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Protests Continue as Britain Approves Sharp Fee Increases

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The Chronicle reports that British Parliament has approved controversial higher education reforms that are expected to skyrocket college prices by as much as three times current rates (see previous post: Britain Rethinks Higher Ed Financing). Elsewhere, the Chronicle details ongoing student and faculty protests across Europe in response to these and similar proposals in other European countries.

As state budgets in the US continue to face growing deficits, another year of sharp tuition increases may also be likely in this country.

UC Commission Proposes Familiar Strategies for Cutting Costs

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The University of California Commission on the Future recently released its final report addressing potential solutions for keeping public higher education in California vibrant in the face of declining resources.

A group that included regents, administrators, faculty and students, the Commission’s 50 page report recommended a host of actions for UC to consider, including:

  • Expand on the somewhat controversial UC Online Instruction Pilot Project
  • Develop and offer three year degree programs where feasible
  • Increase nonresident student enrollment from 6% to 10% to generate additional tuition revenue
  • Ease the community college student transfer process

The Commission also acknowledged that in extreme financial circumstances the UC system might need to consider raising both tuition and nonresident enrollment even more sharply, and consider decreasing resident enrollment and/or financial aid.

The Commission rejected other popular proposals such as differentiated tuition by major or class status, and the practice of cohort tuition pricing.

The UC Commission’s recommendations are familiar to anyone keeping up with current discourse on higher education reforms. While the recommendations may have considerable merit, none constitute the re-imagining recently proposed by one of UC’s own, John Aubrey Douglass.

Loss of Federal Stimulus Funds About to Hit State Budgets Hard

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The National Conference of State Legislatures released their November 2010 State Budget Update today. While the report notes that many states are experiencing some level of stabilization in revenue collections, and beginning to be more optimistic  about the general revenue outlook, they are at the same time facing unprecedented pressures on the demand for services such as healthcare and education, and also facing the withdrawal of the federal stimulus funding that has been critical in mitigating severe budget cuts for the last two years. Referred to as an impending ‘funding cliff’, the ramifications of the loss of federal fiscal support are expected to translate into painful budget cuts in states across the country starting in fiscal year 2012.

Inside Higher Ed provides some additional links to reports that echo these same facts. Meanwhile, the Center on Budget and Policy Priorities continues to update their own report on state budget cuts.

Federal Maintenance of Effort Requirement Makes State Financial Aid Programs Vulnerable

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Both the American Recovery Act (ARRA) of 2009 and the 2010 Education Jobs Fund provided federal funding for education. In exchange for accepting federal funds, both fiscal relief vehicles came with Maintenance of Effort (MOE) provisions requiring states to continue financial support for higher education institutions at certain minimum levels. However, some forms of state support, such as capital projects, financial aid, and research support are exempt from MOE calculations.

The UW received ARRA funding in the state budget in the 2010 fiscal year. As a result, MOE requirements from both federal actions helped protect higher education funding in Washington State from what may have been even deeper budget cuts. Last year, the State reduced higher education spending down to the federally-required MOE floor for fiscal year 2011. Federal MOE requirements expire after FY 2011.

Due to a state budget deficit that continues to grow, the Governor has called a special session to achieve another round of mid-year budget cuts for the current fiscal year. If the state further reduces funding for higher education, it must choose to violate the federal MOE mandate, or reduce state support for higher education activities exempt from federal MOE, primarily the State Need Grant (SNG), Washington’s need-based financial aid funding program.

In her proposed special session cuts for FY 2011, the Governor chose the latter, recommending that the state delay $76 million of SNG funding until July 1, 2011 (start of FY 2012), with institutions temporarily funding the gap to protect students. The UW’s share of this funding shortfall would be $15 million. While the Governor’s proposal assumes reimbursement on the first day of the new fiscal year, delay of this payment would require the University to cut $15 million to balance its current FY 2011 budget. In addition, given the $5.7 billion state deficit that remains for the upcoming 2011-13 biennial budget, it is not at all certain that this delayed payment would be made to institutions in 2012, when the federal maintenance of effort provision will no longer be in effect.

Any option that reduces or delays funding for higher education will impact University of Washington faculty, staff and students. The Office of State Relations and the Office of Planning and Budgeting will work hard to keep the UW community up to date on special session, and important state budget related news in the coming days.

California Projects Annual Deficits of $20b Through 2016

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A new report from California’s non-partisan Legislative Analyst’s Office (LAO), California’s Fiscal Outlook, details current California state budget projections through at least 2016. The LAO projects that CA will have to solve at least a $25.4 billion deficit for 2011-12, and will continue to face budget gaps of at least $20 billion per year through 2015-16.

While analysts are clear that doomsday scenarios threatening the collapse and/or bankruptcy of the state are not realistic, they do emphasize the importance of lawmakers and citizens making painful choices now to avoid placing a massive burden on future generations of Californians. The LAO recommends a multi-year approach to addressing the state’s structural deficits, including making difficult choices on increasing revenue while making additional spending cuts. Detailed estimates are provided for each major area of government spending– see pages 29-30 for higher education.

California is unique in many ways, but the choices facing the state and its citizens are, though perhaps grander in scale, very similar to those being faced by states across the country, including Washington.

Seattle Times Highlights Importance of Pension Funding Policy

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The Seattle Times published an article yesterday that outlined the State Treasurer’s desire to pursue a state constitutional amendment that would require the Legislature, starting in 2015, to invest more money into pension plans up front to help the state avoid ever entering ‘pay-go’ status where pension obligations must be covered from the state general fund.

In the meantime, the Treasurer, Jim McIntire, has requested that the Legislature invest $1.4 billion in existing pension plans for the 2011-13 biennium, a doubling of the $770 million invested in 2009-11.

The current estimated state budget shortfall for the 2011-13 biennium is $5.7 billion, and pension policy will play an important role as the state is forced to reorganize a shrinking budget.

For more information about this issue, read the OPB Brief published earlier this month.

Elevating the College Cost Debate

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As we reported last month, two economists at the College of William and Mary have published a new book called Why Does College Cost So Much?. We are almost finished reading this very well written and researched book and will provide our own assessment soon.

In the meantime, the book continues to generate passionate discussion–see Stanley Fish’s column at the New York Times. If you are as intrigued by this topic as we are, and have a lot of time to spare over Thanksgiving break, I might suggest reading some of the 400+ comments left on Fish’s column. To keep the discussion going, Fish handed his column over to the book’s authors, Robert Archibald and David Feldman, to address some of the most common objections to their arguments. If you really want to punish yourself, readers have thus far left another 240+ comments to sift through!

And for a break from all of this talk about budget cuts and cost crises, here are some links to a couple of feel-good, holiday themed pieces published today:

Inside Higher Ed: In Praise of the Americans

The Chronicle of Higher Education: On Gratitude in Academe

We wish the entire UW community a very happy Thanksgiving holiday. Stay warm and travel safely!

Additional Near- and Long-Term Cuts Expected as State’s Revenue Forecast Worsens

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After the November 18, 2010 release of the state’s November revenue forecast, Vice Provost of Planning and Budgeting Paul Jenny released the following information to UW leadership:

As most of you are aware, the November revenue forecast for the state was released yesterday, and it was not good news.  The forecast projects a shortfall of $385 million in the current fiscal year budget and a deficit for the upcoming 2011-13 biennium (FY12 and FY13) of $5.7 billion. There are many factors for the continuing lack of improvement in state revenues:  the real estate market remains weak, expected revenue increases will not materialize due to voter rejection of the soda and candy sales tax measure, case loads continue to increase, and so forth.The most immediate concern is the reduction in revenue of $385 million for the current fiscal year.  To bring the budget back into balance, there are three options available:

  • The governor could impose across the board reductions as she did following the September revenue forecast.
  • The governor could call a special session of the legislature to balance the budget.
  • The legislature could take up this issue in passing a final supplemental budget for FY11 that addresses this shortfall as the beginning agenda item in the normal legislative session that commences on January 10, 2011.

While we do not know what course of action will ultimately be taken, we need to anticipate another mid-year reduction as a result of any of these options. As a point of reference, the shortfall in the September revenue forecast of $520 million resulted in a cut to the UW of $17.1 million.  If the response to the current shortfall of $385 million is consistent with the September actions, we may see a reduction of approximately $10 million -$13 million.  Again, this is just our best guess at this point. My office will provide greater detail as it becomes known to us.

Longer term, we need to understand that the solution to a $5.7 billion deficit in the 2011-13 biennium will not be pleasant. We don’t know what our share of the cut will be.  What we do know is that only 30 percent of the budget can be touched at this point – the rest considered ‘off-limits’. We can safely assume that because higher education is the biggest part of the discretionary budget, we will be hit very hard. While we had to model a 10% reduction in a response to a request by OFM, we should anticipate that our cut may be higher than 10%.  Cuts of these magnitudes will inevitably place more pressure on the discussion surrounding tuition increases as a mitigating factor to these cuts.

While this is distressing news, the Offices of Planning & Budgeting, External Affairs, and State Relations will be working with our elected officials to consider different solutions that can stave off some of the impact these cuts, if not mitigated, would create.

APLU Releases Regional Meetings Report

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In advance of the 123rd annual meeting in Dallas on November 14, The Association of Public and Land-Grant Universities (APLU) has released the final report resulting from five regional meetings to discuss key concerns about the future of public research universities, one of which took place at UW Seattle on April 26, 2010.

The report, Ensuring Public Research Universities Remain Vital, outlines the important contributions that public research institutions like the UW make to knowledge, society and the economy. The report also reaffirms the need for institutions to remain committed to their public mission of providing world class education that is affordable and accessible, and for the states to remain committed to facilitating that mission by restoring and protecting the public investment in higher education.

Additionally, the report addresses ways that the federal government can help keep US public research institutions vital. First, by reforming indirect cost reimbursement rate setting policies and regulations associated with federal research grants. Second, by exploring ways that the federal government can partner with institutions to provide operating support, including endowed faculty chairs, funding for doctoral trainees, and new targeted research funding.