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State of the States

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We continue to closely follow the fate of Washington State’s budget, but are also keeping our eyes on what is happening in other states. Below are some resources that you might also find of interest:

Education Week provides brief coverage of and links to the State of the State addresses as they are made in each state.

The Center on Budget and Policy Priorities (CBPP) continues to track and report on state budget deficits and policy actions as they unfold.

The National Association of State Budget Officers (NASBO) posts links to reports and stories relating to state budgets, including this letter from Governor Gregoire to the Washington State federal delegation in response to the idea that the Federal Government may be considering legislation allowing for state bankruptcies.

New OPB Brief on Institutional Autonomy

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The economic outlook for state budgets remains bleak and additional steep cuts to public higher education inevitable, making it imperative to re-imagine how institutions can become more efficient and self-sufficient while remaining effective and accountable to the public. For many institutions greater autonomy from the practices and requirements of state government seems attractive, and this topic is explored in OPB’s latest brief on variations in institutional autonomy among the UW and its peers.

Somber State Budget Update Presented to UW Regents

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Paul Jenny, Vice Provost of Planning & Budgeting, presented the Governor’s proposed budget for higher education and the UW to our Board of Regents last Thursday. Paul touched on the upcoming state revenue forecast, the Governor’s cuts to all institutions, and the impact of future state funding cuts on campus.

The Regents expressed many concerns throughout the presentation, but a few points proved especially troubling:

  • If the Governor’s budget is adopted, higher education institutions’ funding would be cut by half, or $500 million since FY 2008.
  • State funding for higher education institutions on a per student full time equivalent (FTE) basis has deteriorated. While the state covered 70% of funding per student FTE in 1991, the Governor’s budget would only cover 30% of needed funding per student FTE.
  • The Governor’s budget proposes 11% tuition rate increases for resident undergraduates, but even with tuition increases factored in from all student categories, the UW would still face a net $91 million reduction in state funding.

As usual, Planning & Budgeting will continue to post budget updates throughout the 2011 Legislative Session on this blog. As we’ve stressed before, the Governor’s budget is the first budget proposal for the upcoming biennium; we have a long session before us and no budget is final at this point.

Are the States Alright?

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You may have read a widely circulated New York Times article today concerning the possibility of the federal government creating a pathway for states to seek protection in federal bankruptcy court if their debt burdens spiral out of control. Some policymakers think that the severe economic strain created by the Great Recession has revealed deep structural problems in state budgets that may be unfixable without intervention.

However, in Misunderstandings Regarding State Debt, Pensions, and Retiree Health Costs Created Unnecessary Alarm, the Center on Budget and Policy Priorities puts current state budget woes in historical perspective, and emphasizes that, while the near-term future for state budgets across the country remains grim, we must exercise caution in conflating the short term problems caused by the recent recession with the very long term structural issues associated with revenue systems and pension plans.

A New Normal?

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In A New Funding Paradigm for Higher Education, the National Association of State Budget Officers (NASBO) puts the Great Recession into context and discusses the cyclical nature of state funding for higher education, which has historically followed a pattern of major cuts in poor economic periods followed by generous reinvestment in good times.

Considering the generally bleak assessment of the speed of economic recovery for state budgets, NASBO asserts that this boom and bust funding pattern may finally be broken. Many do not expect state funding for public higher education to return to previous levels, and this has states, institutions, and other stakeholders wondering what a ‘new normal’ may look like.

Many institutions think that at least part of the answer lies in seeking greater autonomy from state processes and requirements, and more flexibility in managing institutional resources. Whatever the outcomes, many are hoping that achieving a more stable and predictable funding model might keep public higher education on solid ground as we move toward an uncertain future.

Another Budget Blow to Public Higher Ed in CA

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Today, newly elected California Governor Jerry Brown released his first proposed state budget. The 2011-12 budget proposes over $12.5 billion in spending cuts and over $12 billion in new revenue generation to close an existing deficit of over $25 billion.

Cuts include 10 percent pay reductions for state workers, cuts to Medi-Cal and Welfare, and, notably, deep cuts to higher education only months after the Legislature approved a 2010-11 budget that restored some previously cut funding for public institutions.

Specifically, the budget proposes cutting the UC system by $500 million (17%), the CSU system by $500 million (18%), and community colleges by $400 million (6.5%).

UC President Mark Yudof notes that, if enacted, this budget would mean the state’s annual contribution per student would be less than the portion paid by students and their families for the first time in California’s history. We crossed this same threshold in Washington State for the first time in 2009.

Op-Eds Call for Increased Flexibility for Public Higher Ed in WA

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Three op-eds published recently by local newspapers outline the changing relationship between Washington State and its public higher education institutions. All three op-eds call for the state to increase institutional flexibility in the face of large budget cuts.

The Governor will release her initial state budget for the 09-11 biennium this morning. Stay tuned to the Office of State Relations and the Office of Planning and Budgeting for information about how higher education and the UW are affected.

Legislature Passes Second Supplemental Budget in Seven Hours on Saturday

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The Washington State Legislature quickly passed a second supplemental budget for Fiscal Year 2011 on Saturday, which closed $580 million of the FY11 $1.1 billion deficit. More cutting must be done; we anticipate that this action will occur in a final supplemental budget, which would be adopted in January 2011, likely as the first action of the 2011 legislative session set to begin on Monday, January 10th.

This Saturday’s budget included reductions to many areas of government but Basic Education, Human Services, and the Department of Social and Health Services were hardest hit. Meanwhile, Higher Education received a revision of October’s across-the-board cuts in order to maintain a  federally-required maintenance of effort (MOE) funding floor. While this federal requirement spared individual higher education institutions from major cuts this month, the MOE does not apply to state-funded financial aid programs, and the next round of FY11 cuts will likely include reductions to the State Need Grant.

Please review our briefing on Saturday’s budget for more information and contact us directly with any questions.

Americans Believe Higher Ed Drives Economy, Unwilling to Pay More Taxes

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The results of a Stanford University/AP education poll conducted in September were released yesterday. The representative group of respondents confirmed earlier data on the same topic, mainly that Americans believe strongly that higher education is a vital economic engine and that more Americans should participate in it, but that they are not very willing to pay higher taxes to increase public support for institutions.

Some of the most compelling findings included:

  • 88% believe that higher education has a very large or large impact on the overall prosperity of the country.
  • 79% believe that the US economy would improve if all Americans had at least a two-year degree.
  • 74% believe that the quality of education provided by four year public institutions in their state is excellent or good.
  • Survey respondents primarily blame students and parents for graduation rates, whether high or low.
  • Only 42% favor or somewhat favor raising taxes to increase support for higher education, while 46% oppose raising taxes.