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.

We have updated the OPB brief we posted on February 27th, to reflect additional information regarding the employee health insurance related agency reductions. Both the House and Senate budget would decrease agency contributions for employee health benefits. The House budget cuts state funding by $7.6 million and the Senate budget cuts state funding by $4.4 million. However, both of these reductions are offset by lower per employee spending “limits” on benefits. The House budget would reduce monthly employer funding to $658 per eligible employee. The Senate budget would reduce monthly employer funding to $703 per eligible employee.

Leadership in both the House and Senate fiscal committees released supplemental operating and capital budgets this week, proposing technical corrections and appropriation changes to the current 2013-15 biennial budgets (primarily applicable to FY15). Please see the full OPB brief for information on each proposal.

As a reminder, both budgets will be amended in respective committees, and possibly on each chamber floor, before negotiations begin towards a compromise budget.

 

Governor Jay Inslee called the Washington State Legislature back to Olympia beginning today, Thursday, November 7, 2013 to introduce and ultimately approve several bills aimed at Boeing production of a 777x plane and its carbon fiber wing. The Governor’s press conference is available on line, but a cursory read of the initial bills introduced today indicate that the package will not directly affect the University of Washington.

Stay tuned!

On Tuesday, June 18, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of General Fund-State (GFS) revenues. Compared with the March forecast, expected GFS revenues are up $110 million for the current biennium (2011-13) and $121 million for the next biennium (2013-15), meaning legislators have an additional $231 million to factor into their budget negotiations.

While these changes are positive, they represent very minor adjustments. Under the updated forecast, the state is expected to take in $30.65 billion in the current biennium and $32.66 billion in the next, thus the increases represent adjustments of less than 0.5 percent each.

Most of the positive variance came from increases in forecasted housing construction, taxable real estate activity, and Revenue Act taxes. Real estate excise taxes came in $34 million (34 percent) higher than forecasted and Revenue Act taxes came in $54 million (2 percent) higher—exceeding the January 2008 pre-recession peak. Lower than expected inflation and employment worked against these gains, but weren’t enough to negate them.  Although Washington employment has been slowly increasing in most sectors (especially construction), aerospace and government employment are in decline.

It is important to note that much uncertainty surrounds the council’s 2013-15 baseline forecast due to the Federal sequester, Europe’s recession, and China’s slowing economic growth. The ERFC gives its baseline a 50 percent probability and its optimistic and pessimistic alternative forecasts 20 percent and 30 percent respectively. The optimistic forecast is $2.5 billion above the baseline and the pessimistic forecast is $2.5 billion below.

In addition, it should be noted that, like the March forecast, the June update did not assume any revenue from taxable marijuana sales as the Federal Government’s response to Initiative 502 is still unclear.

Some state lawmakers are optimistic that the new forecast will expedite their budget negotiations; however, the two sides’ have a ways to go before the end of the fiscal year on June 30th (12 days from now). “We’ll get closer as a result of this,” said Representative Ross Hunter during a press conference Tuesday morning.

On Saturday, the Senate released a revised budget proposal, which closely resembles the budget they passed in April. For the UW, the two budgets differ in just a few ways:

  • Unlike the original Senate budget, the revised budget does not include a $12.5M transfer away from the UW Hospital Account;
  • The revised budget does not cut the UW by $3.2M for “administrative efficiencies” that were assumed in the original budget; but
  • Compared to the original proposal, the revised budget provides the UW with $3.2M less in new funding.

The latter two changes essentially nullify each other. A few additional changes occurred with regards to state employee health benefits; we are working to interpret the effects and will provide more information as soon as possible.

As mentioned, the revised Senate budget doesn’t stray far from the original. Just like the Senate’s original proposal, its revised budget:

  • Provides the UW with $479.6M (General Fund and Education Legacy Trust funds) for the 2013-15 biennium—$10.2M of which is one-time performance-based funding;
  • Assumes 0% tuition increases for resident undergraduates;
  • Preserves tuition setting authority, but nullifies that authority if either SB 5883 or SB 5941 pass (the bills would require the UW to decrease resident undergraduate tuition rates by 3 percent for the 2013-15 biennium and limit future resident undergrad tuition growth to the rate of inflation); and
  • Generates “new” funding for higher education by imposing a 20 percent tuition surcharge on international students at the state’s public colleges and universities.

For more information about the original Senate proposal, please see the full OPB brief.

House Ways & Means Chair Ross Hunter released a revised House budget proposal today. The proposal represents Democrats’ updated negotiating position as budget discussions intensify in the last few weeks of the current biennium. We expect the revised House chair budget to pass the floor later this week, after which leaders of both parties and chambers will continue their budget negotiations. It is likely that the UW will not have a clear sense of its actual anticipated state funding level until the end of June.

The revised House budget provides approximately $5 million less for the UW than the previous House budget.  In addition, the revised House budget assumes tuition increases of only 3 percent per year for resident undergraduates, compared to 5 percent per year in the House engrossed budget. Thus, even less revenue is available.

Additional differences between the revised House budget and the House engrossed budget:

  • Clean Energy Institute Proviso – Unlike the previous House budget, which allocated $12 million of the UW’s general fund for the creation and staffing of a Clean Energy Institute, the revised budget only directs $9 million to that purpose.
  • Center on Ocean Acidification – Identical to the budgets of Governor Inslee and the Senate, the House now provides $1.82 million for a new Center on Ocean Acidification.
  • Forestry Program – The revised House budget states that the UW shall establish a Forestry Program “within existing resources.”  In the accompanying budget spreadsheet, $450,000 in “tuition resources” is set aside for this purpose.

Some similarities between the two budgets (this list is not exhaustive):

  • Computer Science & Engineering Proviso Both House budgets stipulate that $14.5 million of the $20.8 million in Education Legacy Trust funding appropriated to the UW for the biennium must be reserved for the expansion of computer science and engineering enrollments.
  • College of Engineering Proviso – Like the prior House budget, the revised budget appropriates $2 million in new state funds to expand College of Engineering enrollments.
  • O&M Funding – Both House budgets provide funding to cover operation and maintenance (O&M) costs for the UW’s new Molecular Engineering building and Balmer Hall.
  • Compensation – Both budgets restore the 3 percent salary cut imposed on state agencies in the last biennium.  And, as neither budget explicitly extends the current salary freeze for state employees, which is set to expire on June 30 of this year, we assume the freeze will be lifted under both.

Please see the full OPB brief for more information.

A recent update on our state’s progress toward meeting the Washington Roundtable’s Benchmarks for a Better Washington emphasizes the need for legislative action on education, including protecting funding for our public universities, as well as transportation and business costs.  The Roundtable – a nonprofit, public policy organization comprised of major, local business executives – created the Benchmarks in 2011 as a means to measure and track Washington’s economic vitality and quality of life. The organization publishes annual updates that examine state-by-state comparative data (primarily from federal sources like the U.S. Dept. of Education); assess Washington’s position in key categories; and highlight opportunities for improvement.

The May 2013 update showed that:

  • Washington trails most states in high school graduation rates (ranking 32nd nationally) and bachelor’s degrees awarded per capita (39th nationally).
  • Washington’s road condition rankings have dropped from 16th (2012 ranking based on 2008 data) to 29th (2013 ranking based on 2011 data) and our state continues to rank poorly on bridge conditions (41st).
  • Washington ranks in the bottom third of states for business tax burden (36th), unemployment insurance tax rates (40th) and workers’ compensation benefits paid (50th).
  • However, Washington has held onto its lead in patent generation (5th) and in low commercial and industrial electricity rates (3rd).

The authors argue that Washington must move quickly to improve its education pipeline and align with workforce needs. As 70 percent of Washington jobs will require postsecondary training by 2020, they assert, “It is imperative that Washington prioritizes higher education and does a better job of preparing its citizens to succeed.”

In Monday’s edition of CrossCut, Roundtable President, Steve Mullin, urged lawmakers to focus on two key topics during the remaining weeks of session:  education and transportation. He specifically called for legislators to ensure our colleges and niversities have the funding they need to develop necessary talent. “Decision time is here,” he wrote, “Education is the driver of prosperity and individual quality of life. Transportation is the backbone of commerce. Both need attention before the 2013 Legislature adjourns.”

House Ways & Means Chair Ross Hunter released the House budget proposal today. Please see the OPB Brief for a complete analysis. Table 1 shows the total funding the UW would receive under the House chair budget, divided into three standard categories: the carry forward level, the maintenance level and the performance level.

The House assumes that the UW will increase undergraduate resident tuition by 5 percent each year, thus making more revenue available. However, the House Chair budget requires that $2 million go toward the College of Engineering, $12 million be used to create a Clean Energy Institute, and a total of $16.5 million of the appropriation be used to support enrollments in Computer Science and Engineering.

As shown in the table below, once recognized additional operational needs are met and once dedicated funds are removed from the equation, the UW is left with almost $10 million less in net new state funding in 2013-15 compared to the previous biennium under the House budget.  Once the potential additional tuition revenue is taken into account, however, the UW fares better under the House budget, even with its spending requirements.  Moreover, the Senate relies on a draconian 20 percent surcharge on international student tuition to generate this additional funding amount.  As mentioned in our previous brief, given that the majority of international students in Washington are enrolled at the UW, this amounts to a tax on UW students. It is expected that the surcharge will lead to a decline in international student enrollments, which could lead to an overall reduction of revenue for the UW.

We are still reviewing the potential impacts of this budget proposal and will provide revisions to the brief as more information becomes available. Once the House chair budget passes the floor (which is expected later this week), leaders of the House and Senate will begin negotiations to reconcile the differences between their respective approaches. It is likely that the UW will not have a clear sense of its actual anticipated state funding level until the end of this month at the earliest.

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.

Next Page →