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February 2015 State Revenue Forecast Update

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General Fund-State (GF-S) 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

 

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鈥檚 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听.

AASCU States 鈥淧ay It Forward Is Not the Solution to Addressing College Affordability鈥�

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On Thursday, the American Association of State Colleges and Universities (AASCU) released examining the potential consequences of Pay It Forward (PIF) (please see our for background information). 听The AASCU brief summarizes other, similar approaches to paying for college and analyses PIF as a potential state approach to financing public higher education. 听

The report describes the following 鈥�13 Realities of PIF College Financing Proposals鈥�:

  1. Most students could pay more, not less, for college.
  2. Considerable uncertainty would be introduced into campus budgeting and planning efforts.
  3. The majority of college costs are not covered.
  4. Students from sectors with the heaviest student debt burdens would be ineligible to participate.
  5. The class divides in public higher education, and more broadly, in American society, could intensify.
  6. Costs borne by students pursuing privately financed degrees and higher-paying careers would increase dramatically.
  7. PIF is duplicative鈥攖here are existing public and private programs that calibrate student debt to earnings.
  8. PIF鈥檚 start-up costs would be enormous.
  9. Payment collection would be costly and challenging.
  10. Campus and state leaders would have strong incentives to promote programs leading to high-paying occupations, to the possible detriment of the liberal and applied arts, humanities, and public service careers.
  11. Underlying college cost drivers would not be addressed.
  12. Support for state and institutional student financial aid could dissipate.
  13. Support for maintaining existing state investment in public higher education would erode, creating a pathway to privatization.

In addition, the authors discuss 鈥淭he Unknowns of 鈥楶ay It Forward鈥欌��:

  1. How will institutional financing gaps be addressed?
  2. How would payments be collected?
  3. Who would control PIF funds?
  4. How would PIF鈥檚 structure and revenue generation differ from campus to campus?
  5. How would PIF complement or conflict with federal higher education programs?
  6. How would transfer students be integrated into PIF?
  7. What would be the consequences for noncompleters?
  8. How would college savings change under PIF?
  9. How would PIF affect campus philanthropic campaigns?

The report鈥檚 conclusion reads, 鈥淐reating a lifelong tax and privatizing public higher education through pay it forward is not the solution to addressing college affordability.鈥� 听

I recommend that readers review .

AASCU Releases Latest State Outlook

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On Thursday, the American Association of State Colleges and Universities (AASCU) released its most .听 According to the report, state operating support for public 听four-year colleges and universities is 3.6 percent higher for FY 2015 than it was for FY 2014. Of the 49 states that have passed a budget thus far, support for higher education increased in 43 states and decreased in only 6 states. Of those 6 states that reduced funding, all were under 3 percent: Alaska, Delaware, Kentucky, Missouri, Washington (0.8 percent decrease) and West Virginia.

There was a relatively small amount of variation between states in terms of their year-to-year funding changes. For FY 2015, the spread between the state with the largest gain and that with the largest cut was only a 24 percent鈥攖his is compared to 57 percent, 25 percent and 46 percent, respectively, in FYs 2012, 2013 and 2014. The report notes that this decreased volatility likely indicates 鈥渁 continued post-recession stabilization of states鈥� budgets.鈥�

Charitable contributions to U.S. colleges and universities increased 9 percent in 2013, to $33.8 billion鈥攖he highest recorded in the history of the Council for Aid to Education (CAE) Voluntary Support of Education (VSE) survey. In addition, college and university endowments grew by an average of 11.7 percent in FY 2013, according to a January 2014 study released by the National Association of College and University Business Officers and the Commonfund Institute.听 This represents a significant improvement over the -0.3 percent return in FY 2012.

The report also describes ten highlights/trends from states鈥� 2014 legislative sessions, those being:

  1. State initiatives linking student access to economic and workforce development goals.
  2. Tuition freezes or increase caps in exchange for state reinvestment鈥攖his occurred in Washington and another example is discussed in .
  3. Performance-based funding systems that attempt to align institutional outcomes with state needs and priorities.
  4. Governor emphasis on efforts to advance state educational attainment goals.
  5. Interest in policies related to vocational and technical education, including allowing community colleges to grant certain four-year degrees (as described in ).
  6. Efforts to develop a common set of expectations for what K-12 students should know in mathematics and language arts.
  7. STEM-related initiatives, including additional funding for STEM scholarships in Washington.
  8. Financial support for the renovating and/or constructing of new campus facilities鈥攗nfortunately, Washington鈥檚 legislature did not pass a capital budget.
  9. Bills allowing individuals to carry guns on public college and university campuses鈥攁s of March 2014, seven states had passed such legislation.
  10. Legislation that extends in-state tuition or, as occurred in Washington, state financial aid to undocumented students.

Other noteworthy policy topics described in the report include:

  • Student financial aid programs鈥攕ome states broadened their programs while others limited them;
  • Online and competency-based education reciprocity agreements;
  • 鈥淧ay It Forward鈥� Funding Schemes; and
  • Consumer protection as it pertains to student recruitment, advertising and financial aid at for-profit colleges.

Four Year Degrees and Tuition Freeze

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Posted by Corrin Sullivan, Intern at the Office of Planning & Budget and Educational Policy student through the month of July 2014. My focus is on higher education access and听policy. I look forward to sharing newsworthy events听in the higher ed world with you.

Let’s start with a quick听summary of two articles from this past week in higher ed news.

The California State Assembly Committee on Higher Education approved (SB850) this past week, which launches a pilot program offering fifteen community colleges the opportunity to offer a four-year degree program as soon as January 1, 2015. The Community College Board of Governors and chancellor, in consultation with the California State University (CSU) and University of California (UC) systems, will consider a variety of colleges and select fifteen districts based on four-year degree proposals that meet a variety of criteria; most notably, degrees not available at any of California鈥檚 four-year schools and that address the state鈥檚 unmet workforce needs. Although the UC system has yet to comment on SB850, California鈥檚 Community College Chancellor, Brice Harris, commends the Assembly Committee鈥檚 approval of legislation stating that it has the potential to broaden higher educational access and offer more job training opportunities for Californians.

The North Dakota Board of Higher Education recently approved its biennium budget request, which asks for an approximate 14 percent increase in funding in exchange for freezing tuition rates among its eleven colleges and universities for the coming biennium (2015-17). Based on a new funding formula instituted in the 2013 legislative session that relies largely on credit-hour completion, the budget鈥檚 $774 base request reflects a $94 million dollar increase from the previous year鈥檚 request. The $94 million dollar increase includes a $49 million dollar request to cover operating costs associated with additional credits taken at the state鈥檚 colleges and universities. In addition to the $94 million base increase, the board has also requested $9.5 million dollars to cover sums 鈥渟tudents would have to cover without a freeze,鈥� compounded with several smaller requests to meet institutional equipment and staffing needs. The Board states that they will freeze tuition rates at all colleges and universities from 2015 through 2017 if and only if, the legislature agrees to fully fund the base budget and increase employee salaries and benefits. Noting affordability as an issue in declining student enrollment numbers, the freeze aims to decrease tuition so that rates are competitive with the state鈥檚 regional counterparts.

While the Board has frozen tuition rates at the state鈥檚 two-year schools for four of the past six years, this request to freeze tuition for all North Dakota higher education institutions is unprecedented. The budget is before Governor Jack Dalrymple, pending recommendations, prior to advancing to the state鈥檚 legislature.

Updated House and Senate Supplemental Budget Brief

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We have updated the听听we posted on February 27th, to reflect additional information regarding the employee health insurance related agency reductions. Both the House and Senate budget would decrease agency contributions for employee health benefits. The House budget cuts state funding by $7.6 million and the Senate budget cuts state funding by $4.4 million.听However, both of these reductions are offset by lower per employee spending 鈥渓imits鈥� on benefits. The House budget听would reduce monthly employer funding to $658 per eligible employee. The Senate budget would reduce monthly听employer funding to $703 per eligible employee.

House and Senate Release Supplemental Operating and Capital Budgets

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Leadership in both the House and Senate fiscal committees released supplemental operating and capital budgets this week, proposing technical corrections and appropriation changes to the current 2013-15 biennial budgets (primarily applicable to FY15). Please see the full for information on each proposal.

As a reminder, both budgets will be amended in respective committees, and possibly on each chamber floor, before negotiations begin towards a compromise budget.

 

Governor Releases 2014 Supplemental Budgets

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Governor Jay Inslee released 2014 supplemental budgets, making changes to the current 2013-15 (FY14 & FY15) biennial operating and capital budgets. As a reminder, both chambers of the Legislature will propose their own supplemental budgets throughout this short 60-day session as they听work towards compromise budgets.

The supplemental operating budget would provide an additional $1 million for the 天美影视传媒鈥檚 Institute for Protein Design and $500,000 for an Advanced Materials Manufacturing Facility plan, associated with the ongoing attempt to keep Boeing鈥檚 production of the 777x and its carbon fiber wing in Washington.

Additionally, the Governor鈥檚 supplemental operating budget appropriated new funds for the College Bound program and the Entrepreneurs-In-Residence program.

The budget also contains some changes to the UW鈥檚 state appropriation related to unanticipated positive claim activity for health insurance. The change appears to be a reduction in funding available to the UW during FY15. More information will follow as details are available.

The Governor did not provide additional capital funding for the UW in his supplemental capital budget.

A is available on OPB鈥檚 website. As usual, please post any comments or questions you may have.

This Week in Higher Ed News

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Student Exchanges Hit Record High.听 According to the on International Educational Exchange, the number of international students at U.S. colleges and universities and the number of American students studying abroad are at record highs. In 2012-13, 820,000 foreign students attended American higher ed institutions, a 55,000 increase (7.2 percent) from the previous year. Chinese undergraduates exhibited the biggest increase, 26 percent, bringing the total number of Chinese students studying in the U.S. (undergraduates and graduates) to 235,000. In 2011-12 (the most recent year for which data are available) 283,000 American students went abroad for credit university courses, up 3.4 percent from the prior year. 听For institutions hosting the most international students, the UW ranked 14th in the country.

New Studies Cast Doubt on Effectivenessof State Performance-based Funding.听 Now that economies are recovering from the Great Recession, state legislators across the country have been hurrying to adopt systems that link state funding for higher education to student outcomes like degree production and completion rates. However, several presented at the annual meeting of the Association for the Study of Higher Education question the effectiveness of these 鈥減erformance-based funding鈥� systems. See for a summary of the findings.

College Completion Rates See Little Improvement.听 College-completion rates remained largely unchanged this year, according to the . Of the first-time students who entered college in fall 2007, 54.2 percent earned a degree or certificate within six years鈥攗p 0.1 percentage points from the 2006 cohort. In the public sector, completion rates rose by 1.3 percentage points for students who started at public four-years and by 1.1 percentage points for those who began at public two-years. Unlike the federal government鈥檚 college-completion measure, the center tracks part-time students and students who transfer to a different college, sector, or state. Only 22 percent of part-time students earned credentials within six years, compared with 76 percent of those enrolled full time. The research center will issue its full report next month.

University of Michigan鈥檚 Shared Services Strategy Faces Opposition.听 The University of Michigan is the latest campus to implement 鈥渟hared services,鈥� a cost-saving strategy that has academic departments rely on centralized staff, rather than department-level staffers. Theoretically, employees in the central pool could become more specialized, and thus more efficient, than departments鈥� jack-of-all-trades staff. Administrators at Michigan hoped to save $17 million by moving 275 staffers from their campus offices to a single building on the edge of town. However, not only are faculty and students speaking out in opposition, the plan is no longer expected to save nearly as much as once hoped and may barely break even in the short term.听 at Inside Higher Ed.