Monthly Archives: March 2011

State Loses Revenue But Does Not Hit $1 Billion Mark

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Washington’s state budget took a large hit this morning. The March Economic & Revenue Forecast, released today, shows an additional $777.8 million decline in revenue between now and 2013.

The Forecast will require Washington to further reduce the budget for the current fiscal year by $79.8 million and by $698 million in 2011-13.

The forecast widens the state’s budget shortfall from $3.6 billion to $5.5 billion. The shortfall is the difference between projected state revenues and what it would cost to continue state services at current levels, plus pay for wage and benefit increases, new programs and higher costs to keep up with inflation and population growth.

Washington’s State Chief Economist, Arun Raha stated that the revenue forecast is primarily down because the economy is not recovering as quickly as previously expected. In addition, Raha cited conflict in the Middle East and the subsequent hike in oil prices  as well as the economic impact to the state from the natural disasters in Japan as contributors.

The latest revenue projections are in line with what budget writers had been expecting. Though budget action has not been scheduled for next week, it is likely to take place soon so stay tuned.

Biennial Budgets Expected Soon

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Tomorrow the Washington State Forecast Council will be presented with the latest revenue forecast. Dr. Arun Raha, Washington’s State Economist will present the forecast at Noon.

Initial projections for the 2011-13 biennium were estimated at $4.6 billion when the legislative session began in January. Since January lawmakers have passed a second supplemental budget reducing the budget gap in the current fiscal year to approximately $250 million and have been planning on an additional $500 million shortfall in the latest revenue forecast for the 2011-13 biennium.

However, it is expected that $500 million may be a low ball figure, with some expecting the shortfall to range between $1-2 billion.

If the forecast is not significantly greater than anticipated, the House plans to release their proposed biennial budgets on March 22, hold public hearings on the proposed budget as soon as March 23, and move the bill out of Committee by March 24. A vote on the budget on the House floor is tentatively scheduled for March 26.

The budget discussions would then shift to the Senate.

Washington Senate Recognizes Female Athletes

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The Washington Senate adopted a resolution  recognizing women in sports. 

Sponsored by Sen. Kohl-Welles, the resolution honors women in sports from elementary school to College.  The resolution specifically recognizes that participation in athletics is one of the most effective ways for girls and women in the United States to develop leadership skills, discipline, initiative, and self-confidence.

In addition the resolution recognizes the participation of female athletes at Washington’s higher education instituions, include the 55 female athletes at Evergreen.

The resolution calls for the Washington State Senate to honor Washington girls and women in sports on March 16, 2011, and encourage support for our state’s female athletes and athletic programs.

U.S. House Passes Another Budget Stop-Gap Bill

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Yesterday the U.S. House passed another short-term stop-gap spending bill .

With a vote of 271-158, the House passed a three-week continuing resolution containing $6 billion in cuts. The resolution (H.J. Res 38) will expire on April 8.

None of the cuts included in this latest resolution would impact student aid or funding for the U.S. Department of Education.

House Budget Committee Holds Work Session on Higher Education

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This afternoon the House Ways & Means Committee held a work session on higher education funding.

Committee members received several presentations focused on the funding trends and impacts of the Governor’s proposed budget for the two-year and four-year public higher education sectors and state financial aid programs.

Mike Reilly, Council of Presidents, shared with legislators the impact of state funding trends and the Governor’s most recent budget proposal on the six, public baccalaureate institutions. 

Since the 2007-09 biennium state funding for Washington’s public baccalaureate institutions has been cut by nearly $500 million or 28%. Current state funding is at the same level as it was in the 1999-01 biennium.

The Governor’s proposed 2011-13 budget would cut an additional $380 million in state funds (a reduction of nearly 50% in state support since 2007-09) leaving state support of approximately $1 billion as part of a proposed $32.1 billion state budget.

The Committe also heard from the State Board of Community and Technical Colleges, the Higher Education Coordinating Board and higher education legislative fiscal and policy staff.

Legislators asked a variety of questions ranging from what is the elasticity of tuition at the institutions to how does a change in focus from enrollment (inputs) to degrees (outputs) impact quality and access.

Congressional Budget Office Proposes Reductions to Three Areas of Federal Financial Aid

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The Congressional Budget Office (CBO) has proposed cuts to three areas of financial aid spending in its annual report, “Reducing the Deficit: Spending and Revenue Options.”  

To reduce spending on student aid, the CBO proposes the elimination of subsidized loans to graduate students, a change in the interest rate structure for student loans and tighter eligibility criteria for the Pell Grant program.

“Under current law, students with an expected family contribution (EFC) exceeding 95 percent of the total maximum Pell grant award ($5,273 for academic year 2010-2011) are ineligible for a grant,” the CBO report states. “This option would make students with an EFC exceeding $2,500 ineligible for a Pell grant.”

Restricting the Pell Grant to the neediest students, the CBO argues, would focus the grant program on students with the greatest need.

Assuming that the maximum discretionary award level remains at $4,860 in future years, the CBO estimates that this option would yield discretionary savings of $2 billion through 2016 and $7 billion through 2021, along with accompanying mandatory savings of about $1 billion through 2016 and $5 billion through 2021.

The CBO report argues that eliminating subsidized loans for graduate students would help focus federal financial aid priorities on what some people consider the federal government’s primary responsibility — making higher education accessible to high school graduates.

“This option would end, in 2012, the practice of making new subsidized loans to graduate students, on the presumption that those students would generally take out unsubsidized loans instead,” the CBO report states. “The option would reduce federal outlays by more than $8 billion from 2012 to 2016 and by about $18 billion from 2012 to 2021.”

Additionally, the report proposes changing the structure of interest rates on federal student and parent loans to resemble those on fixed-rate mortgage loans.

“In particular, the interest rate on new loans would depend on conditions in financial markets at the time of origination but remain fixed for the life of the loan,” according to the report. “Under this option, the interest rate on all new federal student and parent loans would be set to the interest rate on 10-year Treasury notes at the beginning of the academic year in which the loan is originated plus 3 percentage points.”

The CBO estimates this option would reduce federal outlays by $900 million from 2012 to 2016 and by $52 billion from 2012 to 2021.

“Currently, the interest rate on all new unsubsidized and subsidized loans to non-undergraduate students is 6.8 percent,” the report states. “On all new PLUS loans, the interest rate is 7.9 percent. For the 2011-2012 academic year, the interest rate on new subsidized loans to undergraduate students will be 3.4 percent, but for all subsequent years, that rate will be 6.8 percent because of the expiration of a provision in the College Cost Reduction and Access Act of 2007.”

Congress has yet to finalize a budget for the remainder of fiscal year (FY) 2011, which ends Sept. 30, and is beginning debates on the FY2012 budget.

Another Short-Term Gap Spending Bill Considered in D.C.

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This week Congress is expected to approve a three-week, stop-gap spending bill that reduces federal spending by $6 billion, but does not cut student aid or funding for the U.S. Department of Education. 

The federal government is currently being funded by a two-week, stop-gap measure  that is set to expire on March 18. The three-week CR would prevent a government shutdown after March 18 and give Republicans and Democrats time to negotiate a long-term CR for the remainder of fiscal year (FY) 2011, which ends on Sept. 30.
 
The bill faces opposition from some conservatives in the House who are concerned that the bill does not included enough cuts, but Republican leaders in the House and Democratic leaders in the Senate have expressed confidence that they will be able  to pass the measure. The bill could be difficult for Democrats to oppose because the cuts are the same as those proposed by the Obama administration in its 2012 budget request.

Caseload Forecast Shows Some Optimism; Not Expected in the Revenue Forecast Out this Week

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On Friday the Washington Caseload Forecast Council released the March caseload forecast report but did not adopt the report due to a lack of a quorum. The forecast shows a reduction of $287 million in the cost of government through June 2013.

The forecast in effect  shows a reduction of $78 million to the state from costs for public schools, Medicaid, prisons and other programs through June and an additional $207 million for the next two-year budget cycle.

The reason for the reduction in costs is primarily federal health care reform. Reduced use of state-paid medical services by those on the case rolls is driving down the costs, accounting for $70 million of the avoided costs in the short term and about $117 million in the next cycle. 

In other news, the Economic and Revenue Forecast Council released its monthly tax collections report Friday, saying they are down by a cumulative $85 million through early March, compared with the November forecast.

The collections for the state general fund fell $39.9 million below the previous forecast over the past month alone. But the state’s economy is growing, and tax collections overall still are higher than in the previous year.

The revenue council makes its next quarterly report Thursday. Dr. Arun Raha will offer the latest revenue forecast on March 17 at noon in Olympia to legislative members of the Economic and Revenue Forecast Council. The announcement is expected to be carried live on TVW. 

Some legislators fear revenue could fall as much as $2 billion from November’s predictions. “Optimistic” projections pegged the revenue shortfall at $500 million more than originally projected. Lawmakers are expressing concerns that it will be even larger, which will make closing the current projected gap of $4.6 billion for the 2011-13 biennium even greater.

State revenue is tied in a major way to sales and business activity, and sales are linked to consumers’ sense of job security or job prospects. But the quarterly economic forecast issued a week ago said the state still is 180,000 jobs below the pre-recession peak, and full job recovery won’t occur until after the next biennium ends June 30, 2013.

About all that legislative leaders have agreed on at this point is to first try writing a budget without tax increases.

2011 Legislative Session: Week 10

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Next week will be filled with a mix of work sessions and committee hearings primarily on bills from the opposite chamber and on a handful of bills that are deemed necessary to implement the budget.

Several bills that may impact higher education are scheduled for a public hearing next week including legislation that would provide regulatory relief for higher education institutions and alter the current retire/rehire practice for higher education employees.

In addition a public hearing is scheduled on SB 5717 which would implement the Governor’s Higher Education Task Force Recommendations and an executive session is scheduled on SB 5182, which would restructure higher education in Washington. In addition, a work session on higher education funding in House Ways & Meansis also scheduled. Please see the links below for a list of all the hearings that might be of interest.

Also next week the State revenue forecast will be released on March 17. It is expected that the forecast will soon be followed by the release of the first biennial budget. The House writes a budget first this year and the earliest we may catch a glimpse of it is March 21. 

However this may change if the revenue forecast is significantly large and increases the $4.6 billion gap for the 2011-13 operating budget. Originally lawmakers were hearing an additional shortfall of $500 million; estimates are now creeping up to the $2 billion mark. In that case proposed budgets may not be released until a week later (Week of March 28).

Evergreen Testifies in Support of Vet Friendly Bill

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This afternoon the Washington Senate Higher Education and Workforce Development Committee held a public hearing on legislation referred to committee.

Among the legislation heard, was HB 1221, regarding the rights of certain higher education students involved in military service. In particular the bill would allow a student at an institution of higher education who is a member of the Washington National Guard or other military reserve component and is ordered for 30 days or less into active or inactive service is entitled to make up any missed class, test, exam, lab, or event without affecting the final course grade or evaluation.

Students currently called for active service are able to make up any assignments without affecting the final course grade or evaluation.

The Evergreen State College testified in support of HB 1221, advocating for the predictability and stability this bill would offer veterans attending higher education institutions in Washington.