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House Chair Released 2013-15 Operating Budget

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House Ways & Means Chair Ross Hunter released the today. Please see the for a complete analysis.听Table 1 shows the total funding the 91探花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 91探花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 91探花is left with almost $10 million less in net new state funding in 2013-15 compared to the previous biennium under the House budget. 听Once the potential additional tuition revenue is taken into account, however, the 91探花fares better under the House budget, even with its spending requirements.听 Moreover, the Senate relies on a draconian 20 percent surcharge on international student tuition to generate this additional funding amount.听 As mentioned in our , given that the majority of international students in Washington are enrolled at the UW, this amounts to a tax on 91探花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 91探花will not have a clear sense of its actual anticipated state funding level until the end of this month at the earliest.

Senate Chair Releases 2013-15 Operating Budget

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Senate Ways & Means Chair Andy Hill released the proposal today.听Please see the 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, 91探花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鈥檚 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 鈥渇ull time鈥� 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 91探花include:

  1. Funding for the Joint Aerospace Initiative with WSU;
  2. Appropriations for a new Center on Ocean pH Balance;
  3. One-time, performance-based funding;
  4. Operation and maintenance funding for MolE and Dempsey Hall;
  5. Funding reductions related to administrative efficiencies;
  6. An international student surcharge; and
  7. A fund transfer from the 91探花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 91探花will not have a clear sense of its actual anticipated state funding level until later this month.

Governor Inslee Releases Budget Priorities

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On Thursday, Governor Inslee released his budget priorities for the 2013-15 biennium. OPB released a on the plan, but below is a quick summary of the major points in the Governor鈥檚 budget.

Governor Inslee鈥檚 plan would fund all of higher education, including financial aid,听with nearly $3 billion (8.4 percent of the total budget), of which the 91探花 would receive just over $232 million per year. This funding level represents about $3.6 million more per year听than the 91探花would have received under Governor Gregoire鈥檚 鈥淣ew Law鈥� budget. Governor Inslee鈥檚 plan also:

  • Authorizes tuition increases of up to five percent per year for resident undergraduates at 91探花and WSU (three percent at other four-year universities). While the 91探花still has tuition setting authority, it must provide increased financial aid if it raises tuition above five percent.
  • Provides the 91探花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鈥檚 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鈥檚 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鈥檚 plan does not provide explicit funding for wage increases.

Governor Inslee鈥檚 capital budget plan is identical to Governor Gregoire鈥檚, and includes money for the UW鈥檚 top capital priorities such as minor capital repair, the 91探花Tower Chilled Water System Replacement, and Magnuson Health Sciences Center Roofing Replacement.

While Governor Inslee鈥檚 budget blueprint is an important step in the budget process, we expect the 91探花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 for information.

March Washington State Revenue Forecast Remains Relatively Stable

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On Wednesday, March 20, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of State General Fund Revenues.听Revenue from an anticipated increase in Washington housing permits and real estate excise tax receipts is expected to offset higher federal tax rates and spending cuts than were previously assumed. Overall, revenue projections for both the 2011-13 and 2013-15 biennia remain relatively stable, with a slight net gain of about $40 million across the two biennia.听However, this net gain is negated by the roughly $300 million in additional Medicaid caseload costs. The state and its lawmakers now face a $1.3 billion deficit along with court-mandated funding for K-12 education, which could cost another $1 billion. Their upcoming budget proposals will have to reconcile these demands on the state purse.

We anticipate that the Senate Majority Caucus Coalition will release its operating budget proposal sometime next week, while the House will likely release its budget by early next month. Until that time, any specific impact on the 91探花cannot be assessed.听 Please see the full for more information.

 

Moody’s Gives Higher Education a Negative Outlook

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Last week, issued a negative short-term outlook for the entire sector of higher education based on its conclusion that every traditional revenue source for even the most elite colleges and universities is under pressure. That pressure, according to the report, is the result of nation-wide economic, technological and public opinion shifts, which are largely beyond institutions鈥� control.

The outlook report, released annually, articulates the fundamental credit conditions that Moody鈥檚 expects higher education will face during the next 12 to 18 months. For the last two years, Moody鈥檚 gave elite colleges and research universities a stable forecast; but this year, the following factors contributed to a negative outlook for the entire industry:

Struggling Revenue Sources:

  • State appropriations are unlikely to increase meaningfully due to weak economic recovery.
  • Federal spending on research and student aid could be truncated in response to the nation鈥檚 fiscal concerns.
  • Tuition revenue continues to be suppressed by low family incomes and public/political pressure to keep prices down.
  • Endowment returns are vulnerable to any economic volatility that could stem from federal tax and budget decisions.
  • Donations are not expected to increase and could face pressure as Congress evaluates associated tax deductions.
  • Financial diversity is no longer helpful as all revenue streams are strained.

Additional Challenges:

  • Student debt and loan default rates have increased and thus challenged the perceived value of a degree.
  • High school graduates are declining in number.
  • Public and political scrutiny of efficiency and degree value could add to institutions鈥� list of regulatory requirements.
  • New technologies such as online learning and MOOCs could provide new revenue opportunities, but could also undermine traditional higher ed models.

Moody’s analysts warn that revenue streams will never rebound to post-2008 levels and leaders in higher education will need to adapt by thinking strategically and adjusting their operations.

But not all is gloom and doom.听Although Moody鈥檚 gave higher education a negative outlook, most of the country鈥檚 top colleges and universities still hold the strong credit rankings. The UW, for one, continues to maintain a 鈥攖he highest offered by Moody鈥檚.听Additionally, the report stressed that the intrinsic value of and demand for higher education remains stable.

California Governor鈥檚 Budget Includes Additional State Support for Higher Ed

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Last Thursday, California Governor Jerry Brown released a 听that includes substantial increases for higher education鈥攎ade possible by the passage of . For the UC and CSU systems, the proposal provides an ongoing increase of $125.1 million each. This includes $10 million each to expand the delivery of courses through technology and is in addition to the $125 million that UC and CSU will each receive in 2013鈥�14 for not increasing tuition and fees in 2012鈥�13, as required by the 2012 Budget Act.听 In sum, the proposal says 鈥渢he state鈥檚 General Fund contribution to UC and CSU will increase by 5 percent per year in 2013-14 and 2014-15 and by 4 percent in each of the subsequent two years.鈥�

Both higher ed systems had asked for more; but, according to , Gov. Brown said “the gap between what we’re going to give them and what they say they’re going to need” would have to be made up through efficiencies.听 Cal State system’s chancellor that Mr. Brown’s proposal at least “heads us in the right direction.鈥�

However, in exchange for new money, state institutions are expected to keep tuition and fee levels stable over the next four years.听 The institutions are required to increase access to online courses and limit resident tuition rates to the first 150 percent of credits needed to graduate.听 This limitation is an attempt to encourage timely degree completion, reduce student debt, and free up classroom space for other students.

听Thursday, Governor Brown stated that he would be attending UC and CSU board meetings in the hopes of encouraging both systems to keep tuition prices stable.

Welcome to the 2013 legislative session!

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The 2013 Washington State legislative session, scheduled to last 105 days, began today. OPB will be tracking all bills that are relevant to the University and we will do our best to keep you updated on the happenings in Olympia. For the most comprehensive legislative session information, please see the Washington State Legislature鈥檚 .

As always, check the for the latest information on bills relevant to the UW, including scheduled hearings, bill summaries, and the official 91探花position on a bill. This year, we have also integrated our Fiscal Note process into the BillTracker, which will hopefully streamline the data gathering process.

For more information about how to use BillTracker and bill analysis generally, check out . If you have questions about submitting Fiscal Notes, please review this

Please also听feel free to check out the for up-to-date information on the state of events in Olympia.

We will post updates on the budget situation to the blog, and we will announce any new budget briefs here as well. If you have a pressing budget-related question, please contact Sarah Hall at sahall@uw.edu. For any questions related to bill tracking or Fiscal Notes, please email uwbills@uw.edu.

Senate and Congress Reach Deal to Avert Fiscal Cliff

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Yesterday, the Senate and House of Representatives approved legislation to avert the fiscal cliff.听The deal postpones the automatic, across-the-board spending cuts鈥攌nown as 鈥渢he sequester鈥濃�攂y two months and increases tax rates only for individuals earning over $400,000 and couples earning over $450,000. The bill also preserves funding for Pell Grants and extends for five years the American Opportunity Tax Credit (AOTC), which allows students and their parents to claim up to $2,500 a year for tuition and college expenses.

For details, please see the provided by Christy Gullion, Director of Federal Relations, and the articles provided by and

Fiscal Cliff Update

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Christy Gullion, Director of Federal Relations, recently provided an –the combination of large decreases in federal spending and simultaneous increases in income taxes set to take effect January 1st. For background information, please see the 听put out jointly by the 91探花offices of Federal Relations, Planning & Budgeting, and Research.

Governor Gregoire Releases Budgets

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The Governor鈥檚 budget office released the first set of biennial budgets today. The current Governor proposed a 鈥渃urrent law鈥� balanced budget, assuming no new revenue, and a budget with new revenue, appropriating $34.1 billion of Near General Fund State per year, for which all of higher education, including financial aid, would receive nearly $3 billion (or 8.7 percent). As a reminder, Governor Gregoire鈥檚 budget proposals are the first of many budgets to be released for the upcoming biennium. The earliest point that the 91探花will have a sense of its actual anticipated state funding level is late April 2013. In addition, we might see Governor-elect Inslee release his own budget, or a set of budget priorities, in January 2013.

Under Governor Gregoire鈥檚 balanced and new law budgets, each of the state鈥檚 six baccalaureate institutions would receive slight increases in funding when compared to carry-forward budgets levels, with no new tuition increases or state funding reductions. While the 91探花has another year of tuition setting authority under HB 1795, the Higher Education Opportunity Act, this budget does not provide any new financial aid funds to cover tuition increases. 听Note that Education Legacy Trust funding, from which the 91探花normally received at least $8 million annually, was removed from all public baccalaureate institutions鈥� budgets and replaced with general fund appropriations.

The 2012 Legislature appropriated $209 million in state funds to the 91探花for FY13, thus, both of the Governor鈥檚 proposed budgets represent an increase in the UW鈥檚 state funding for FY14 and FY15. However, the budget bill devotes these increases to covering expenses associated with the UW鈥檚 collective bargaining agreements.听 If any funds remain afterward, they will be available for any other purpose(s).

Please review our on the Governor’s operating budgets and capital budgets. As usual, let us know if you have any questions.