any excess revenue collected in the 2015-17 biennium will contribute to reserves (est. $1.8 Billion) that will be available to spend in the 2017-19 biennium, however, the state continues to face significant budgetary challenges in complying with the State Supreme Court’s orders to fully fund K-12 education.

Stay tuned to the OPBlog for updates on revenue forecasts and the upcoming 2017 legislative session.

A new brief from the Office of Planning & Budgeting provides an overview of Activity Based Budgeting (ABB) distribution principles and trends at the UW in Seattle. This brief updates last year’s overview of ABB trends, adding the most recent year’s data. It compares the ABB budgets of Seattle academic units to those of Seattle administrative units over the last six years (FY12-FY17).

Last week, the Economic and Revenue Forecast Council (ERFC) released its June revenue forecast, which increased projected General Fund-State (GF-S) collections by $294 million for the current 2015-17 biennium and by $126 million for the upcoming 2017-19 biennium. This is an improvement over the February forecast, which had predicted slower revenue growth in both biennia (see our blog post here). As a reminder, there will be at least three more revenue forecasts between now and when the legislature sets the 2017-19 budget.

Here is a quick summary of the total projected GF-S revenue for each biennia:

  • $37.431 billion for the 2015-17 biennium, 11.2 percent more than 2013-15.
  • $40.252 billion for the 2017-19 biennium, 7.5 percent more than 2015-17.
  • $43.575 billion for the 2019-21 biennium, 8.3 percent more than 2017-19.

Behind the numbers:

  • The forecast attributed the increase to strong sales of large commercial properties and rising home prices.
  • Other positives included growth in housing permits and increases in inflation, which typically result in greater retail sales, business taxes, and property taxes.
  • Slight decreases in U.S. and Washington state personal income forecasts continue to have a negative effect on the revenue forecast.

According to a press release from the Governor’s Office of Financial Management, “With the latest forecast, the state is now projected to have nearly $1.5 billion in total reserves at the end of the current biennium and more than $1.4 billion at the end of the 2017–19 biennium. Those reserve figures, however, do not take into account the multibillion obligation the state faces in the next biennium to meet its constitutional obligation to fully fund basic education.”

As a result, state agencies, including the UW, have received instructions to severely limit requests for new programs or policy initiatives in their requests for state funding in the 2017-19 biennium.

Stay tuned to the OPBlog for updates on revenue forecasts.

On April 18, Governor Inslee signed the final compromise operating budget after vetoing several sections. One of the Governor’s vetoes reversed a plan to convert activities conducted by the Office of Financial Management (OFM) into a “central service.” As a result of the veto, the UW will no longer be billed approximately $2.03 million from tuition operating fee revenue to cover those services.

Our updated brief is here. Please contact Jed Bradley or Becka Johnson Poppe if you have any questions.

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