Month: December 2007

The Capitol Update Blog is going to take a break over the winter holidays.  Hope all of you have a peaceful and happy holiday season.  We’ll be back at it on January 2nd.

I’ve now had a chance to examine the Governor’s 2008 supplemental budget in a bit more detail, helped along quite a bit by a detailed breakdown of her spending plan prepared by the staff of the Senate Ways and Means Committee.

This analysis looks not only at state general fund spending, but what budget analysts in Olympia refer to as “near general fund” expenditures, which includes spending from other funds and accounts that get their revenue from broad based tax sources.  Over the past several years, the near general fund has been the generally accepted way of tracking overall state operating budget spending.

The Ways and Means analysis concludes that the Governor’s 2008 supplemental budget spends a “net” amount of $234 million from the near general fund, $144 million of which comes just from the state general fund itself.  The term “net” is important because the $234 million figure is a combination of both budget enhancements as well as budget reductions or savings.  For example, $31 million is added to the budget as a maintenance level adjustment for the increased costs of the I-732 COLA, while $106 million is subtracted from the budget for the PEBB rate reduction we discussed in an earlier posting the day the Governor’s budget was released.

The other thing that jumps out at you when you study this budget summary is how many of the policy adjustments in the supplemental budget are dedicated to health care, human services and corrections, and conversely, how little is spent on K-12 and higher education.  Now, to be totally fair, the underlying two-year budget for education is extremely beneficial for all education sectors and nothing in the Governor’s supplemental budget proposal takes away from that reality.  However, some education advocates have already expressed disappointment with the 2008 spending proposal because of the dearth of new K-12 investments in particular, and the higher level of spending in other areas of the budget are likely to fuel those criticisms further.

We have talked about the challenges the University faces when it comes to dealing with a multi-million backlog of capital facilities projects and the difficulties faced by legislators in putting all the pieces together in the state capital budget.  The piece below is part of a regular communication which UW Foundation leaders Orin Smith, Dan Evans and Bill Gates Sr. send to members of the University’s community.  It is a pretty accurate summary of the current state of affairs in UW capital financing, at least from the state perspective.

For many years, Johnson Hall (home of earth and space sciences) was Exhibit A in the UW’s catalogue of worn-out buildings.  It was old, it was big, it was prominent, it was unsafe, it was dysfunctional, and it was depressing.  But as you know if you came to the Foundation Board meeting this past September, Johnson Hall has been reborn.  It looks terrific, and it now provides safe and first-class spaces for teaching and research.  For this wonderful renovation we have state capital funding to thank.

In romantic moments, we like to hark back to the image of Socrates on one end of a log, a student on the other, as the essence of learning.  That image reflects an enduring truth:  great teachers are the heart and soul of education.  But Socrates lived in a different climate, and he did not teach molecular engineering (for example), and he did not have forty thousand students to worry about.  Here and now, the UW requires a body—a campus—as well as heart and soul.  And that campus, as a physical plant, has been built and maintained primarily by years of state capital appropriations.

The trouble is, both state and higher-education officials have come to realize that the state’s capital budget now faces structural problems that raise serious doubts about its capacity to meet the future needs of Washington’s colleges and universities.

A short primer on budget policy is necessary here.  The state’s capital budget is largely financed by bonds.  By constitutional limit, the annual debt service on those bonds cannot exceed 9 percent of general state revenues, calculated as a running three-year average.  That is what puts the ceiling on capital spending.  And the state has now pretty much reached that constitutional ceiling, while demands on the capital budget are growing exponentially.  (Specifics:  When the 2007 legislature convened, the bonding capacity available for new capital projects was capped at $2.1 billion.) 

Randy Hodgins, who became the UW’s director of state relations after many years in Olympia, watched the problems develop.  “When I started out, 20 years ago,” he says, “higher education accounted for about half the state capital budget.  After all, campuses represent about two-thirds of the state’s capital assets.  But in the early 1990s things began to change.  When Initiative 601 put a limit on state operating expenditures, a lot of ‘local community projects’ moved over to the capital budget, which was not covered by I 601.  There were growing environmental pressures to buy lands for preservation.  The state has become a pretty significant player in low-income housing, which used to be built by the feds and local agencies.  Prisons expanded.  And the biggest change is that the state is now picking up a significant share of K-12 construction, since state timber funds have dried up.  So the ‘state’ part of the state capital budget is beginning to take a back seat to local projects.”  The budget has grown, but the claims on it have grown more.  As of the 2005-07 biennium, higher education’s share was a little over 25 percent.

Meanwhile, the capital demands on higher education have also grown.  Since 1990, the system has added seven community and technical colleges and five branch campuses (with another waiting in the wings).  Enrollments have risen dramatically. 

Not surprisingly, building maintenance and renewal have not fared well in this climate.  There are various formulas one can apply for calculating how much we ought to spend every year to keep the campus in good shape and modernize it for evolving uses.  By any of these measures, state funding has fallen far short.  Hence the plight of Johnson Hall and 14 other aging UW buildings that were judged, by a study concluded in June 2004, to be in critical decline.  

The good news is that we are now about halfway through the renovation of those buildings, which collectively became a phased project called Restore the Core.  The state stepped up to the plate, and we are so far on time and on budget.  Four buildings are done, four are now in construction, three more (including the iconic Denny Hall) are on deck for the next biennium, and the rest are due to follow in turn.  You can imagine the excitement of faculty and students who move back into these sparkling “new” facilities.

It is also true that the 2007 legislative session gave us our best capital budget since the late 1990s:  $143.6 million, including $94 million for Restore the Core.  “The state,” says Randy Hodgins, “is still a huge, huge part of our capital building support.”

But both he and Marilyn Cox, who heads up our capital planning office, look at the debt ceiling and the state’s multiplying capital demands and see trouble ahead for higher education.  Even the UW’s 2007-09 appropriation, says Marilyn, welcome as it is, remains “far below the level required for good and prudent facility management, plus growth.”  Over the next half-dozen years or so, the UW is looking to finish Restore the Core, construct a new molecular engineering building, continue development of the Bothell and Tacoma campuses (and the likely new one in Snohomish County), and expand Gould Hall to meet needs of the College of Architecture and Urban Planning.  Where will the dollars come from?

“We’ve got to come up with creative new ideas,” says Marilyn—“we” being the state and higher education working together.  Fortunately, there are legislators who are just as worried about this problem as Randy, Marilyn, and higher-education leaders across the state.  Among ideas on the table:  using state matching funds to attract private dollars; tapping state and local economic-development funds to help build out the new campuses; giving campuses more flexibility to raise and use local funds, such as the building-fee portion of tuition.  “This is one of those long-term problem-solving efforts,” says Marilyn.  

One immediate measure would be renewal of the Gardner-Evans Act (yes, that Evans), which expires at the end of this biennium.  In 2003, that act authorized issuance of state bonds, over three biennia, to provide dedicated funds for enlarging capacity and major preservation on campuses.  In the current biennium, more than a third of the UW’s capital funding comes from Gardner-Evans.  Higher-ed institutions are advocating renewal of the act, now called Gardner-Evans-Locke, for another three biennia.

And of course the UW has turned to non-state funding sources for some recent buildings.  The Foege Building (genome sciences and bioengineering) was built almost exclusively by gifts, and the Ben Hall Building (multi-disciplinary research) relies on bonds financed by federal indirect-cost recovery.

But these are special cases.  The larger quandary remains:  Under current arrangements, the state cannot provide adequate capital funds for higher education to do its job.  So we need to figure out some new arrangements.  There is a huge statewide backlog of campus preservation to attend to, and there are new facilities to build to accommodate growing demand for education and research.  “Not solving this problem,” says Marilyn, “is just not acceptable.  We can’t and won’t give up.”

Governor Gregoire released her 2008 supplemental budget proposal this morning in Olympia.  The $144 million general fund spending proposal includes a “net” total of $99 million in what she terms “required spending items” such as caseloads, litigation, federal requirements, a one-time $105 million savings in health care benefit costs (see below) and other unavoidable costs.

The supplemental budget also calls for $45 million in “targeted investments” which are primarily one time items for disaster response and recovery, education and campus safety, health care and patient safety and community safety.  The major “winner” in the Governor’s spending plan is the state’s savings accounts, with $430 million going into the newly enacted budget stabilization account (Rainy Day Fund) and $774 million in unrestricted reserves.

The Governor’s budget includes a total of $8 million for the University of Washington for the following capital and operating budget items:

• $4.795 million one-time capital and operating funding for campus safety (discussed previously in the blog)
• $2.000 million one-time capital funding for UW Tacoma land acquisition
• $1.109 million on-going operating funding for UW North Sound campus start-up
• $125,000 one-time funding for the Ruckelshaus Center to work property and land rights issues
• $49,000 on-going operating funding for a technical pension adjustment

All state agencies (including the UW by $14.8 million) had their budgets reduced through a technical adjustment for employee health care benefit costs in the second year of the biennium.  The surplus in the public employee benefits account is large enough that the Governor is proposing to use it to “temporarily” reduce the state cost of providing health care benefits in fiscal year 2008-09 by a one-time total of $105 million, about half of which comes from higher education agencies.  The reduction has no effect on the benefits that will be provided to state employees.

The Governor’s proposal is truly one of the smallest supplemental budget recommendations I can remember in many, many years.  She made it clear throughout the fall that she was going to keep this budget rather lean and only fund those items that in her judgment, could not wait until the 2009 session.  In that regard, her proposal exceeds even my expectations for de minimus spending.

Obviously, a number of important items which were included in the UW’s request were not funded or funded only partially in the Governor’s supplemental budget.  Our goal will be to convince the legislature to include a number of them in their own spending proposals which they will begin preparing with they convene in Olympia on January 14.

For more detailed information on the Governor’s budget, visit the Office of Financial Management website.

In his successful campaign for Governor last year, Eliot Spitzer asked why New York did not have a “Berkeley of the East” and said he wanted New York’s public colleges to be among the finest in the nation.  Spitzer’s remark lead to the creation of a 30-member State Commission on Higher Education which releases its findings this morning.  The New York Times obtained an advance copy of the report and reported its major findings in yesterday’s Sunday edition.

The report calls for significantly higher financial support for New York public universities and allowing the universities to set their own tuition without state approval and to vary tuition rates by campus.  The report also urges hiring 2,000 additional faculty members and creating a $3 billion innovation fund for research grants in fields that can fuel economic development.

The reference to UC Berkeley is an acknowledgement that New York has historically under-invested in its State University of New York (SUNY) system created during Governor Nelson Rockefeller’s tenure.  While the system has grown substantially, only 55 percent of New York college students are in public institutions compared with 79 percent nationally.  Higher education in New York receives less than 7 percent of the state budget compared with a national average of 11 percent.  According to the Times story, John Simpson, the president of SUNY-Buffalo states that “There is a history of chafing between the public universities and the privates in New York State, and the publics have historically not won.”

While SUNY-Buffalo and SUNY-Stony Brook are both belong to the Association of American Universities, the nation’s major research schools, they are not the same caliber at UC Berkeley which is regularly ranked as one of the country’s top three public research institutions.  For a state with a spotty track record on major investments in public higher education, Governor Spitzer and the New York public universities will have their work cut out for them when the state legislature convenes next year.

Public radio reporter Austin Jenkins wrote this story for Crosscut.com yesterday about what has been a hot topic in the Olympia rumor mill for a number of weeks — will Rep. Helen Sommers (D-Seattle) run for re-election in 2008?

Sommers, who is 75 is the chair of the powerful House Appropriations Committee and a longtime friend of higher education and the University of Washington.  She has served continuously in the House of Representatives since 1973.  In 2004, she battled back a tough primary election challenge from an SEIU-backed Democratic opponent and was then easily re-elected in 2006.

Speculation on her political future began in earnest this fall as several lobbyists reported that Sommers was returning campaign contributions.  For her part, Sommers indicates she remains undecided about another term and won’t make her decision until after the legislative session.

• With the departure of Rep. Jon Lovick from the state legislature due to his election as the new Snohomish County Sherrif, Rep. Jeff Morris (D-Anacortes) has been elected by his caucus to be House Speaker Pro Tem.  In this capacity, Morris will preside over floor debate when House Speaker Frank Chopp is not at the rostrum and will also serve as a member of the House Democratic leadership team.  Rep. John McCoy will take over Morris’ duties as chair of the House Technology, Energy and Telecommunications Committee.
• Rep. Dan Newhouse (R-Sunnyside) has been chosen as House Republican Floor Leader, replacing Rep. David Buri who has left the House to become government relations director for Eastern Washington University.  Rep. Charles Ross (R-Naches) will replace Newhouse as Republican Assistant Floor Leader.
• Rep. Dave Upthegrove (D-Des Moines) is the new chair of House Ecology and Parks Committee.  This new committee will handle environmental protection and conservation issues.  Upthegrove was chair of the Select Committee on Puget Sound.
• Rep. Brian Blake (D-Aberdeen) takes the helm of the House Agriculture and Natural Resources Committee, which became vacant with current chair Rep. Brian Sullivan was elected to the Snohomish County Council in November.

According to Seattle Times chief political reporter David Postman, Rep. Fred Jarrett (R-Mercer Island), a long-time supporter of higher education announced today he is switching parties and will run for the state Senate next year in the 41st district as a Democrat.  Incumbent Sen. Brian Weinstein (D-Mercer Island) has also announced his retirement, clearing the way for Jarrett to run in the primary next August.

Jarrett’s switch means that House Democrats will increase their majority from 62 to 63 out of 98 total members in the lower chamber.  A moderate Republican who got his start in politics on Dan Evans gubernatorial campaign, Jarrett is in his third term in the House of Representatives and is a past Mercer Island mayor and city councilmember.  He works as a project manager in Boeing’s commercial airplane division.

No word yet on possible committee assignments for Jarrett.  If you want to read more about the reasons behind his party switch, here’s a link to the Postman on Politics blog.

Hope most of you saw the story’s in the papers yesterday about the Governor’s proposals to improve campus safety at the state’s universities and colleges.  The UW had requested a total of $5.3 million for various campus safety initiatives in our 2008 supplemental budget request.  This included:

• $4.5 million one-time funding for a mass notification system for many of the oldest buildings on campus
• $195,000 one-time funding for an outdoor public address system
• $100,000 one-time funding for a community alert system
• $405,000 ongoing funding for the Violence Prevention and Response Program
• $112,000 ongoing for the Students of Concern Program
• $50,000 ongoing costs for support of the mass notification system

In her announcement on Tuesday (which was made in Parrington Hall), the Governor made it clear her budget will include ALL the one-time funding components requested by the University but deferred consideration of the ongoing requests until the 2009-11 biennial budget.

Here is a link to the official campus safety annoucement from the Governor’s office.

Obviously, a major priority for my office is to insure the legislature supports the Governor’s one-time recommendations while persuading House and Senate fiscal and higher education committee members to support the ongoing funding components.

The Governor will release her entire 2008 supplemental budget recommendations next Tuesday December 18.

According to a story in this morning’s Tri City Herald, a state auditor’s report released on Monday has found that staff members at WSU Tri Cities improperly manipulated data to inflate the campuses reported enrollment.  The report stems from a whistleblower complaint June 21 that alleged that campus officials were complicit in inflating student credit hours.

WSU officials announced that as a result of the findings, four university officials, including two vice chancellors, have been disciplined and their duties discontinued.  WSU officials further indicated that a 2008 supplemental budget request for additional enrollment funding has been withdrawn.

The Auditor’s report said the net effect of the WSU Tri Cities changes was to make the enrollment figures appear higher than reality.  In the fall of 2006, the campus reported 692.9 full time student equivalents (FTE), but in reality only had 661.54 student FTE.

WSU Tri Cities Chancellor Vicky Carwein said she first learned about the discrepancy when the campus was informed about the complaint last summer.  She then put policies in place to stop the practice.  WSU President Elson Floyd said in a statement that he supports Chancellor Carwein’s actions.