Office of Planning and Budgeting

2014 Sup Budget Comparison v2

*Although the conference budget cuts state funding by $7.3 million, it also reduces the amount employers can spend on benefits per employee per month to $622, which essentially offsets the cut.

† The $1,200,000 figure is an estimate until OFM sends additional instructions.

On Thursday, Governor Inslee released his budget priorities for the 2013-15 biennium. OPB released a comprehensive brief on the plan, but below is a quick summary of the major points in the Governor’s budget.

Governor Inslee’s plan would fund all of higher education, including financial aid, with nearly $3 billion (8.4 percent of the total budget), of which the University of Washington would receive just over $232 million per year. This funding level represents about $3.6 million more per year than the UW would have received under Governor Gregoire’s “New Law” budget. Governor Inslee’s plan also:

  • Authorizes tuition increases of up to five percent per year for resident undergraduates at UW and WSU (three percent at other four-year universities). While the UW still has tuition setting authority, it must provide increased financial aid if it raises tuition above five percent.
  • Provides the UW with $6 million per FY to create a Clean Energy Institute with the purpose of researching energy storage and solar energy.
  • Appropriates$1 million per FY to the UW’s College of Engineering to support increased enrollments.
  • Funds the joint Aerospace Initiative and the Center on Ocean Acidification at levels consistent with Governor Gregoire’s budgets.
  • Gives additional funding to financial aid to keep pace with tuition increases and to fully fund the College Bound scholarship program.

Governor Inslee’s plan restores the 3 percent salary cut imposed on state agencies in the last biennium, but includes no mention of the current salary freeze for state employees, which is set to expire on June 30, 2013. We assume this means the freeze will be lifted, however the Governor’s plan does not provide explicit funding for wage increases.

Governor Inslee’s capital budget plan is identical to Governor Gregoire’s, and includes money for the UW’s top capital priorities such as minor capital repair, the UW Tower Chilled Water System Replacement, and Magnuson Health Sciences Center Roofing Replacement.

While Governor Inslee’s budget blueprint is an important step in the budget process, we expect the UW will not have a clear picture of its actual FY14 and FY15 funding levels for at least another month. We will post updates to this blog when the Senate and House release their budgets. Please also monitor the State Relations website for information.

The Governor’s budget office released the first set of biennial budgets today. The current Governor proposed a “current law” balanced budget, assuming no new revenue, and a budget with new revenue, appropriating $34.1 billion of Near General Fund State per year, for which all of higher education, including financial aid, would receive nearly $3 billion (or 8.7 percent). As a reminder, Governor Gregoire’s budget proposals are the first of many budgets to be released for the upcoming biennium. The earliest point that the UW will have a sense of its actual anticipated state funding level is late April 2013. In addition, we might see Governor-elect Inslee release his own budget, or a set of budget priorities, in January 2013.

Under Governor Gregoire’s balanced and new law budgets, each of the state’s six baccalaureate institutions would receive slight increases in funding when compared to carry-forward budgets levels, with no new tuition increases or state funding reductions. While the UW has another year of tuition setting authority under HB 1795, the Higher Education Opportunity Act, this budget does not provide any new financial aid funds to cover tuition increases.  Note that Education Legacy Trust funding, from which the UW normally received at least $8 million annually, was removed from all public baccalaureate institutions’ budgets and replaced with general fund appropriations.

The 2012 Legislature appropriated $209 million in state funds to the UW for FY13, thus, both of the Governor’s proposed budgets represent an increase in the UW’s state funding for FY14 and FY15. However, the budget bill devotes these increases to covering expenses associated with the UW’s collective bargaining agreements.  If any funds remain afterward, they will be available for any other purpose(s).

Please review our budget brief on the Governor’s operating budgets and capital budgets. As usual, let us know if you have any questions.

 

The Economic Revenue and Forecast Council (ERFC) released its September revenue forecast on the 19th. Believe it or not: Anticipated revenues for the current (2011-13) and upcoming (2013-15) biennia were slightly ahead of the previous forecast.

Although only eight months of the current biennium remain, revenues are running $29 million ahead of predicted levels due to better than anticipated employment numbers, construction activity, and real estate excise tax collections.

Projected revenues for the upcoming 2013-15 biennium (FY14 & FY15) were raised by $23 million; but, as the full forecast and press release note, the downside risks resulting from potentially stagnant employment gains, an extremely weak Washington export market, sovereign European debt crisis, and possible federal fiscal cliff threaten these modest gains.

While ERFC will refine the revenue forecast again in November and the Governor will use it as a basis for her budget, she and the Office of Financial Management (OFM) have already committed any possible additional revenue above current forecasted levels to K12. Revenue projections may have increased slightly with the release of this forecast, but required expenditures in the upcoming biennium will far outweigh potential revenues. OFM projects a $1 billion deficit out the gate.

 

Yesterday, Governor Gregoire’s budget office issued a lackluster four-year revenue and expenditure outlook for the state’s near general fund. The coming 2013-15 biennium (FY14 & FY15), for which the Governor will release a budget in December, comes up short on anticipated revenue and long on expenditures. Before accounting for required increases in K12, across-the-board salary increases, and minor increases to financial aid spending, the anticipated deficit for both years of the coming biennium is $1.7 billion. If the Legislature appropriates funds from the budget stabilization account, the biennial deficit shrinks to $956 million. The deficit was calculated based on the assumption that near general fund revenue will grow 2.2% in FY14 and 4.4% in FY15.

Expenditure assumptions include the backfill of an equivalent 3% salary reduction in each of the prior two fiscal years (FY12 & FY13). In other words, it is presumed that the Legislature will backfill the UW’s budget by approximately $12 million per year to replace the temporary salary-related reductions it imposed on the University during the prior biennium. However, without an infusion of revenue, the Legislature will not be able to fund required K12 policy enhancements, financial aid, or salary increases.

The outlook serves as a reminder that the state’s economy remains tenuous and even a minor replenishment of higher education spending is questionable.

The Governor’s budget office released the first supplemental budget proposal today, further reducing state expenditures for the 2011-13 biennium by $1.7 billion. All told, higher education institutions would absorb about nine percent of the total cut.

Under the Governor’s proposal, each of the state’s six baccalaureate institutions  would receive 16-17 percent cuts in state funding for Fiscal Year 2013 (FY13), while community and technical colleges would receive a 13 percent cut.

Funding cuts are once again disproportionately concentrated at four-year institutions even though the Governor discussed making equal across-the-board cuts as recently as October, because, as noted by budget staff, four-year institutions have a greater ability to   generate tuition revenue than community colleges.

Note that the Governor’s budget eliminates funding for the state’s Work Study program next academic year but importantly, preserves funding for the State Need Grant program.

For more information about budget increases for the College of Engineering, aerospace innovation funding, and financial aid impacts, please review our Planning & Budgeting brief.

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.

Leadership in both fiscal committees of the House of Representatives and Senate signed a compromise budget to closing the remaining FY 2011 budget deficit. Both new cuts and fund transfers are included in the compromise.

While the budget is not final and both chambers must take a floor vote, the conference budget is in near final form. Higher education institutions would not receive direct state funding cuts, but would be asked to backfill a new cut to the State Need Grant (SNG) with institution resources. The UW would be directed to use $5,658,000 of internal funds to cover the general fund reduction to the SNG.

Also note that higher education institutions were exempt from a salary reduction (furlough) requirement.

Lastly, the compromise budget did not close the Basic Health Plan but it did make significant cuts to K12 and other social services.

Both the American Recovery Act (ARRA) of 2009 and the 2010 Education Jobs Fund provided federal funding for education. In exchange for accepting federal funds, both fiscal relief vehicles came with Maintenance of Effort (MOE) provisions requiring states to continue financial support for higher education institutions at certain minimum levels. However, some forms of state support, such as capital projects, financial aid, and research support are exempt from MOE calculations.

The UW received ARRA funding in the state budget in the 2010 fiscal year. As a result, MOE requirements from both federal actions helped protect higher education funding in Washington State from what may have been even deeper budget cuts. Last year, the State reduced higher education spending down to the federally-required MOE floor for fiscal year 2011. Federal MOE requirements expire after FY 2011.

Due to a state budget deficit that continues to grow, the Governor has called a special session to achieve another round of mid-year budget cuts for the current fiscal year. If the state further reduces funding for higher education, it must choose to violate the federal MOE mandate, or reduce state support for higher education activities exempt from federal MOE, primarily the State Need Grant (SNG), Washington’s need-based financial aid funding program.

In her proposed special session cuts for FY 2011, the Governor chose the latter, recommending that the state delay $76 million of SNG funding until July 1, 2011 (start of FY 2012), with institutions temporarily funding the gap to protect students. The UW’s share of this funding shortfall would be $15 million. While the Governor’s proposal assumes reimbursement on the first day of the new fiscal year, delay of this payment would require the University to cut $15 million to balance its current FY 2011 budget. In addition, given the $5.7 billion state deficit that remains for the upcoming 2011-13 biennial budget, it is not at all certain that this delayed payment would be made to institutions in 2012, when the federal maintenance of effort provision will no longer be in effect.

Any option that reduces or delays funding for higher education will impact University of Washington faculty, staff and students. The Office of State Relations and the Office of Planning and Budgeting will work hard to keep the UW community up to date on special session, and important state budget related news in the coming days.

UW administration recently submitted four budget exercises to not only close out the current biennium (2009-11), but also to plan for the coming biennium (2011-13). Each submission was required by OFM.

Information to make final adjustments to the current, 2009-11 biennium:

Information to help the Governor and the Legislature write initial budgets for the 2011-13 biennium:

  •  The state’s budget forecast for the coming biennium (2011-13) calls for a shortfall in state funds that could be between $4.5 and $6 billion. In an effort to understand how agencies would be affected by further state funding reductions in 2011-13, OFM ordered all agencies to submit information about the possible effects of a 10 percent reduction in funds, $58 million for the UW (please note this was an illustrative exercise and does not represent existing UW plans for implementing future budget cuts). The UW’s plan was submitted on September 30, 2010.
  • On September 13, 2010, the UW submitted its 2011-13 operating and capital budget requests, including all required university data plus any requests for funds for the coming biennium. As we’ve noted in the past, we do not anticipate any new operating resources from the state for new endeavors on campus. The UW’s operating budget and capital budget were submitted to OFM on September 13, 2010.

The University anticipated and responded to any requests for information about prior and future budget cuts by working with appropriate units that have experienced the most significant reductions in the past, and which will likely be affected by further reductions in the future. The reductions we’ve made in the past two fiscal years were strategic in nature; academic units were largely shielded from reductions and various administrative units were targeted for larger reductions.

While each unit had to take an immediate cut in funds to reconcile the $17.1 million October reduction, any future cuts will once again be strategic, differential, and the result of collaboration between units, the Provost, and Planning & Budgeting.