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March Revenue Forecast Reduces WA General Fund Budget by $698 million

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State Economic Forecast Council Director Dr. Arun Raha released the today. This forecast serves as the revenue basis for the Legislature鈥檚 general fund budget in the 2011-13 biennium (FY12 and FY13).

2009-11 Biennium (FY10 & FY11)

While many economic indicators used in his analysis show tentative growth in 2011, revenue collections through March 10, 2011 were $85 million below expectations and growth through the next quarter will continue to lag expectations, contributing to an additional $80 million deficit in the 2009-11 biennium. Legislative leadership confirmed that an additional (fourth) supplemental budget will be needed to reconcile . The timing of that budget is unknown.

2011-13 (FY12 & FY13)

Weaker growth in several key sectors over the last three months prompted Dr. Raha to increase the projected deficit for the . 聽The Legislature will use a $31.9 billion revenue base for the General Fund State. For comparison, the Governor鈥檚 December budget was based on a $32.1 billion general fund state budget.

While we anticipate the House will release their operating budget proposal next week, House leadership did not commit to a date.

The March forecast includes new data about the downside risks to our economy including the . Further, Dr. Raha states that the most significant threat to economic growth is the . 聽He fears escalating gas prices will continue to erode consumer confidence, regardless of job growth. These downside risk factors overwhelm any upside risks (employment growth, consumer confidence, and commodity prices) by 10 percent.

Please check this blog regularly for state budget updates as they become available.

Chronicle Corrects 91探花Data

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Were you surprised to learn in the Chronicle of Higher Education this week that, in 2008, the 91探花received over $19,500 in state appropriations per student, the second highest rate in the country? Well, so were we!

Office of Planning Budgeting staff worked with the Chronicle to clarify that they were not reporting state appropriations per student, but what the Delta Cost Project calls the overall educational ‘subsidy’ enjoyed by students, which includes state appropriations but also other revenues such as gifts and endowment income.

The Chronicle agreed to revise the text of their chart to match the measure they were actually reporting, and they also wrote up an accompanying article to explain why the revision was important, using the 91探花as an example. Please for more detail and links to the revised publications.

We don’t think the overall ‘subsidy’ figure that DELTA produces by looking at IPEDS finance survey data is a very useful one when comparing institutions on education related funding per student, nor do we think that 2008 funding levels tell us much about where public flagship institutions are now, but it is very important that the Chronicle narrative now matches the data and the chart is no longer misleading.

Education Roundtable with US Secretary of Education Arne Duncan

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US Secretary of Education Arne Duncan joined Governor Chris Gregoire and legislative leadership Duncan congratulated state lawmakers on discussing the issue of education reform, even through tough budget times. He further drew attention to the grave problems troubling education in the United States鈥攁 25% national dropout rate, poor STEM education, the large number of students taking remedial courses, and gaping budget gaps, which challenge the adequate funding of education.

Of particular interest, Duncan commented on the current system of education governance in Washington, claiming: 鈥淲ashington has eight different agencies with different strategic plans working in Washington and it鈥檚 very difficult for me to understand how having different agencies handling education鈥ill transform education.鈥�

Governor Gregoire has in to consolidate education governance into one Department of Education headed by the Governor. The would also consolidate many existing state education agencies into four primary education divisions: Early Years Division, K-12 Division, Community College and Technical Education Division, and the University Programs Division. All units would report to a new Department of Education Secretary.

Secretary Duncan reiterated President Obama鈥檚 despite the economic downturn, and gave examples of strategic programs and innovations the administration is working towards:

-Investing in Early Learning programs like , which studies have shown to improve achievement especially for disadvantaged students who do not have many educational opportunities at home

-Continuing the program which rewards schools for outstanding innovation and improvement in education (if approved by Congress)

Lastly, Governor Gregoire distributed a document describing how much it costs taxpayers when students 鈥渇all through the cracks鈥� of the education system– by dropping out, taking remedial courses, or repeating grades–a number her advisers estimate at around $ 100 million a year. Though the problems facing education in Washington state and in the nation are indeed grave, it was encouraging to see lawmakers pause during a critical week to discuss education. As Secretary Duncan asserted, 鈥渙ur children cannot wait for the economy to bounce back鈥濃�攅ducation must remain a priority, despite the dire budget situation.

State Budget Updates

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OPB published a yesterday discussing expectations for the upcoming Washington State revenue and caseload/entitlement forecasts, and how both are likely to affect 91探花state funding levels.

**EDITED TO ADD: Note that after we released this information, the was released and lowered the expected growth of caseloads for K-12, Medicaid, and Corrections. In particular, the anticipated impacts of federal healthcare reform lowered the predicted caseload for state-supported medical programs by $117 million in the long-term and $70 million in the short-term.**

Nationally, the Center on Budget and Policy Priorities (CBPP) updated their this week. They summarize the challenges faced by states via their :

  • For fiscal year 2012, one of the most difficult budget years on record. Some 44 states are projecting shortfalls totaling $112 billion for the year, which begins July 1 in most states. (See chart below.)聽 This figure is somewhat lower than in our previous version of this analysis, largely because of actions that Illinois took in its last legislative session that reduced the size of its 2012 shortfall.
  • The loss of emergency federal assistance. Assistance through the 2009 Recovery Act and the August 2010 jobs bill has been a huge help to states, allowing them to balance their budgets with smaller budget cuts and tax increases than they would otherwise need to make.聽 But that aid will largely be gone by the end of fiscal year 2011.
  • A long road to recovery. Already, 26 states are projecting shortfalls totaling $75 billion for fiscal year 2013, which begins in 16 months.聽 This number will likely grow once all states have prepared estimates.

NYRB Assesses Recent Higher Ed Literature

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The New York Review of Books has published a high level review of the recent spate of ‘higher education in crisis’ books. In , Peter Brooks takes a look at common themes contained in four recent publications on the state of higher education in the US.

Read the whole piece if you get a chance, but we have pulled out a couple of passages that especially struck us:

  • “On the whole, one has to say that the relative autonomy of the American university has been far more beneficial than the contrary. American higher education is a nonsystem that is messy, reduplicative, unfair鈥攋ust like American society as a whole鈥攂ut it has made genuine commitments to quality and to a greater degree of social justice, to the extent that is within its control, than most other institutions of the society.”
  • “Research and teaching have always cohabited: anyone who teaches a subject well wants to know more about it, and when she knows more, to impart that knowledge. Universities when true to themselves have always been places that harbor recondite subjects of little immediate utility鈥攑laces where you can study hieroglyphics and Coptic as well as string theory and the habits of lemmings鈥攑laces half in and half out of the world. No country needs that more than the US, where the pragmatic has always dominated.”
  • “[Universities] often fail, they need reform and course correction, but they are not, at their best, merely venal and self-serving. They deserve better critics than they have got at present.”

More on the Public/Private University Resource Gap

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Two higher education news stories leapt out at us this morning as emblematic:

  • Pennsylvania Governor Tom Corbett announced for four-year public institutions. The largest institution, Penn State, would see its state subsidy reduced from $465 million per year to $233 million. The University the proposed cuts as devastating:聽 “A reduction of this magnitude would necessitate massive budget cuts, layoffs and tuition increases, with a devastating effect on many students, employees and their families,” said Al Horvath, senior vice president for Finance and Business. “While we have for many months been planning for a potential state funding cut, we could not have envisioned one so damaging to the future of the University and the Commonwealth.”
  • Meanwhile, in Los Angeles, the University of Southern California kicked off the day with an of a new, record high, unrestricted $200 million gift to the College of Letters, Arts and Sciences. The College will be named after the alumni donors, David and Dana Dornsife, who told the Los Angeles Times that they “had confidence in USC faculty and administrators to spend it wisely.” USC intends to use the money primarily to enhance the humanities and social sciences through faculty hiring, graduate fellowships and research funding.

As mentioned in about faculty salaries, the growing resource gap between public and private institutions predates the Great Recession, which appears to be dramatically accelerating the existing trend. Read the 2009 Association of Public and Land-Grant Universities (APLU) report, , to learn more about this concern: “from 1987 through 2006 revenue per student in private research universities in every revenue category except state funding has grown to be multiples of that available to the publics.”

Public/Private Faculty Salary Gap Widens

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New survey results released today show that faculty at public institutions of higher education, on average, received no salary increase for the second year in a row, while salaries for faculty at private institutions increased, on average, by about 2 percent (compared to also being stagnant last year).

This trend is particularly troubling because the current economic crisis seems to be accelerating pre-existing gaps between public and private faculty salaries.聽 Inside Higher Ed .

State Budget Pressures Continue to Mount

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Here are a few interesting and updated resources on the current budget pressures being faced by states across the US:

  • This shows, by state, projected deficits for FY 2012, ruling political parties, number of public employees, and whether most public employees have bargaining rights.
  • This is continuously updated and contains compiled information on municipal debt, pension liabilities, bankruptcy proposals and other issues related to state and local government finances.
  • This compiles information about initial FY 2012 budget proposals for those states that have released them, documenting a fourth year of deep cuts for many states.

GAO Details How For-Profit Colleges Exploit Veterans

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The Government Accountability Office (GAO) released a report and recommendations, , ahead of another focused on the conduct of for-profit colleges, this time held by Senator Tom Carper.

The GAO report focused on the DOD Military Tuition Assistance Program, which provides tuition benefits for active duty soldiers. In 2009, the program provided $517 million in tuition assistance to over 375,000 service members of which for-profit institutions received a disproportionate amount. The report addressed two primary points:

  • DOD oversight of schools receiving Tuition Assistance Program funds
  • The extent to which DOD coordinates with accrediting agencies and the U.S. Department of Education in its oversight activities

The Senators the gaps in oversight exposed by the report, and also discussed the fact that Tuition Assistance Program revenue is not included in the calculation to determine whether at least 10 percent of annual revenue comes from non-federal sources, which is required for an institution to be eligible to receive federal student aid. This is a rule that Senator Tom Harkin has specifically mentioned as a target for reform in earlier hearings he has held on for-profit institutions.

Meanwhile, the association that represents for-profit colleges is the US Department of Education in an attempt to block new federal regulations, and House Republicans included an to block the controversial gainful employment rule from moving forward in their recently passed budget.

For past OPBlog posts on this continuing story see:

Supreme Court Hears Arguments in Research Patent Case

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On Monday, the Supreme Court for Stanford University v. Roche Molecular Systems et al.. At issue is whether the Supreme Court will agree with the argument made by research institutions to expand the current interpretation of what is known as the (1980’s University and Small Business Patent Procedures Act), which requires that royalties received from patents awarded based on federally funded research are retained by universities and used to fund research, education, and payments to inventors.

The case originated as a dispute between Stanford University and Roche, a company that required a Stanford researcher to sign a consultant agreement聽 containing language regarding patent rights (“do hereby assign”) that was stronger than the language contained in the Stanford contract he had signed a year earlier聽 (“I agree to assign”). Roche in 2005 after they refused requests to acquire a license to Stanford’s patents relating to the researcher’s work.聽 A federal district court initially ruled in Stanford’s favor, but that ruling was overturned by a federal appeals court, which determined that the Roche contract language聽 superseded the Stanford contract language, giving Roche a rightful patent claim.

While universities can be more careful with contract language going forward, a Supreme Court decision in favor of Roche could call聽 into question decades of patents that have provided billions of dollars in royalties to institutions. At the urging of the President and Justice Department, the Supreme Court agreed to hear the case. In addition to the support of the Obama administration, many institutions and organizations have filed . Notably, former Senator Birch Bayh, co-sponsor of the Bayh-Dole Act in question, filed his own emphasizing that the federal legislation was never meant to allow ambiguity about whether universities had exclusive rights to patents generated by federal funded research.

Monday’s oral arguments provided no clear indication of how they might rule in the case. A decision is expected by July.