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.
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.
Senate Ways & Means Chair Andy Hill released the Senate budget proposal today. Please see the OPB Brief for a complete analysis.
Tuition: The Senate Chair budget contains language allowing the Regents to set tuition and fees for all student categories other than resident undergraduates. The budget bill assumes no tuition increases for resident undergraduates; however, UW Regents retain the authority to set tuition rates under HB 1795. It is crucial to note that the budget states that these tuition provisions will be nullified if SB 5883 passes. SB 5883 would require a 3 percent decrease in resident undergraduate tuition for 2013-14.
Compensation: The budget deems the UW’s collective bargaining agreements (CBA) to be financially feasible and restores the 3 percent salary cut imposed on state agencies in the last biennium. We assume the budget lifts the current salary freeze for state employees as it makes no mention of extending it. In addition, the budget assumes savings by changing the definition of “full time” employee to align state employee healthcare eligibility with the federal standard set out in the Affordable Care Act. This is a significant change in policy, and we expect it to become a serious topic of public debate in the weeks to come.
Other policy changes affecting the UW include:
- Funding for the Joint Aerospace Initiative with WSU;
- Appropriations for a new Center on Ocean pH Balance;
- One-time, performance-based funding;
- Operation and maintenance funding for MolE and Dempsey Hall;
- Funding reductions related to administrative efficiencies;
- An international student surcharge; and
- A fund transfer from the UW Hospital Account.
The Senate chair budget proposal is one of a series of budgets released as part of the biennial budget process; the House is expected to release its budget proposal next week. It is likely that the UW will not have a clear sense of its actual anticipated state funding level until later this month.
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.
Here is a quick look at some recent happenings in the world of higher education:
- The College Scorecard confuses students and lacks desired information, says a report released today by the Center for American Progress (CAP). The College Scorecard, which President Obama proposed last February, is an online tool to help students compare colleges’ costs, completion rates, average student-loan debt, and more. The CAP asked focus groups of college-bound high-school students for their opinions on the scorecard’s design, content, and overall effectiveness. Student responses indicated that they did not understand the scorecard’s purpose; they would like the ability to customize the scorecard according to their interests; they want more information on student-loan debt; and they would prefer seeing four-year graduation rates, rather than six-year rates. The CAP report includes recommendations for improving the readability and usability of not just the scorecard, but of government disclosures in general.
- The U.S. House of Representatives passed the STEM Jobs Act on Friday by a 245 to 139 vote. The bill would eliminate the “diversity visa program,” which currently distributes 55,000 visas per year to people from countries with low rates of immigration to the U.S. Those visas would instead go to foreign graduates from U.S. universities who earn advanced degrees in science, technology, engineering or mathematics (STEM). Proponents of the Republican-backed bill say it would keep “highly trained, in-demand” workers in the U.S., boosting the nation’s economy and preserving its global competitiveness. While the White House and most Democrats support the expansion of STEM visas, they oppose the bill’s attempt to eliminate the diversity visa program. Consequently, the measure is unlikely to pass the Democrat-controlled Senate.
- The overlapping agendas of Texas, Florida, and Wisconsin governors could signal a new Republican approach to higher education policy, says Inside Higher Ed. The three governors agree on cost-cutting strategies such as requiring some colleges to offer $10,000 bachelor’s degrees; limiting tuition increases at flagship institutions; linking institutions’ graduation rates to state appropriations; and letting performance indicators, such as student evaluations, determine faculty salaries. Although the governors’ proposed reforms appeal to some voters, “actions taken by all three have been sharply criticized not only by faculty members and higher education leaders in their states, but also by national leaders, who view the erosion of state funding and increased restrictions on what institutions can do a breach of the traditional relationship between state lawmakers and public colleges and universities.”
Here are a few noteworthy headlines from the past few days of higher education news:
- History professors at the University of Florida are fighting a proposed differential tuition strategy that would hold tuition rates stable for “high-skill, high-wage, high-demand” degree programs for at least three years. Most STEM degrees made the list of majors recommended for this tuition freeze, while core Humanities disciplines (such as history) did not. The Governor-commissioned task force responsible for the proposal said, “The theory is that students in ‘non-strategic majors,’ by paying higher tuition, will help subsidize students in the ‘strategic’ majors, thus creating a greater demand for the targeted programs and more graduates from these programs, as well.” Supporters feel such an approach will provide taxpayers with the maximum return on their investment and “improve the university system overall.” However, the opposition, championed by a number of history professors, argues the strategy would detract from the university’s prestige and lead to a less “richly educated” workforce. Over 1,300 faculty from Florida and beyond have petitioned Florida Governor Rick Scott to seek faculty input for future decisions regarding Florida’s higher education system. This particular form of differential tuition contrasts with the more typical, cost-driven approach, under which students in majors that cost the university more to provide (such as STEM fields) are charged higher tuition than students studying less expensive subjects (like history).
- Carnegie Corporation President, Vartan Gregorian, is advocating for a presidential commission on higher education to “generate the kind of attention and urgency that the circumstances demanded for the nation to keep its competitive edge.” The commission’s mandate would be to address the many challenges confronting higher education (cost, access, etc.) and help policy makers determine its future. Given the drastic demographic, technological, and economic changes already occurring in higher ed, Mr. Gregorian believes now is the appropriate time to discuss nation-wide reform.
- Apprenticeships are becoming more popular in the U.S. as a means of bridging the disconnect between what students learn in college and what their future employers actually want them to know. Several Harvard professors, inspired by Germany’s “dual system” of providing students with practical job-related skills and theoretical instruction, are working with six states to establish apprenticeship programs.
Last week, a Los Angeles Times/USC poll found that support for Proposition 30 is dwindling. Only 46 percent of registered voters now approve the California ballot initiative designed to deflect almost $1-billion in state higher-education cuts—a 9-point drop over last month’s poll by the same organizations. Meanwhile, 42 percent of respondents oppose the proposition.
If Prop 30 passes:
- The state’s sales tax would increase by 0.25 percent through 2016;
- Californians earning more than $250,000 would pay higher income taxes through 2018;
- The resulting $6 to 8.5 billion in additional revenue generated each year would allow the state to continue its current level of higher education funding into, at least, the coming year; and
- The University of California system would freeze undergraduate tuition rates.
If Prop 30 fails:
- California community colleges would lose $338 million;
- The California State system would lose $250 million—requiring the system to lay off (by their estimate) 1,500 faculty and staff, reduce next year’s Fall enrollment by about 20,000 students, and increase tuition and fees for in-state students by 5 percent; and
- The University of California system would lose $375 million—resulting in, as System officials declared, a tuition increase of as much as 20 percent.
Proponents of Prop 30 face resistance from the state’s fiscal conservatives and competition from another ballot initiative, Proposition 38, which would raise income taxes through 2024 and direct most of the $10 billion per year in revenue toward K-12. If both bills pass, California’s constitution requires that the proposition with the most votes cancel out the other. This is because Prop 30 and Prop 38 both increase personal income tax rates and could, therefore, be seen as conflicting. However, Prop 38 appears to have little momentum, relative to Prop 30 and it is unlikely that both bills will pass.
A recent Insider Higher Education article describes the inventive deals that a handful of public universities are pursuing in an effort to keep tuition rates from rising. By offering tuition freezes in exchange for either (1) increased state funding or (2) individual student efforts to graduate on time, universities hope to meet public demands to stabilize tuition and also ease the financial burden of doing so.
1. Public institutions can afford tuition freezes if states pick up the slack. On several occasions, the University System of Maryland has successfully encouraged state lawmakers to “buy down” potential tuition increases. And just last Friday, the University of Minnesota’s Board of Regents accepted a proposal to freeze undergraduate resident tuition if the state provides an additional $42.6 million over the coming two years. This approach has been successful in some states, but the article mentions a major problem: “many states simply don’t have the money or the political will to invest in education at the moment.” However, even when schools do not expect to receive more state support, these proposals may at least spark conversations about the crucial linkage between falling state appropriations and rising tuition rates.
2. Benefits of better on-time graduation rates may be enough to offset costs of tuition freezes. Getting more students to graduate sooner can improve a university’s ranking, lower its students’ average debt, and make room for more incoming students. For some schools, this is enough incentive to provide tuition freezes in a targeted manner. Last week, leaders of the Indiana University system offered to freeze tuition for students who have earned 60 credits by the end of their sophomore year and are, therefore, on track to graduate within four years. Additionally, UT-Austin will pilot a program next year that would award students who receive Federal Direct Unsubsidized Loans with $1,000 of loan forgiveness for each semester they stay on pace to graduate in four years. UT-Austin’s Director of Student Financial Services said the program could save students up to $12,000 over the course of their education.
As public institutions continue to face dwindling state appropriations and increased pressure to stabilize tuition, we may see more of these innovative proposals.
The NY Times reports that researchers at the Brookings Institution have summarized why college is worth it. Their chart shows the percent of people at each income level who have various levels of educational attainment. Not surprisingly, the conclusion is that more education opens the gateway to better, higher-paying jobs.
A few findings to consider:
- Of the Americans who earn over $150,000, 82 percent had a bachelor’s degree.
- An individual with only a high school diploma is twice as likely, relative to someone with a college degree, to earn less than $40,000 per year.
- Conversely, an individual with a college degree is 9 times more likely to make over $100,000 and 13 times more likely to make more than $200,000 per year when compared to someone with only a high school diploma.
Although half of all UW undergraduates graduate with zero debt, even when factoring in debt, college is still a great investment. The same researchers developed another chart showing the return on investing in one’s higher education relative to the return on investing comparable tuition money in the stock market, long-term Treasury bills, housing, corporate bonds or gold.
Once again, the numbers show that postsecondary education opens the door to higher-paying jobs and more opportunities.
AAUP released its annual academic salary information this week. The data show, once again, that faculty salaries have not kept up with inflation, that they have not increased significantly over many years, and that the pay gap between professors at public and private institutions continues to grow.
Although these data do not address the rapidly increasing costs of benefits (healthcare especially), they do make clear that the growing cost of tuition is not primarily driven by increasing faculty salaries, a popular argument. Don’t expect that explanation to fall out of favor, however, as previous years of data have seemed to make no impact on its prevalence.
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