Latest revenue forecast adds to ‘daunting’ nature of budget-balancing effort

As expected, Thursday’s release of the latest state revenue update confirmed that legislators have more work to do to balance the books on the 2009-11 biennium, and they face even bigger challenges in developing a budget for the next biennium, which begins July 1.

According to Dr. Arun Raha, the state’s chief revenue forecaster, revenue for the remainder of the current biennium is expected to be $80 million less than was forecast in November. That means total projected revenue for the biennium is $28 billion.

For the 2011-13 biennium, revenue is expected to decrease $698 million, resulting in total projected General Fund revenue for that biennium of $31.9 billion.  

Based on the November forecast, Gov. Chris Gregoire in December released a proposed 2011-13 budget that included significant state spending reductions, including a $344.7 million reduction in state General Fund appropriations for higher education.  The Governor proposed partially offsetting those cuts by allowing resident undergraduate tuition to increase by 9 to 11 percent annually, depending on the type of institution. 

Legislators were awaiting the March revenue forecast before announcing their own budget proposal.  Following a briefing on the forecast Thursday afternoon, Rep. Ross Hunter of Medina, chair of the House Ways & Means Committee, wouldn’t predict when the budget proposal would be released.

Raha told the Washington State Economic and Revenue Forecast Council that rising gas prices, uncertainty over the situation in Japan, continuing weakness in the home construction industry, and growth in untaxed online purchases are among the factors contributing to lower revenue projections. 

Hunter declined to speculate on which programs might see further cuts as a result of the new forecast. “The problem has become more daunting,” he said.

The Office of Financial Management issued a news release on the latest revenue forecast.

Advocates scramble to reflect student viewpoints on higher education issues

The student perspective on issues such as state higher education funding and child-care support for students with families is provided by a group of student advocates who are hard at work in Olympia these days.  In an article today, the Seattle Times profiles the students and some of the issues that concern them.   

State leaders and U.S. Education Secretary discuss governance issues

In a roundtable discussion on education governance Monday, U.S. Secretary of Education Arne Duncan commended the state’s governmental leaders for putting tough governance issues on the table and dealing with them openly and honestly on behalf of children.

“Governance isn’t going to solve all the problems, but it’s a starting point,” the Secretary said, speaking through a remote link from the nation’s capital. Listening and asking questions from Olympia was a panel that included Gov. Chris Gregoire, Superintendent of Public Instruction Randy Dorn, and several legislators who are involved in education issues.

Duncan acknowledged he did not know all the details of Washington’s governance issues, and he did not offer a blueprint for how he thought a state should structure its education governance system. However, he clearly was familiar with one point raised by Gov. Chris Gregoire in support of her argument for a single Department of Education—to provide state-level governance from early learning through higher education.

As an outsider looking in, Duncan said, he thought Washington has too many agencies dealing with education issues. “To have eight different agencies involved in education, I couldn’t think of a management guru who would draw up a structure like that from the ground up,” the Secretary said.

Superintendent Dorn, who has frequently been at odds with the Governor over her education department proposal, said that for him, the biggest education issue facing the state today are budget cuts. “We’re looking at cutting days, cutting budgets and cutting kids’ educational opportunity,” Dorn said.

Another panelist, Rep. Marcie Maxwell of Renton, said, “I would like to know how an overhaul of education governance will help with the daunting task of preserving funding for our schools.”

Duncan said the level of federal help provided to states through the American Recovery and Reinvestment Act is not likely to happen again, but he said President Obama has proposed adding $2 billion for education in his proposed FY 2012 budget.  Although obtaining funding at the proposed level will be difficult given the current budget challenges, “We have zero intention of reducing funding,” Duncan said.

Other remarks from the education Secretary:

·     If each state were an independent country and were compared with other nations, the state with the highest performing educational system, Massachusetts, would rank 17th. 

·         A U.S. education system that calls for up to six hours of primary and secondary schooling per day in a 180-day school year is based on a 19th Century agrarian economy and isn’t competitive with educational systems in other nations.

·         Schools in some parts of the country are taking advantage of the communication tools popular with young people today, such as using cell phones to make assignments and extend learning time for students.

Financial aid cuts produce ripple effect in higher education funding

Don Bennett, HECB executive director, and Rachelle Sharpe, director of student financial assistance, told House Higher Education Committee members Thursday that cuts to financial aid programs are placing higher education beyond the financial reach of thousands of students. The cuts also represent a drain in an important potential funding source for higher education. If fewer students enroll because they can’t get financial aid, institutions lose significant tuition revenue.

Current and proposed cuts in financial aid, in combination with continuing reductions in direct state support, have stalled progress on increasing degree production, a primary goal of the state’s Strategic Master Plan for Higher Education, Bennett said.

He added it will likely take 20 years for the state to recover from the deep budget cuts to higher education dealt out over the last three years, and much longer if additional deep cuts are made in the coming biennium. He spoke at the end of two days of testimony from the state’s public two- and four-year institutions on the effect of the continuing budget cuts.

Bennett emphasized that cuts in financial aid to students have a direct impact on overall institutional funding. For example, the $25 million cut to the State Need Grant program in the 2011 supplemental budget approved in February represents, in reality, an additional cut of that magnitude in state support for the two- and four-year public colleges and universities.

The institutions will have to come up with the money to cover this year’s SNG commitments to students from their operating budgets, Bennett said. Retained tuition revenue may be used for part of this, but in some instances institutional operating reserves may be driven down to unacceptable levels and funding for other necessary programs and services marginalized.

Reducing financial aid at a time when tuition is being raised sharply puts many more students at the margins of affordability, said Rachelle Sharpe. Far too many students, faced with what they consider unacceptable levels of debt, simply opt out. This failed potential puts a drag on the effort to increase degree production.

The Governor’s proposed 2011-13 budget provides an additional $91 million for the State Need Grant program in the next biennium, Sharpe said. But this simply holds harmless from tuition increases the existing number of students now being served by SNG. It doesn’t take into account the many thousands of additional students who have enrolled in higher education during the recession and who qualify for financial aid. Meeting this additional need would require another $125 million for the State Need Grant program in the coming biennium.

More than 70,000 students are helped annually by State Need Grants, which accounts for 95 percent of all state financial aid distributed. In each of the last two academic years, the program has not been able to serve 20,000 students who are enrolled and qualify for a grant. This compares with fewer than 2,000 un-served students just three years ago.

These 70,000 students who receive State Need Grants represent nearly a quarter of all students enrolled in Washington’s public higher education institutions. Funding for the second largest need-based aid program, State Work Study, also has been cut severely and is halved in the Governor’s 2011-13 budget proposal. It is estimated nearly 7,000 students would be affected by this reduction. For many of these students, the extra money earned through SWS jobs is critical to their continued participation in higher education.