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February Revenue Forecast Shows Continued Growth

The Economic and Revenue Forecast Council (ERFC) released their聽 on February 19. The projected Near General Fund-State (GF-S) revenue forecast increased by $606 million for the 2019-21 biennium and by $536 million for the 2021-23 biennium. The report projects higher than forecasted revenue compared to the聽.

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

  • $52.339 billion for the 2019-21 biennium, 13.6 percent more than the 2017-19 biennium
  • $55.690 billion for the 2021-23 biennium, 6.4 percent more than the 2019-21 biennium
  • $59.176 billion for the 2023-25 biennium, 6.3 percent over expected 2021-23 biennium

More background on the state revenue forecast is available here.

Some context behind the numbers:

Washington state:

  • Revenue collections have been higher than forecasted in November. Cumulative major GF-S revenue collections from November 11, 2019 through February 10, 2020 were $162 million above the forecast. About $90 million of the collections surplus came from a larger-than-expected spike in real estate activity ahead of the January 1 increase in real estate excise tax (REET) rates on property worth more than $1.56 million.
  • Cumulative Revenue Act taxes (retail sales and use, business and occupation, public utility and non-cigarette tobacco products taxes), which make up the bulk of GF-S revenue, were $64 million (1.4 percent) higher than forecasted.
  • Forecasted Education Legacy Trust Account (ELTA) revenue for the 2019-21 biennium increased by $310 million, mainly due to higher-than-forecasted estate tax receipts.

Local:

  • Seattle-area home prices rose over the year for a fourth consecutive month in November following year-over-year declines in the previous four months. According to the S&P/Case-Shiller Home Price Indices, seasonally adjusted Seattle home prices increased 0.8 percent in November. Because of the strong growth in the last five months, November Seattle home prices were up 3.3 percent over the year. In comparison, the composite-20 index was up 2.5 percent over the year.
  • Seattle-area consumer price inflation slightly trailed the national average in December despite above average shelter cost inflation. From December 2018 to December 2019, the Seattle CPI rose 2.2 percent compared to a 2.3 percent increase in the U.S. City Average.

The legislature will use revenue estimates from this forecast when crafting the proposed 2020 supplemental operating budget, which will amend the enacted . These proposals follow previous proposals from Governor Jay Inslee. A subsequent compromise budget will be released in the coming weeks.

Stay tuned to the OPBlog for updates on the 2020 supplemental budget proposals and the legislative session!

Governor Inslee鈥檚 Proposed 2020 Supplemental Operating and Capital Budgets

On Wednesday, Governor Jay Inslee released his proposed 2019- 21 supplemental and budgets. The budgets include corrections and technical changes to the 2019-21 biennial budgets passed in April 2019. For a detailed analysis and summary of the Governor鈥檚 proposals, or to look back at OPB鈥檚 brief on the biennial budgets, please see OPB鈥檚 briefs on聽this page.

Overall, the Governor’s operating budget does not make significant changes to the enacted biennial budget. The largest change in the higher education sector was a transfer of nearly $28 million to the Workforce Education Investment Account (WEIA) to ensure that the fund would not go into deficit in the 2019-21 biennium, given the forecasted caseload for the Washington College Grant. The most significant adjustments for the 91探花are:

  • A budget-neutral shift of allocations to provide one-time payments to eligible represented employees at the UW;
  • A significant increase to the amount that the Governor鈥檚 Office of Financial Management (OFM) will bill the University for central services charges beginning in FY21; and,

As for the capital budget, the University received $1 million for its request for predesign to study a multi-phased approach to renovate or replace portions of the Magnuson Health Sciences Center. New space will accommodate the growing demands of education space for the health sciences schools, including space for interdisciplinary innovation and collaboration.

The release of the Governor鈥檚 budget proposals represents the first step in the supplemental budget process. Lawmakers in the Senate and the House will release their own proposals throughout the upcoming 2020 legislative session, beginning on January 13.

For more information regarding the UW鈥檚 current requests for state funding, please see OPB鈥檚 2020 operating and capital request submissions on the聽.

Stay tuned to the OPBlog for updates during the 2020 legislative session!

November Revenue Forecast Shows Increased Revenue, but Slowing Growth

The Economic and Revenue Forecast Council (ERFC) released their聽 on November 20. The final tabulation of Near General Fund-State (GF-S) revenue for the 2017-19 biennium was $46.081 billion, $5 million less than estimated in September. Projected revenue collections increased by $299 million for the 2019-21 biennium and by $181 million for the 2021-23 biennium. The report projects similar growth to the聽.

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

  • $51.733 billion for the 2019-21 biennium, 12.3 percent more than the 2017-19 biennium
  • $55.154 billion for the 2021-23 biennium, 6.6 percent more than the 2019-21 biennium

More background on the state revenue forecast is available here.

Some context behind the numbers:

Washington state:

  • Revenue collections have been higher than forecasted in September. Cumulative major General Fund-State (GF-S) revenue collections from September 11 through November 10, 2019 were $135 million above the forecast. Much of this surplus, however, came from transfers of unclaimed property into the GF-S, which were $47 million higher than forecasted in October.
  • Cumulative Revenue Act taxes (retail sales and use, business and occupation, public utility and non-cigarette tobacco products taxes), which make up the bulk of General Fund-State (GF-S) revenue, were $50 million (1.7 percent) higher than forecasted.
  • Cumulative real estate excise taxes (REET) came in $22 million (11.8 percent) higher than forecasted. Large commercial sales spiked while residential sales activity remained close to forecasted levels.
  • Over half of the increase in forecasted GF-S revenue for the current biennium and the bulk of the increase for the next biennium came from property tax collections. These increases stemmed from a revised estimate of the market value of the existing stock of taxable property, which will determine the level of the calendar year 2020 levy. The increase in estimated market value will increase the levy for next year as well as the following years. The revised valuation, combined with other forecast changes, has resulted in a forecast increase of $147 million for the current biennium and $177 million for the 2021-23 biennium.

Local:

  • Seattle area home prices rose over the year for the first time in five months. According to the S&P/Case-Shiller Home Price Indices, seasonally adjusted Seattle area home prices increased 0.5 percent in August while the composite-20 index declined 0.2 percent. Seattle home prices increased 0.5 percent in July as well. Because of the growth in the last two months, Seattle home prices are up 0.7 percent over the year.
  • Seattle area consumer price inflation slightly outpaced the national average in October. From October 2018 to October 2019, the Seattle CPI rose 2.2 percent compared to a 1.8 percent increase in the U.S. City Average.

Governor Jay Inslee will use revenue estimates from this forecast when crafting his proposed 2020 supplemental operating budget, which will amend the enacted 2019-21 biennial budget. The Governor鈥檚 budget release is the first step in the budget process for the upcoming 2020 legislative session, which begins in January.

Stay tuned to the OPBlog for updates on the 2020 supplemental budget proposals and the legislative session!

Income Share Agreement Update

Income Share Agreements (ISAs) have grown in popularity in recent years. They have been lauded by some as a solution to the student debt crisis, and criticized by others for further complicating the education finance market. Given the continued interest in ISAs, we have updated our 2016 brief on the topic. Here are some key takeaways:

  • While our 2016 brief compared ISAs to the federal Income Based Repayment (IBR) plan, it is now clear that ISAs聽typically supplement subsided loans rather than replace them, and are thus better compared to private loans than public loans.
  • More colleges and universities have begun offering ISAs directly, as have more coding academics and other non-traditional institutions.
  • Some members of the Washington state legislature introduced a bill that would create an ISA pilot program and establish ISA regulations for Washington state. There continues to be interest in ISAs on a federal level but also within our state.

For more information and to read the updated brief, please see our OPB Briefs page.

Background on the State Revenue Forecast

The Office of Planning & Budgeting (OPB) publishes a summary of the state鈥檚 quarterly revenue forecasts. This primer provides background on revenue forecast reports, including helpful information about how to interpret and understand their contents.

Who produces the report?

The produces the revenue forecast, and is comprised of both bipartisan legislative and executive members and the State Treasurer.

What does the revenue forecast show?

The quarterly revenue forecast seeks to predict how much tax revenue (or income) will be remitted to Washington state during the given timeframe. This includes funding projections from a variety of sources, including income, property, estate, and sales taxes. Since revenue from these sources is affected by other economic factors (employment, income, home prices, etc.) the forecast generally includes a wider conversation on the health of national, state, and local economies.

Why is it helpful?

Washington state is unique in this approach to revenue forecasting in that the forecast is nonpartisan and is used by both the executive and legislative branches in budget preparation. The Governor uses the November forecast to inform their proposed budgets to the legislature, and the legislature uses the February forecast to inform their final budget recommendations. It is helpful for the 91探花to monitor the report, as changes in state revenue may be tied to changes in appropriations to the University as part of the state budgeting process.

What accounts support the 91探花?

  • Near General Fund – State (NGF-S): The combination of the State General Fund, Education Legacy Trust Account, and Opportunity Pathways Account.
    • General Fund – State (GF-S): Created in 1907, the general fund serves to account for all financial resources of the state except those required to be accounted for in another fund. The general fund is the principal state fund supporting the operation of the state. It is funded through taxes, federal grants-in-aid, charges and miscellaneous revenue, licenses, permits, fees and interest income. The vast majority of state funding for the University comes from GF-S.
    • Education Legacy Trust Account (ELTA): Created in 2005, this account can be used only for support of the K-12 schools, and for expanding access to higher education through funding for new enrollments, financial aid, and other educational improvement efforts. The ELTA is funded through estate taxes and interest earnings.
    • Opportunity Pathways Account (OPA): Created in 2010, this account is intended for the recruitment of entrepreneurial researchers, innovation partnership zones, research teams, early childhood education, higher education grants and scholarship programs, and charter schools. This is funded through lottery revenue.
  • Workforce Education Investment Account: Created in 2019, the Workforce Education Investment account can be used only for higher education programs, higher education operations, higher education compensation, and state-funded student aid programs. The Account is funded through a business and occupation tax on large technology companies, called the 鈥渨orkforce education investment surcharge.鈥
  • Other accounts: The University receives several appropriations from special state appropriated accounts that are not as visible or contemplated at all in the revenue forecast. These include amounts for the School of Public Health Department of Environmental and Occupational Health Sciences (DEOHS) (Accident and Medical Aid Accounts), funding for marijuana research and education (Dedicated Marijuana Account), funding for ocean acidification and management research (Biotoxin Account, Aquatic Lands Enhancement Account), and to support aerospace initiatives (Economic Development Strategic Reserve Account).

 

September Revenue Forecast Indicates Slowing, but Continued Growth

The Economic and Revenue Forecast Council (ERFC) released their聽. The projected Near General Fund-State (GF-S) revenue forecast for the 2017-19 biennium increased by $27 million. Projected revenue collections for the 2019-21 biennium increased by $447 million, decreased by $63 million for the 2021-23 biennium. The report projects similar growth to the聽.

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

  • $46.086 billion for the 2017-19 biennium, 18.0 percent more than the 2015-17 biennium
  • $51.435 billion for the 2019-21 biennium, 11.6 percent more than the 2017-19 biennium
  • $54.973 billion for the 2021-23 biennium, 6.9 percent more than the 2019-21 biennium

Some context behind the numbers:

Washington state:

  • The June forecast included an $85 million transfer of property tax from the GF-S into the Education Legacy Trust Account (ELTA) in Fiscal Year (FY) 2019. While some of this transfer did occur in June 2019, $84 million of the transfer occurred in July 2019, the first month of FY20. This increased the preliminary cash estimate of GF-S revenue for the 2017-19 biennium by $84 million above the June forecast and decreased the forecast for the 2019-21 biennium by the same amount.
  • The preliminary estimate of GF-S revenue for the 2017-19 biennium, which ended June 30, 2019, is $44.144 billion, which is $102 million higher than forecasted in June. Absent the abovementioned delayed transfer, however, collections would have been $18 million higher than forecasted.
  • While the September economic forecast was very similar to the June forecast, expected Revenue Act collections have increased in the current 2019-21 biennium due to their recent strength. Expected slower growth in the 2021-23 biennium, however, has slightly reduced expected Revenue Act collections in that period.
  • Washington鈥檚 unemployment rate remained at 4.6 percent in August for a fourth consecutive month. The state鈥檚 unemployment rate remains near its all-time low of 4.4 percent last reached in October 2018.
  • Washington personal income rose to $471.5 billion in the first quarter from $466.6 billion in the fourth quarter of 2018. The reported 4.3 percent growth rate in Washington personal income was the 15th largest among the states and District of Columbia and exceeded the 3.4 percent growth rate for the U.S. as a whole.

Local:

  • Seattle area home prices increased in July but were down over the year. According to the S&P/Case-Shiller Home Price Indices, seasonally adjusted Seattle area home prices increased 0.5 percent from June to July. Monthly Seattle home prices have, on average, been trending down since June 2018. As of July 2019, Seattle home prices were down 0.7 percent over the year.
  • Seattle area consumer price inflation continued to outpace the national average in August. From August 2018 to August 2019, the Seattle CPI rose 3.2 percent compared to the 1.8 percent increase in the U.S. City Average.

The Governor will use the November forecast revenue estimates when crafting his proposed 2020 supplemental operating budget, which will amend the enacted 2019-21 biennial budget.

Stay tuned to the OPBlog for updates on revenue forecasts and the upcoming 2020 legislative session!

June Revenue Forecast Growth Driven by Legislative Activity

The Economic and Revenue Forecast Council (ERFC) released their聽. The projected Near General Fund-State (GF-S) revenue forecast for the 2017-19 biennium decreased by $47 million. Projected revenue collections for the 2019-21 biennium increased by $432 million. This change was primarily driven by legislative activity in the 2019 session. The report projects similar growth to the聽.

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

  • $46.059 billion for the 2017-19 biennium, 17.9 percent more than the 2015-17 biennium
  • $50.988 billion for the 2019-21 biennium, 10.7 percent more than the 2017-19 biennium
  • $55.036 billion for the 2021-23 biennium, 7.9 percent more than the 2019-21 biennium

Some context behind the numbers:

  • Revenue has been coming in close to the March 2019 forecast. Cumulative major GF-S revenue collections from March 11 through June 10, 2019 were only 0.5 percent ($30 million) higher than expected.
  • Washington鈥檚 unemployment rate remained at 4.7 percent in May after increasing in March and April. The reason for the increase in recent months is that although employment has continued to grow, the labor force has grown faster.
  • Legislative changes accounted for significant adjustments to the previous forecast. This included:
    • An $85 million transfer of property tax into the Education Legacy Trust Account (ELTA), which decreased the forecasted GF-S revenue for the 2017-19 biennium by $87 million. The legislated transfer of additional real estate excise taxes (REET) revenue from new graduated rates plus other small changes added $220 million to forecasted ELTA revenue in the 2019-21 biennium and $327 million in the 2021-23 biennium.
    • An increase in REET receipts due to the adoption of graduated tax rates. The total increase in GF-S revenue from legislative and budget-driven changes is $109 million in the 2019-21 biennium and $282 million in the 2021-23 biennium.
  • Absent these legislative changes, forecasted revenue for the 2019-21 and 2021- 23 biennia would have increased slightly due to positive changes in the economic forecast. Most of the increases stemmed from Revenue Act taxes and REET. These economic changes increased forecasted revenue by $86 million in the 2019-21 biennium and $64 million in the 2021-23 biennium.

Stay tuned to the OPBlog for updates on revenue forecasts!

2019 Higher Education Trends

As the higher education landscape continues to change and evolve in the United States, below are some select national and state trends driving higher education policy and innovation in recent years. The Office of Planning & Budgeting (OPB) continues to monitor these, and other, trends. This list was curated using multiple sources, including recent news articles and blogs, recent state-level legislation, and higher education trends analyses from The Brookings Institution and The Chronicle of Higher Education.

1. College Affordability

College affordability continues to dominate the national conversation around higher education. This year, the to make college more accessible and affordable for Washington families. Read more about the proposal in OPB鈥檚 brief on the legislature鈥檚 final compromise 2019-21 state budgets.

Additionally, many of the Democratic candidates for president in 2020 have released higher education policy proposals to address college affordability. These to increase funding for Pell Grants, to create 鈥渇ree college鈥 using state-federal partnerships, expand student loan forgiveness, and increase dedicated funding for Historically Black Colleges and Universities (HBCUs) and other Minority-Serving Institutions (MSIs).

2. Changing Student Profiles

According to the , 38 percent of all undergraduates are older than 25. Traditional college students 鈥 18- to 21-year-olds who attend school full-time 鈥 now only make up about a third of the college population.

Students are also increasingly taking on additional responsibilities while in school. According to , 85 percent of students are working in paid employment while studying. Lumina also reports that students work, on average, 19 hours per week.

3. Integrating Data

A from the National Association of Student Personnel Administrators, Association for Institutional Research, and Educause found that 鈥渕ost institutions are investing in data and analytics projects, but few are measuring the resulting costs.鈥

The report found that colleges are using data in more ways as they modernize and manage programs to show returns on student and state investments. Studies of students鈥 academic progress and success are the leading types of data projects. Many institutions are conducting several types of student success studies annually. However, nearly one fourth of institutions are not collecting usable business and systems-level data and few institutions are systematically collecting, integrating, and using their data.

4. Changes in Admissions

Last year, the University of Chicago that it would no longer require applicants to submit SAT or ACT scores, the most-selective institution ever to adopt a test-optional policy. Today, have adopted similar policies.

As colleges and universities continue to use data to better understand how their students perform, they become less reliant on test scores. According to the , 鈥渙n many campuses, deep dives into enrollment data have helped admissions offices determine which pieces of information they collect from applicants actually help them predict a variety of student outcomes, such as first-year grades and progress toward a degree.鈥 The University of Chicago 鈥渇ound that ACT and SAT scores didn鈥檛 tell it much about who would succeed and who would struggle.鈥

5. Open-Access Research

Global advocates are for publicly funded research to be available through open-access sites, rather than behind paywalls of subscription-based journals. Over the last few years, the movement has gained momentum at increasing cost to publishers. In 2018, said it would not subscribe to a publisher鈥檚 journals in one bundled deal. This year, the cancelled its contract with Elsevier, one of the biggest academic publishers in the world. The University of Iowa also a new open-source online journal, providing open access to the research and creative scholarship of the university.

This debate has some immediate consequences for academics and researchers, who will lose access to journals unless schools renegotiate with publishers. The University of California attempted to mitigate some of these consequences by alternative methods to access publications.

听6.听Transnational Students

According to , the number of American students enrolling at foreign colleges is expected to grow from 2.3 million student in 2015 to 6.9 million in 2030. This trend is attributed to multiple causes, including 鈥渉igher ambitions and investments for world-class universities鈥 and 鈥渁ccelerated growth of global, multi-national networks.鈥

However, in the United States, the number of new international student enrollments is declining. Inside Higher Ed that, 鈥淣ew enrollments fell 6.3 percent at the undergraduate level, 5.5 percent at the graduate level, and 9.7 percent at the non-degree level from 2016-17 to 2017-18.鈥 While , increasing by 1.5 percent in 2018, there is 聽that new U.S. immigration policies might have long-term impacts on international enrollment.

7. Online Enrollment

Online courses continue to become more popular in the United States. In 2016-17, , while the number of students who took at least some of their courses online grew by 5.7 percent. Over the last 15 years, online enrollment has .

However, a from George Mason University claims that the growth in online enrollment has been 鈥渄isproportionately large in the for-profit sector.鈥 Further, 鈥渙nline coursework has contributed to increasing gaps in educational success across socioeconomic groups while failing to improve affordability.鈥

8. Online Program Managers

As online enrollments rise, online program managers (OPMs) are working with colleges and universities to provide online options for students. contract with institutions of higher education to create, market, and recruit for online degree and non-degree programs. In return, from the online programs offered at public colleges and universities.

College and universities like Harvard University, the University of Pennsylvania, and the University of North Carolina already provide online programs through OPMs. Purdue University chose to Kaplan University in 2017 to directly expand its online presence.

Conclusion

Higher education continues to adapt to new technologies and a changing global environment. This blog represents just some of the most recent changes, and there are many other challenges and opportunities for American colleges and universities. As institutions seek to balance the status quo with contemporary shifts, their flexibility to adapt to changing circumstances will be a key element in determining their future success.

91探花Ranked #28 in the World for Second Straight Year by Times Higher Education (THE)

The 91探花 maintains its #28 rank for second year in a row in the Times Higher Education (THE) , released Wednesday July 17th. This ranking is commonly used to measure a university鈥檚 global impact.

The 91探花is one of only 11 of our US News top public research university peers to make the top 50 in the reputation ranking. In that group of 11, 91探花is ranked 4th overall, coming in 4th in both research and instruction.

This ranking is based on an opinion survey sent to published scholars around the world. THE asks scholars to name the top 15 universities that come to mind in two categories:聽 research and teaching. The ranking score is a count of how many times an institution is named by a respondent as being the best in their field. 聽This year, Harvard University was cited most often, therefore their score was set to 100 and the rest of the universities were graded on a curve as a percentage of Harvard鈥檚 100 score.

聽In the survey, scholars are asked their opinions based on their specific discipline.聽 Scholars with at least 14 years of experience in their field are invited to respond.聽 This year, THE received 11,554 responses.

Finally, it is worth noting that the survey data used for the Reputation Ranking serves as one of 11 indicators used to create THE World University Rankings that will be published in the fall.

Legislature Passes 2019-21 Biennial Operating and Capital Budgets

On Sunday, April 28, leadership in the legislature reached a compromise on the state鈥檚 2019-21 biennial operating and capital budgets. The Governor is expected to approve these budgets, but has line-item veto power. As part of the compromise budget package, the legislature passed , which creates a dedicated source of funding for higher education through an increase to Business and Occupation (B&O) taxes on professional services.

For a detailed analysis and comparison of the proposals, see OPB鈥檚 newest brief on .

The outcomes of the state operating budget will be incorporated into the UW鈥檚 Fiscal Year 2020 (FY20) operating budget, which will be presented to the Board of Regents as an information item in May and as an action item in June.

Operating Budget

Some noteworthy items in the final operating budget include:

  • Competitive Compensation and Foundational Support: The UW鈥檚 highest operating budget priority for the 2019 legislative session was funding to provide competitive compensation to recruit and retain valued faculty and staff. HB 2158 provides $25 million over the biennium in 鈥渇oundational support鈥 to increase the share of state funding for new compensation and central services in 2019-21. The amounts are also sufficient to make permanent the one-time compensation funding provided last year.
  • STEM Enrollments: HB 2158 also includes funding for STEM investments at the UW, including increasing high-demand enrollments across all three campuses and maintaining the Washington State Academic RedShirt (STARS) program.
  • Financial Aid: The compromise budget package will increase funding for the State Need Grant, which was re-named the 鈥淲ashington College Grant鈥 under HB 2158. The new funding will reduce the program鈥檚 current waitlist by one-third in FY20 and will fully eliminate the waitlist in FY21. Starting in FY21, the program鈥檚 income eligibility threshold will be expanded to include students with a household income of up to 100 percent of the state鈥檚 median family income.
  • 91探花Hospitals and the School of Dentistry: The compromise budget includes additional funding to 91探花Medical Center, Harborview Medical Center, and the School of Dentistry to support their role in providing safety-net care for the state. The budget also provides B&O tax parity for Harborview.

Capital Budget

The compromise capital budget appropriates $167.7 million in new state funding, $94.3 million from the 91探花Building Account, and $1.8 million from the Model Toxics Control Account. The final capital budget provides significant new state funding for capital projects seeking to advance state and University priorities, including STEM, behavioral and mental health, and health sciences education.

Overall, the final budget fully funds multiple 91探花requests and provides a substantial amount of new funding for key projects that will benefit both the 91探花and Washington state as a whole.

Stay tuned to the OPBlog for more updates!