Office of Planning and Budgeting

On Wednesday, the Economic and Revenue Forecast Council released its November revenue forecast, which projected a slight increase to General Fund-State (GF-S) collections over the September revenue forecast. The GF-S revenue forecast increased by $113 million for the current 2015-17 biennium and $30 million for the 2017-19 biennium.

  • Final GF-S revenue collections for the 2013-15 biennium were $33.666 billion.
  • Total projected GF-S revenue for the 2015-17 biennium is now $37.204 billion, 10.5 percent more than the 2013-15 biennium.
  • Total projected GF-S revenue for the 2017-19 biennium is now $40.567 billion, 9 percent more than the 2015-17 biennium.

Behind the numbers:

  • The forecast attributes the higher projections to strong performance in auto sales and service-providing industries.
  • Cannabis revenue from Clark County fell after Oregon legalized marijuana, but statewide revenues have continued to grow.
  • Concerns cited in the forecast include weaker-than-expected job growth, a dip in exports, and a manufacturing decline in the United States and Washington state.
  • The forecast assumes that the Federal Reserve will gradually increase interest rates starting in December.

According to a Spokesman Review article, expenditures in the 2015-17 biennium are expected to exceed the $37.204 billion in expected revenue. Further complications include a costly wildfire season, the $100,000 per-day fine that the state Supreme Court levied on the Legislature for failing to come up with a plan to boost public school funding, and voter approval of Initiative 1366, which will reduce state sales tax by 1 percent if the Legislature doesn’t approve a constitutional amendment to require a two-thirds vote for tax increases.  David Schumacher, director of the Office of Financial Management (OFM) is quoted in the Spokesman Review article as saying, “What this means, of course, is that there will be very little room for new spending in this year’s supplemental budget.”

Governor Jay Inslee will use the November revenue forecast to craft his 2015-17 supplemental budget proposal, which is expected to be released in December. Stay tuned to the OPBlog for updates on the Governor’s budget proposal when it is released.

A recent story in the LA Times, “UC seeks to boost Californians’ enrollment by 10,000 by 2018,” outlined the University of California’s plan to expand resident undergraduate enrollment at their nine undergraduate campuses. Like many U.S. public universities that have faced significant state divestment during the recession, the UC system has enrolled more nonresident students in recent years to help cover funding cuts and keep resident tuition increases to a minimum. To adjust this trend, the California Legislature recently increased its investment in the UC system by $25 million to partially fund the enrollment of 5,000 additional resident undergraduate students by no later than 2016-17.  To pay for an additional 5,000 enrollments proposed by UC, system President Janet Napolitano plans to phase out aid for low-income non-resident students and request additional funding from the California Legislature. Napolitano was quoted as assuming the legislature would “continue to support access for California students.”

According to the article, UC officials are now “working through the logistics of housing, laboratory availability, and classroom sizes.” The increase in undergraduate students will also necessitate enrolling 600 more graduate students for instruction and lab support.

The University of Washington has faced similar financial pressures as a result of the recession, but remains committed to providing Washington students with affordable, quality higher education.

  • The UW continues to fully fund Husky Promise, which covers, at minimum, tuition and fees for resident undergraduate students who qualify for the Pell Grant or State Need Grant.
  • Since 2009-10, the UW has increased incoming enrollment of resident undergraduates by more than 1000 students at its three campuses.
  • During the recession, the UW increased its contribution to institutional financial aid in order to maintain access for students with the most financial need.
  • The percentage of Pell-eligible students at the UW rose from less than 20 percent in 2007-08 to 29 percent in 2014-15.

With over 188,000 undergraduate students in the UC system, the plan would increase their undergraduate enrollment by over 5 percent. To achieve a similar overall increase, the UW would need to add approximately 2000 students and would face significant barriers in doing so. Unlike the UC system, UW does not provide need-based aid for non-resident undergraduate students, and thus would not be able to cut that non-resident aid funding to pay for additional resident enrollment. Additionally, all three campuses are nearly at capacity without significant capital investment.

Undergraduates who graduated with student loan debt from four-year colleges in 2014 owed an average of $28,950, according to a recently released report by The Institute for College Access and Success (TICAS).[1][2] 69 percent of graduates have loan debt, the same figure as last year and slightly higher than it was in 2004 (65 percent). The average amount of debt per borrower is up 56 percent from 2004 – more than double the inflation rate over the same period – but only up 2 percent from 2013.

A number of factors have contributed to the rising student debt load over the past decade. States have decreased their investment in public higher education over the last ten years, causing students at public institutions to bear a higher percentage of the funding burden. Since 2004, the share of public higher education funding provided by states has dropped (from 62 percent to 51 percent) and the share paid by students and their families (in the form of tuition) has increased (from 32 percent to 43 percent).

In addition, the growth of Pell Grants has not kept up with rising costs. The TICAS report shows that between 2004 and 2012—the last year in which data is available—recipients of Pell Grants at public four-year colleges saw average cost of attendance rise by $7,400 and grant aid rise by just $2,900. At private, non-profit colleges the gap is even wider; costs rose by $14,400 and grants increased by $8,700.

Washington state is performing well with regard to student loans: only 58 percent of Washington bachelor’s degree recipients who graduated in 2014 had loans, and those who did had an average of $24,804, more than $4,000 below the national average. The University of Washington also looks good by these metrics: thanks in large part to the University’s commitment to institutional aid through programs such as Husky Promise, less than half of all UW undergraduates who graduated in 2014 had student debt and the average debt burden was $21,558, well below the state and national averages.

While Washington’s performance relative to its peers is laudable, student debt is still a major issue for many students. The TICAS report offers a series of proposals to mitigate the student debt load, among them doubling the size of Pell Grants, simplifying income-driven repayment plans, and improving student loan servicing to make it easier for students to pay back their loans. It is important that policymakers remain focused on reducing the student debt burden and continue working with institutions to make higher education accessible and affordable for all students during and after graduation.

 

 

 

[1] It’s important to note that borrowing rates and debt levels vary widely by state, college and sector.

[2] Because the federal government does not require colleges to report debt levels for their graduates, data in the TICAS report is based on voluntary reporting by institutions. Hardly any for-profit colleges voluntarily report their graduates’ average debt, so this year’s debt figures are for public and nonprofit colleges only.

Leadership in both House and Senate passed a compromise operating budget in the form of  Engrossed Substitute Senate Bill 6052.

All of higher education including financial aid would receive $3.5 billion of Near General Fund (NGF) for the biennium which is 9.2 percent of the overall NGF appropriation of $38.2 billion.

The compromise budget adopts the provisions in Second Engrossed Substitute Senate Bill 5954, which reduces the operating fee portion of resident undergrad tuition at all public higher education institutions. In 2015-16, resident undergraduate operating fees at all public institutions are to be 5 percent below the 2014-15 rates. In 2016-17, resident undergraduate operating fees at the state universities (the UW and WSU) are to be 15 percent below the 2014-15 rates; at the regional universities, they are to be 20 percent below the 2014-15 rates; and at the community and technical colleges, they are to be held at 5 percent of the 2014-15 rates.

This budget provides $27 million to partially fund compensation increases of 3% in FY16 and 1.8% in FY17. This budget also partially funds collective bargaining agreements with WFSE and SEIU.

Listed below are some of the Key funding’s provided by this budget:

Computer Science – $6 million over the biennium to increase bachelor’s degrees awarded in Computer Science.

WWAMI – $9 million over the biennium to continue operations in Spokane.

Family Practice Medicine Residency Network – $8 million over the biennium to fund additional medical residencies.

O&M Funding – $1.76 million over the biennium to cover maintenance costs for UW Bothell’s Discovery Hall.

The legislature also passed the final capital budget. For more details on the operating and capital budgets, please refer our OPB Brief.

Leadership in the House Appropriations Committee released a third operating budget proposal today in the form of 2P2SHB 1106 and PSHB 2269. This proposal still differs from the Senate budget proposal SB 6050 and varies from the previous House operating budget P2SHB 1106.

All of higher education (including financial aid) would receive nearly $3.348 billion (8.8 percent of near general fund appropriations). Under this proposal, the UW receives a total appropriation of $650.5 million, of which $598.19 million is from Near General Fund account.

Here are some of the key points from the House Budget (2P2SHB 1106) released today :

  • Tuition – This budget assumes tuition rates remain at the levels charged in 2012-2013. Funding is provided to freeze resident undergrad tuition in the first year; however, funding in the second year is provided in HB 2269 (see below).
  • Compensation Increase – This budget proposal is similar to prior proposals, authorizing a 3% and 1.8% for FY16 and 17 respectively; in addition, this budget provides limited funds for the UW’s contracts with SEIU and WFSE.
  • WWAMI – This budget contains a proviso to transfer $4.68 million a year from WSU to the UW to maintain WWAMI and support expansion of this program to 60 students.
  • O&M Funding – $1.762 million over the biennium to cover the Operating and maintenance cost of UW Bothell Discovery Hall which is the same as the House budget, but slightly higher than the Governors funding.

HB 2269 was introduced alongside the primary appropriations bill and would fund the following activities:

  • Medical Residencies – HB 2269 appropriates $8 million over the biennium for medical residencies.
  • Computer Science – This budget provides $8 million over the biennium to increase bachelor’s degrees awarded in computer science.
  • Computer Science Building – This budget appropriates $32 million over the biennium from State building construction account.

We anticipate significant activity this week and will post additional updates to the blog.

Leadership in the House Committee released a new Operating budget proposal in the form of P2SHB 1106 as a counter offer to the Senate budget released last week. This proposal still differs from the Senate budget and varies slightly from the engrossed House operating budget, ESHB 1106.

All of higher education (including financial aid) would receive nearly $3.49 billion or 9 percent. UW receives a total appropriation of $612.3 million of which $591.39 million is from Near General Fund account.

Here are some of the key points from the House “Offer “Budget proposal:

  • Tuition – This budget freezes tuition to all higher education institutions at the levels charged in 2012-2013. Funding is provided to freeze resident undergrad tuition.
  • Compensation Increase – This budget proposal is similar to prior proposals in authorizing a 3% and 1.8% for FY16 and 17, however this budget would only partially fund the cost of increase. This budget provides limited funds for the UW’s contracts with SEIU and WFSE.
  • WWAMI – This budget contains a proviso to transfer $4.68 million a year from WSU to the UW to maintain WWAMI and also a contains a requirement to support 60 first year medical students and 60 second medical students through WWAMI program in Spokane.
  • O&M Funding – $1.762 million over the biennium to cover the Operating and maintenance cost of UW Bothell Discovery Hall which is the same as the House budget, but slightly higher than the Governors funding.
  • Computer Science – This budget provides $4.25 million over the biennium to increase bachelor’s degrees awarded in computer science.

Please refer to our OPB Brief for more information about the special session House “Offer” budget.

Leadership in the Senate Ways and Means Committee released a new Operating budget proposal on May 28th 2015 in the form of Senate Bill 6050. This proposal makes significant changes to the engrossed Senate operating budget, ESSB 5077 and continues to differ from the engrossed House operating budget, ESHB 1106.

Though the 2015 legislature is scheduled to adjourn today, no compromise operating or capital budget exists. Thus a second special session will be required.

All of higher education (including financial aid) would receive nearly $3.6 billion or 9.2 percent increase from the Governor and House budgets. UW receives a total appropriation of $685.7 million of which $666.36 million is from Near General Fund account.

Here are some of the key points from the Senate “Offer “Ways & Means Budget proposal:

  • Tuition affordability program– This budget reduces the operating fee portion of resident undergrad tuition to 14 percent of the State’s average annual wage in FY16 and FY17. It provides $107 million to offset the reduction in operating fees and an additional funding to backfill the foregone tuition revenue. In spite of the above funding, UW anticipates a shortfall of $3.7 million over the biennium.
  • WWAMI – Senate budget provides $9 million over the biennium for continued operations of the WWAMI medical school program, and the bill requires that the state cost per student per year not exceed $45,000 in Spokane.
  • O&M Funding – $1.762 million over the biennium to cover the Operating and maintenance cost of UW Bothell Discovery Hall which is the same as the House budget, but slightly higher than the Governors funding.
  • Compensation Increase – “Like the House proposal, this budget authorizes 3% and 1.8 % increases for FY16 and FY17, respectively. However, this budget would only partially fund the cost of those increases”.

Please refer to our OPB Brief for more information about the special session senate chair budget. Special session house budget is expected to be released Monday.

report released today by Demos, a New York public policy think tank, attempts to identify the reasons why tuition prices at public four-year institutions have increased over the last decade. The findings reinforce the understanding that declining state support, rather than “administrative bloat,” is the primary cause of tuition increases. Although administrative spending did increase marginally, the authors attribute the slight change to rising health care costs[1]  and to new support services required over the past decade – such as those to support growing technology needs.

The report analyzed data from the Delta Cost Project and examined research institutions separately from institutions that primarily award bachelor’s and master’s degrees.

Between 2001 and 2011, state funding per student fell by $3,081 at research universities and, simultaneously, tuition per student increased “in near lockstep,” by $3,628. Consequently, the majority of funding formerly provided by the state is now borne by students and their families.

The Causes of Rising Tuition at Public Research Universities

(taken from Figure 6 in the report)

Causes of rising tuition - research universities

As seen in the figure above, of the tuition hikes at public research universities:

  • 79 percent is attributable to declining state appropriations,
  • 9 percent is due to higher instruction costs (largely the result of rising health insurance premiums)
  • 6 percent is due to more construction costs, and
  • 6 percent is due to increased administrative spending.

With regards to “administrative bloat” – which some still view as a key driver of tuition increases – the report finds that “the number of executives and administrators has actually slightly decreased relative to the size of the student body” and the average number of total employees per 1,000 students has remained relatively constant over the last decade.

Instead, public institutions are employing more part-time faculty and professional staff (e.g. employees who work in admissions, human resources, information technology, etc.). “All of these things are necessary to support the growing university,” said Robbie Hiltonsmith, the report’s author.  Hiltonsmith also noted that when state funding for higher education declines, colleges can either raise tuition to make up for the forgone revenue or look for ways to trim expenses.  “If there isn’t a lot of fat to cut, then their only option is to raise tuition or lose quality of education.”

[1] On average, the amount spent by public universities to provide health insurance to staff and faculty rose by nearly $2,700 per employee between 2001 and 2011, a 40 percent increase.

State Higher education Executive Officer (SHEEO) announced its annual release of State Higher Education Finance (SHEF) report for FY14, which provides a comprehensive review of state and local funding, tuition revenue, and enrollment trends for public higher education.

National trends and Current status of state funding for higher education

On average, state and local support per full time equivalent (FTE) student was $6,552, a slight increase from $6,215 in 2013. Net tuition collections per FTE student is at $5,777, a 2.7 percent increase from 2013. Two rather interesting findings were highlighted in the report:

  • State and local support was 57.3 percent in 2014 as a share of per-student total educational revenue available to public institutions of higher education.
  • The explosive enrollment growth at public institutions from 2008 through 2011 tapered off in 2012 and is continuing in the downward trend. In 2014 enrollment fell another 1.3 percent from 2013.

Washington State compared to U.S Average

As a reminder, the SHEEO SHEF report combines community and technical college and college/university enrollment, state appropriations and tuition revenue for purposes of this report. In it, they found that enrollment (FTE) increased by 3.5 percent from 2009 to 2014, which is close to U.S. average (3.9 percent). They also found that public higher education in Washington improved in a number of other dimensions; including:

  • 15.3 percent increase in educational appropriations per FTE since 2013, higher than the U.S. average of 5.4 percent;
  • 3.7 percent increase in net tuition revenue per FTE from total educational revenue, higher than the U.S. average of 2.7 percent; and,
  • Total educational revenue per FTE increased by 9.4 percent, which was higher than the U.S. average of 4.1 percent.

However, two years of per-student funding increases might have meant that national average was on the path to exceeding pre-recession funding levels, which was not the case. Educational appropriations per student in FY14 remained 18.9 percent below 2008 pre-recession levels.

Read the full report for more data, analysis and methodological details.

The Senate capital budget appropriates $102 million in new funding from the State Building Construction Account, which is significantly more than the House capital budget appropriation of $41 million.

Here are some of the major funding items from the Senate capital budget:

  • $32.5 million for computer science and engineering expansion.
  • $16 million for UW Tacoma Urban Solution Center.
  • $46.2 million for Burke Museum.
  • $4 million for Health Science education MHSC T-wing renovation predesign.

The Senate voted its operating budget, Engrossed Substitute Senate Bill 5077 off the floor, adopting only five floor amendments, making virtually no changes to the higher education budget presented in our prior budget brief, available here. However, one of these five adopted amendments would redirect state marijuana-related revenues to the general fund, in lieu of allocating those funds to the state’s research universities (per citizen’s Initiative 502).

We will keep you updated as the House and Senate continue to work toward a final conference budget.

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