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February 2015 State Revenue Forecast Update

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General Fund-State (GF-S) revenue forecast has been increased by $107 million for the 2013-2015 biennium and by $129 million for 2015-2017.

  • GF-S revenue for the 2013-2015 biennium is now $33.547 billion (9.4% higher than collections in the 2011-13 biennium) and
  • The forecasted GF-S revenue for the 2015-2017 biennium is now $36.449 billion (8.7% higher than collections in the 2013-15 biennium)

Revenue collections through February 10th were $69 M (1.5%) higher than forecasted. Of this amount, $52 M came from Revenue Act Sources (retail sales, business and occupation, public utility and tobacco products taxes).

A few additional highlights from the update:

  • Oil Prices have declined further since November forecast.
  • Sales tax growth is strong and is driven by sales in construction, autos and building materials.
  • Real estate excise tax since November forecast came in $11 M higher than forecasted.
  • Average monthly increase of 7,000 net new jobs in Washington. Seattle area employment is growing much faster than the rest of the state.

Note: Caseload forecast Council will release their report this afternoon at 1.30PM

 

UW’s Annual Economic Impact on Washington State

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In May 2014, Tripp Umbach, a national leader in economic impact analysis, was retained by the UW to update its 2010 analysis of the economic, employment and government revenue impacts of operations and research of all of its campuses.  The updated Economic Impact Report reveals that University of Washington’s annual economic impact on the state of Washington is now $12.5 billion an increase from $9.1 billion just five years ago.

An article regarding this is posted on Seattle Times as well.

A Growing Student Loan Crisis? Maybe Not

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A new report from the Brookings Institution concludes that student loan borrowers may not be in such a dire situation as media reports commonly suggest.  The report, Is a Student Loan Crisis on the Horizon?, finds that while student debt levels have risen along with college tuition over the past two decades, college graduates’ incomes have kept pace.  The authors analyze data on student borrowers over the period 1989-2010.  They conclude that education debt has not become a greater burden on borrowing households.

  • Education debt increased most among households with higher levels of educational attainment.  Roughly one-quarter of the increase in student debt can be explained by an increase in the number of households with college degrees, especially graduate degrees.  Since 1989, student borrowers with graduate degrees saw their average debt level increase from about $10,000 to about $40,000.  Over the same time, the debt level for borrowers with bachelor’s degrees increased by a smaller margin, from $6,000 to $16,000.
  • On average, student borrowers’ incomes more than kept pace with increases in student debt.  While average household debt increased by about $18,000 between 1992 and 2010, average annual household income for borrowers increased by about $7,400 over that same period.  The average increase in earnings would pay for the increase in debt incurred in just 2.4 years.
  • The ratio of monthly debt payments to monthly income has held steady.  Between 1992 and 2010, the median borrowing household consistently paid between three and four percent of monthly income toward student debt.  The mean monthly payment decreased from 15 percent to 7 percent of income over that period.

Student debt levels have increased over the past two decades.  The authors conclude that this is largely driven by tuition increases over that time.  However, higher levels of student borrowing also partly reflect an investment in higher levels of education.  For the average borrower, that investment pays off in higher incomes.

Governor Inslee’s 2015-17 Operating and Capital Budgets

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The Governor released operating and capital budgets yesterday morning. Though the UW fared well in the capital budget, we believe the operating budget, as currently proposed, presents challenges. Please note that the Governor’s budgets will be taken up by the Legislature in January; we are many months away from a final legislative compromise. As usual, we will be sending out budget briefing documents throughout legislative session to keep you updated.

For an analysis and summary of the operating and capital budgets, please review the OPB brief.

Average Debt for Graduates Continues to Rise

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Overall student debt levels of recent bachelor’s degree recipients continue to rise according to Student Debt and the Class of 2013, a new report from the Project on Student Debt at The Institute for College Access & Success (TICAS).  The report includes 2013 state- and college-level debt data for graduates from colleges that opt to disclose their graduates’ debt. However, since very few for-profit colleges choose to disclose debt data, the report’s figures represent only public and nonprofit colleges.

  • At the national level, 69 percent of graduating seniors had student loans and those that borrowed had an average debt of $28,400 – a 2 percent increase over 2012. For comparison, in 2013, 50 percent of UW undergraduates graduated with debt, and those that borrowed graduated with an average debt load of $21,471.
  • At the state level, borrowers’ average debt at graduation ranged from $18,656 to $32,795, and the likelihood of graduating with debt ranged from 43 to 76 percent. In six states, average debt was greater than $30,000; in one state, it was under $20,000. Nearly all the highest debt states were in the Northeast and Midwest, with the lowest debt states in the West and South. In Washington, 58 percent of graduates had debt, and those that borrowed had an average of $24,418 in loans. Debbie Cochrane, research director at TICAS and coauthor of the report, says, “The importance of state policy and investment cannot be overstated when it comes to student debt levels.”
  • At the college level, borrowers’ average debt at graduation varied widely – ranging from less than $2,500 to more than $71,000 – and the likelihood of graduating with debt also varied – running from 10 percent to 100 percent. At nearly one in five (18%) colleges, average debt rose at least 10 percent, while at 7 percent of colleges, average debt decreased by at least 10 percent. In general, colleges with higher costs had higher average debt at graduation, although that wasn’t always the case.

The authors note that the report’s data have significant limitations, primarily because colleges are not required to report debt levels for their graduates. Only 57 percent of public and nonprofit bachelor’s degree-granting colleges provided data, representing 83 percent of graduates in those sectors. And for-profits, as mentioned, were excluded because hardly any chose to disclose their graduates’ debt.[1] Even colleges that do provide data may understate graduates’ debt loads because they do not include transfer students and are often not aware of all private loans.

Thus, the report’s main recommendation is to get better debt data via federal collection of cumulative student debt data for all schools. The report also makes recommendations about reducing students’ need to borrow, helping students make better-informed college decisions, and simplifying income-driven repayment plans.

See the report or TICAS’ interactive map for more information.

[1] Federal data for 2012 graduates of for-profit. four-year colleges show that the vast majority (88%) took out student loans and that borrowers graduated with an average of $39,950 in debt—43 percent more than bachelor’s recipients in the other sectors. In addition, students at for-profits tend to default on their loans much more frequently than students in other sectors.

Final Gainful Employment Rule Removes Default Rate Metric

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The Education Department’s (ED) final “gainful employment rule,” which was released yesterday, will hold vocational programs accountable to just one of the two outcome metrics that were proposed in the March draft rule.  Cohort default rates (CDRs) were eliminated from the legislation, meaning that debt-to-earnings ratios will be the only criteria upon which individual career education programs are evaluated to determine federal aid eligibility.

Community colleges had advocated for the change on the grounds that a relatively small number of their students take out federal loans and, thus, cohort default rates are “materially and statistically unrepresentative of all the students in a program.”

Student and consumer advocates, however, have contended that the change weakens the rule and doesn’t do enough to protect students and taxpayers. Pauline Abernathy – Vice President for The Institute for College Access & Success (TICAS), a consumer advocacy group – issued a written statement yesterday saying:

“We and more than 50 student, civil rights, veterans, consumer, and education organizations urged the Obama Administration to strengthen its draft gainful employment regulation, but instead this final regulation is even weaker. The final rule also does not provide any financial relief to students who enroll in programs that lose eligibility; lets poorly performing programs enroll increasing numbers of students, right up to the day the programs lose eligibility; and even passes programs in which every student drops out with heavy debts they cannot pay down.”

For-profit colleges weren’t pleased with the outcome either, arguing that the legislation does nothing to fix a proposal they see as being “fundamentally flawed.”

Arne Duncan, the education secretary, estimates that 1,400 programs—99 percent of which are at for-profit colleges—will fail the rule in the first year. However, that number is 500 less than it would have been under the March version of the rule. Unfortunately, of those 500 programs, 15 are ones where students are more likely to default than they are to graduate.  See the article by TICAS for more information.

Since programs will only become ineligible for federal aid after they fail the debt-to-earnings tests twice in a three-year period or are “in the zone” for four consecutive years, institutions will not face penalties for at least three more years. Therefore, it is possible that the gainful employment rule will be revised yet again before its effects are truly felt.

UW Ranked 14th Best University in the World by U.S. News & World Report

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The University of Washington was ranked the 14th best university in the world by U.S. News & World Report’s inaugural “Best Global Universities Ranking,” which was released on Tuesday.

Unlike U.S. News’s national rankings, which focus on undergraduate admissions data and graduation rates, these new rankings were based on research-heavy factors such global research reputation, number of publications, PhDs awarded, and highly cited papers (learn more about how the rankings were calculated).  This methodological difference helps explains the odd fact that U.S. News ranks the UW 14th globally, but 48th nationally.

“This is about faculty productivity and prestige … It is meaningful for certain things and not necessarily meaningful for other things. We get that. This is about big muscular research universities doing what research universities claim is their mission,” U.S. News Editor, Brian Kelly, told The Washington Post.

The 2015 Best Global Universities rankings include 500 institutions and 49 countries, and provide breakdowns by region, country, and 21 subject areas. The U.S. dominated the rankings with 16 institutions in the top 20, and 134 institutions on the list overall.  Germany had the second most institutions on the list, with 42, followed by the United Kingdom, with 38. China, which has received a lot of attention in the higher education world lately, also did well with 27 schools among the top 500.

The UW ranks highly on several other global lists:  15th worldwide by the Academic Ranking of World Universities and 26th by the Times Higher Education World University Rankings.