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.
Tag: olympia
Somber State Budget Update Presented to UW Regents
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.
Gearing up for the 2011 Legislative Session
Today, the Office of State Relations and the Office of Planning and Budgeting held a legislative session overview for folks across campus who are frequently called upon to respond to requests for information during session, including providing feedback on proposed bills, completing fiscal note responses, or working with state relations to testify or answer questions in Olympia.
Please visit our State Budget Process webpage to view or print all four presentations that were made this afternoon, to access the UW BillTracker, and other documents and presentations relating to the State budget process.
- Fiscal Notes Presentation (Jessica Thompson, P&B)
- Bill Tracking Presentation (Sarah Hall, P&B)
- Reporting Public Agency Lobbying (Karin Yukish, State Relations)
- UW 2011 Legislative Agenda (Margaret Shepherd, State Relations)
Also make sure to subscribe to OPBlog and to the State Relations Blog for regular updates throughout Session and beyond.
WA Higher Education Task Force Report Released
Last summer, Governor Gregoire created a Higher Education Task force, comprising both public and private leaders, and charged them with proposing a new funding strategy for public higher education, as well as new ideas for increasing institutional accountability. The Task Force released its report yesterday, January 3rd, recommending three major reforms to higher education policy in Washington State.
First, the group suggested that tuition setting authority be given to the universities to help make up for budget cuts from the legislature. Based on their proposal, the institutions would use a formula to determine appropriate tuition rates, taking into account state appropriations, tuition at peer institutions, and enrollment levels.
Second, the Task Force proposed the creation of a Washington Pledge Scholarship Program, which would be funded by private donors. They hope the fund would reach $ 1 billion by the end of the decade. Corporations would receive a tax credit for donating, although that benefit would not kick in until overall tax revenue returned to 2008 levels.
Third, they recommended that the state give cash incentives to universities that meet certain degree production targets. In addition, they encourage universities to make plans to reach retention goals set forth by the state.
Finally, the Task Force listed other money-saving strategies, such as including more online introductory-level classes, developing three-year degrees, giving more credit for college-level work done in high school and at other institutions, and eliminating underused degree programs.
Make sure to check the State Relations blog for a round-up of some of the local press coverage relating to this report.
Op-Eds Call for Increased Flexibility for Public Higher Ed in WA
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.
- Phyllis Wise, Interim President, UW: The new normal State public university students will bear bigger share of costs
- George Bridges, President, Whitman College: Seeking a new paradigm for funding Washington’s public higher education
- Amy Kinsel, Instructor, Shoreline Community College: Give community colleges more flexibility to help students, economic recovery
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
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.
Federal Maintenance of Effort Requirement Makes State Financial Aid Programs Vulnerable
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.
Seattle Times Highlights Importance of Pension Funding Policy
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.
Additional Near- and Long-Term Cuts Expected as State’s Revenue Forecast Worsens
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.
New OPB Brief: WA State Public Pensions
Be sure to check out our latest OPB Brief, Looking Ahead: Washington State Public Pension Costs. This brief is the first in a series intended to provide summary information about major categories of state spending that could impact budgetary outcomes for higher education in future biennia.