Tag Archives: Budget

State budget deficit for 2011-13 Biennium -$3 billion

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The Washington Office of Financial Managment (OFM) expects that the gap between state revenues and “basic spending pressures” will be approximately $3 billion next biennium.

In a report that provides state agencies, including higher education, with operating budget instructions for the next biennial budget, OFM suggests to provide funding to move current state programs forward, state funds will need to replace nearly $2 billion in federal funds that were made available to Washington during the recession. Part of these funds were used to offset cuts to higher education during the 2009-11 biennium.

In addition, funding requirements for pending funding obligations, statutory requirements to support important reforms in basic education, and restoration of voter approved commitments to reduce class size (I-728) and provide cost of living adjusts for teachers (I-732) add another $2 billion in spending pressures.

Though this adds up to a shortfall of $4 billion, OFM project that new revenues will provide $1 billion to close the gap, leaving $3 billion to be settled by the state.

So one may ask is there any good news.

In the report issued by OFM, indications show that Washington is experiencing much stronger revenue growth of 8.8% for FY 2011. Though this growth is relative to a new, much lower revenue base, it is definitely a positive note when compared to the drop in revenue in the last two years.

As Washington nears the 2011 legislative session more details will come into focus to provide a much clearer picture of the state budget.  The next big step in the process will be in mid-June when both the state caseload forecast and economic and revenue forecast are released.

Federal Dollars for Washington’s State Budget Still Alive

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Late last week concerns arose about the likelihood that states would receive federal Medicaid match dollars.  However, it appears that these federal dollars may still be alive in the Senate.

The Office of U.S. Senator Patty Murray reported today that a federal Medicaid match worth $480 million to Washington state has been included in the American Jobs and Closing Tax-Loopholes Act now before the Senate.

This is in stark comparison to the U.S. House of Representatives  which passed legislation without language to extend federal Medicaid dollars for six-months, a $23 billion investment.

Washington, along with 30 other states, incorporated federal dollars to assist in offsetting state budget shortfalls. Washington’s 2010 supplemental operating budget anticipated $480 million in additional resources based on the Federal Medical Assistance Percentage (FMAP) enhancement being extended by an additional six months through June  2011.

Without these funds ($480 million) the dollars in reserves ($450 million) planned as a cushion would be eliminated, leaving the state vulnerable to changes in tax revenues.

If the American Jobs and Closing Tax-Loopholes Act passes with the federal funds intact, the bill will have to return to the House for approval.

Concerns Rise Regarding State Budget

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Doubt is emerging about anticipated federal funds for Washington.

Washington State’s budget was balanced based on four strategies: (1) Reductions to public services and programs, (2) Transfer of funds to the General Fund, (3) Increases in revenues, and (4) Incorporation of approximately $618 million of approved/anticipated additional federal relief to Washington State.

The 2010 supplemental operating budget anticipated $480 million in additional resources based on the Federal Medical Assistance Percentage (FMAP) enhancement being extended by an additional six months through June  2011.

In addition, based on  U.S. Department of Health and Human Services reversal of the decision to disallow state savings from Medicare Part D “clawback” payments for prescription drugs, the state expected to receive $87 million in additional federal resources beyond the current level assumed in the state budget.

At the time the state budget was signed into law, Congress was considering legislation that would extend the enhancements beyond the current end date, December 2010. Legislation that both the House and Senate had considered before and passed.

However, today states, including Washington, are running into roadblocks with regard to the anticipated funds in Congress.

Last week the U.S. House of Representatives stripped language for a six-month, $23 billion extension. Washington is seeking approximately $480 million of these funds as part of the four-strategy approach to balancing the state’s most recent shortfall (2010).

Without these funds ($480 million) the dollars in reserves ($450 million) planned as a cushion would be eliminated, leaving the state vulnerable to changes in tax revenues.

Governor Gregoire along with 47 other governors, both Democrat and Republican, have asked for the extension. More than 30 states counted on these dollars in their budgets.

The legislation now moves to the Senate where the bill could be taken as soon as after the Memorial Day week long recess.

Stay tuned…

Governor Partially Vetoes 2010 Supplemental Budgets

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This afternoon Governor Gregoire partially vetoed the 2010 supplemental operating and capital budgets passed by the Legislature in April.

Operating Budget

The Governor vetoed several sections of the 2010 supplemental operating budget passed by the Legislature in April. In total she vetoed all or parts of thirty two sections of Senate Bill 6444.

Only a handful of the sections vetoed impact Evergreen in some way. None of the areas vetoed that impact Evergreen changed the state funding reduction to Evergreen’s institutional budget.

  • Vetoe Section 501(1)(f)(iv) – Office of the Superintendent of Public Instruction, Exempting the Professional Educator Standards Board (PESB) from Expenditure Restrictions.
    This section exempted PESB from the restrictions on travel allowances and meeting costs that apply to other boards and commissions under Chapter 7, Laws of 2010 (Engrossed House Bill 2617). This law allows agencies to seek exceptions to the travel and meeting restrictions for critically necessary work. To maintain consistency in the application of these restrictions among state boards and commissions this section was vetoed.
  • Veto Section 708, pp.270-271, Washington Management Service and Exempt Management Services Reductions.
    This section ties to Section 2 of Senate Bill 6503 which was vetoed. The budget proviso assumes additional compensation reductions of $10 million in General Fund-State funding from the Washington Management Service and exempt managers, who comprise less than 5% of the state employees. This cut would require that specified staff take nearly two weeks of temporary layoff time beyond the ten days included in ESB 6503. This inequity is likely to create problems in recruiting/retaining qualified and experienced workers, as well as be disruptive to normal state operations. Managers will be subject to temporary layoffs in the same proportion as all affected state employees.
  • Veto Section 902, pp. 289-290, Agency Staffing Report
    The agency staffing report required by Section 902 adds another layer of complexity to the data already required to be reported through allotment and accounting systems. The addition of monthly job class information adds immensely to agency workloads with seemingly minimal benefit. The Governor directed the Office of Financial Management to work with legislative fiscal staff to identify alternative reporting formats that can be useful without creating an unacceptable workload burden.
  • Veto Section 920, pages 301-302, Washington State Quality Awards
    Section 920 accelerates the date by which agencies must apply to the Washington State Quality Awards program. It also limits that requirement for agencies that have more than 300 full-time equivalent employees. A great deal of time and effort is required for a well-executed Washington State Quality Award application. The new date of June 30, 2010 is too short a timeframe especially for large agencies that may have to submit multiple applications.

Capital Budget

The Governor vetoed only three sections of the 2010 supplemental capital budget passed by the Legislature in April. Of the three sections vetoed, two impact Evergreen.

  • Section 6003, p.111, Office of Financial Management Budget Instructions
    With this proviso the Office of Financial Management must require that preliminary energy audits be conducted on project requests that involved significant renovations or improvements in owned or leased facilities. Reducing energy consumption is a high priority, but requiring energy audits before funding decisions are made will be burdensome and costly. The Governor has directed the Office of Financial Management to develop instructions to state agencies that will serve the goal of reducing energy costs without requiring formal audits for every project.
  • Section 6012, pp. 121-122, Project Tranfer Authority
    This proviso eliminates existing authorization for the Office of Financial Management to approve the transfer of funds from one capital project to another within the same state agency. It also places limitations on approving spending plans for construction contingencies, bid alternates, and equipment costs for capital budget projects already approved by the Legislature. These limitations are too stringent for state agenices and may cause unintended cost increases and schedule delays. The Governor has directed the Office of Financial Management to continue to scrutinize capital project spending plans to identify additional savings that can be directed to new projects in the 2011-13 biennium.

California Governor Threatens Veto if No Additional Funding for Higher Education is Realized

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Yesterday, California Governor Schwarzenegger promised the state’s colleges and universities that he will veto any state budget that does not include additional funding for higher education and the financial aid awards known as Cal Grants.

The Governor made this promise at a meeting with a dozen top administrators and student leaders from the University of California, California State University, and California’s Community Colleges systems.

Schwarzenegger proposed a $224 million increase in general fund spending for higher education for the fiscal year that begins July 1.

Many in Sacramento argue that the Governor’s veto is premature, since the Governor has not yet released his revised budget which is expected in May.

Higher Education Presidents of the Western U.S. Meet to Discuss Business Model

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This week the University of Washington hosted a regional meeting of the Association of Public Land-Grant Universities to discuss future funding for public universities nationally.

The Presidents and other top leaders from approximately 30 colleges and universities in the Western United States discussed their common experiences and strategized about how to “reset” their finances.

Common among the discussion was the concern that higher education continues to be the first area to get cut by states facing lower revenues and paying more for other public services/programs.

Strategies proposed incorporated a wide range of ideas including increased federal funding for institutions to make-up for the gap in reduced state funds and a model in which each state could have one univesity funded by the federal government, eliminating the need for out-of-state tuition surcharges at those institutions.

At the state level several strategies were also proposed inlcuding asking state lawmakers to set aside a fixed percentage of the budget for higher educaiton, emphasizing the job-creation record of universities, promoting achievements such as green technology, and telling people what is at risk.

The meeting is one of five taking place across the nation in hopes of developing a national strategy for securing the future of higher education institutions.

Governor Partially Vetoes Furlough Legislation

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On April 27 Governor Gregoire signed a partially vetoed Senate Bill 6503 – the “furlough” bill. 

Senate Bill 6503 requires agencies to cut the state payroll by $49 million. The final bill directs that savings will be generated at state agencies and institutions of higher education through either 10 temporary agency closure days or alternate-approved compensation reduction plans. This was one of the largest single cuts amid $755 million in reductions in the balanced budget solution the Legislature approved April 12 before adjourning its special session.

Gregoire vetoed section two of the bill, which directed $10 million of the savings to come from exempt employees and Washington Management Service workers, who comprise less than 5 percent of all state workers. Without it, management level employees will be subjected to the same levels of furloughs as other employees.

“A cut of this size, over such a small base, is too large to be practical,” Gregoire said in her veto message. She also expressed her preference that the $49 million in savings come from actual furloughs rather than other actions allowed under the bill.

Governor Gregoire Signs Revenue Legislation Into Law

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On Friday, Governor Gregoire signed the two-bill revenue package passed by the Legislature earlier this month without veto.

Both bills are expected to generate $757 million in revenue through 2013. Senate Bill 6143 modified excise tax laws to preserve funding for public schools, colleges and universities, as well as other public systems essential for the safety, health, and security of Washington.

House Bill 2493 increased taxes on cigarettes and other tobacco products.

Senate Committee Takes Action on FY11 Budget Resolution

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Yesterday, the Senate Budget Committee approved a fiscal year (FY) 2011 budget resolution. The annual budget process calls for a budget resolution, which acts as a non-binding roadmap for federal appropriations for FY11.

The resolution passed by the Committee call for $4 billion less in spending than was requested in President Obama’s budget request in February. The resolution assumes the cuts would come out of international relations, though this assumption is not binding.

In addition, the resolution maintains the majority of Pell Grant funding on the discretionary side, instead of funding the program through mandatory spending as requested by Obama. The resolution also assumes Congress will identify an additional $5 billion to cover the remaining shortfall for Pell Grant funding.

Next steps for the budget resolution remain unclear. It is likely the Senate will set aside the resolution to take up financial reform in the near future, but this is unclear. The House has not scheduled any action on similar legislation at this time.

U.S. Senate Appropriations Committee Holds Hearing on FY11 Budget Request

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Late this week, the U.S. Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education held a hearing on the Presidents FY11 budget request.  Senators reaffirmed their commitment to close any remaining funding gaps that remain in the Pell Grant Program.

“The Pell shortfall is another danger on the horizon,” stated U.S. Senator Harkin, Chairman of the Senate Appropriations Subcommittee on Health, Education, Labor and Pensions.