On Tuesday Governor Gregoire released her proposed 2013-15 Operating and Capital budgets. As required by law, Governor Gregoire submitted an all-cuts budget that reflects existing revenues.

The all-cuts budget would reduce levy equalization by $100 million and eliminate the State Food Assistance Program and other services. In addition, higher education would receive a $52 million across-the-board cut to public universities and colleges. For Evergreen this is a reduction of $836,000 for the two-year budget.

Governor Gregoire in releasing the all-cuts budget stated it  “would have unacceptable consequences for our state and its people”. Given the drastic nature of an all-cuts budget the Governor also proposed a new revenue budget.

The new revenue operating budget proposed by the Governor relies on a combination of new revenues, program reductions, reform savings, and one-time transfers to address an anticipated $900 million shortfall in the next biennium and to take the first step towards  meeting the state’s basic education needs identified by the state Supreme Court in the McCleary decision.

Governor’s Proposed Biennial Operating Budget

The Governor’s proposed new revenue budget addresses the anticipated $900 million shortfall in 2013-15 through a combination of spending reductions, reform savings, and revenue.

The new revenue budget is balanced in large part by spending reductions and reform savings. The budget:

• Suspends teacher cost-of-living pay raises required under Initiative 732 – $360 million
• Delays implementation of the state’s paid family leave law – $14 million
• Reduces funds to dozens of state programs
• Trims funding for local government programs – $57 million
• Assumes savings from the consolidation of “back office” functions via the consolidation of five agencies into a single agency – Department of Enterprise Services – $20 million
• Assumes savings under the Patient Protection and Affordable Care Act (Obamacare) $140 million

In addition the budget assumes new revenue. This includes new or increased user fees, the repeal of a use tax exemption for fuel produced and used internally by extractors and manufacturers, and extends the Hospital Safety Net Assessment which is an inpatient fee that leverages increased Medicaid matching funds. Finally, the budget assumes $172 million in one-time transfers to the General Fund from a variety of accounts.

Though the new revenue budget holds the line on spending for state agencies, the budget does include some targeted investments. Among the investments is $50 million to add enrollment slots to the state’s early childhood education system, $20 million to expand STEM opportunities in higher education, and $8 million to improve prison safety.

The largest investment, however, is in K-12. The Governor’s budget represents a 12.3% increase to K-12 over the current biennium. This investment includes $1 billion – a first installment- to phase in legislation that will meet the requirements for basic education identified through the McCleary decision.

Under this legislation (HB 2776 passed in 2010) funding for K-12 would be provided to:

• Reduce class sizes in grades K-2
• Continue the phase-in of full-day kindergarten programs
• Improve instructional practice through improved teacher and principal evaluations
• Increase funding for maintenance, supplies, and operating costs
• Fund 100% of the state’s new pupil transportation funding formula

To fund the investment in K-12, Gregoire proposes a balance between reductions in other services combined with new revenue. This would include a wholesale excise tax on gasoline and diesel fuel dedicated to pay the costs of pupil transportation services for the next three biennia and the extension of two temporary tax surcharges: (1) A 0.3% increase to the B&O tax paid by professionals (i.e. doctors, lawyers, accountants) and (2) a 50 cent per gallon beer tax.

Higher Education

The new revenue budget proposed by the Governor Gregoire provides a good starting point for budget discussions this session. Her budget builds on the momentum of the Washington Legislature in the 2012 supplemental session to stop any further erosion of state funding for higher education. The budget does not reduce funding for higher education and prohibits tuition increases for Washington’s universities and colleges. In addition the proposed budget maintains funding for the State Need Grant program.

The budget also makes a handful of investments in higher education. Among these investments is the creation of a competitive STEM enrollment pool for the public baccalaureates to compete for enrollment funds in STEM fields – $11 million; expansion of aerospace and STEM offerings at the community and technical colleges – $5 million; support for the colleges of engineering at WSU and UW – $4 million; and an increase in funding for the College Bound Scholarship program – $35 million.

The challenge for higher education under the Governor’s proposed new revenue budget is the total level of funding that is provided. While the budget proposes no reductions or ability to raise tuition, the level of funding for Washington’s public baccalaureate institutions does not meet the basic maintenance funding levels.

Evergreen

Although the Governor fully restores the temporary 3% compensation base reduction, there are no new resources provided to support increases in costs.

Under the new revenue budget, Evergreen is funded at a level that is below the maintenance level needed for the 2013-15 biennium. This means while the budget reflects the restoration of one-time transfers and reductions taken in the 2011-13 biennium, it does not reflect increases in operating costs (i.e. utility rates and collective bargaining agreements).

In addition the Governor’s proposed budget does not provide any funds to support investments requested by the College for IT and business infrastructure; student recruitment, retention and success; and faculty and staff recruitment and retention.

Capital Budget
Governor Gregoire also proposed a biennial capital budget for higher education. The Governor provided funding for a small number of projects across higher education. This includes funding for two projects at Evergreen – the renovation of the Science Lab 1 Basement and the Science Lab 2 second floor.

In addition the budget includes funding for minor works preservation and preventative maintenance.

Though the  Governor’s budget does provide some funding for minor works preservation it does not fully fund the College’s request. In addition, the proposed budget does not fund the design phase of the Lecture Hall Renovation, the predesign for the renovation of Seminar I, and the acquisition of land and design for the Tacoma Campus.

Next Steps

The Governor’s budget is the first of many budgets that will be released to address the 2013-15 biennium. While the Governor’s budget is the first step in the budget development process, there will be at least four more legislative budgets to review as the legislative session progresses.

The next budget is expected to be proposed by Governor-Elect Jay Inslee after he takes office in mid-January.

The Washington Legislature will convene on January 14 to begin its work to develop a biennial budget.  Over the next 105 days, the House and Senate will hold work sessions and public hearings on the gubernatorial proposed budgets as well as the budgets put forth by each chamber before finalizing a conference budget in late-April.