Yesterday the U.S. Senate passed a three-week stop-gap budget bill with a vote of 87-13. The bill will fund the federal government through Apirl 8 and contains an additional $6 billion in reductions.
The U.S. House passed the bill earlier this week. The bill now goes to President Obama for his signature.
The release of the March forecast this week opens the door for the release of proposed biennial budgets next week. The House will release their biennial budgets first this session.
While both the biennial transportation budget and the capital budget (March 23) have been scheduled for a public hearing and executive session, no actions have been scheduled to date for the operating budget.
The budget will be the center of focus next week, both in terms of the biennial budget and the move from policy committees to fiscal committees.
All policy bills from the opposite chamber must be moved either to an appropriations committee or the floor by the end of Friday, March 25 (one week from today). The Legislature will then have a week to move all bills from the appropriations committee to the floor. Bills with a fiscal impact must be moved to the floor by the end of Friday, April 1.
To this end this week will be filled with a mix of public hearings and executive sessions to move bills forward as the deadline looms. Please see the links below for a list of all the hearings that might be of interest.
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.
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.
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.
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.
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.
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.
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.
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.