UW News

February 19, 2009

Legislature faced with unpalatable alternatives in patching state budget’s hole

News and Information

The good news from Olympia is that legislators’ attention has been focused extensively on higher education for the past several weeks. Of course, the bad news is the context within which this scrutiny is occurring — they are faced with a variety of unpalatable alternatives in trying to patch a hole in the state budget that grows every time a new projection is issued.

Last November’s projection of a deficit in the range of $6 billion to $7 billion for the 2009-11 biennium is likely to be supplanted by new estimates of woe, perhaps as early as today, when the state’s Revenue Forecast Council meets. The council’s first task will be to announce a new forecast for the remainder of the current biennium, and the news is certain to be grim, with retailers struggling and announcements of layoffs by major employers.

“The near term situation is perilous,” says Randy Hodgins, interim vice president for external affairs. “Longer term, the federal stimulus package may provide some relief, but given the state’s deteriorating revenue picture, it’s possible that the impact of the federal dollars will be just to bring the state’s situation back to where it was late last year.”

For higher education, the difference between the situation late last year and now could be significant. Gov. Gregoire last December proposed a cut in higher education of about 13 percent. The UW has estimated that this cut, while painful, could be accomplished without doing great permanent damage to the instructional program, provided tuition and federal stimulus dollars were available in sufficient quantities to offset some of these reductions. However, if the cuts are larger, the instructional budget simply could not be protected, and enrollment would need to shrink significantly.

“The hearings on the potential impacts of these cuts has been sobering,” Hodgins says. “Higher education has been effective in portraying how these cuts would affect students and employees.”

With the session about one-third over, legislators are starting to look seriously at ways to balance the budget, but good ideas are in short supply. There have been some very preliminary discussions about taking a revenue package to voters to address critical needs, but no details are available yet.

Despite the state’s dismal financial situation, a record number of bills have been filed, several of which interest the UW. A bill to continue to grant the university tuition setting authority for graduate programs has cleared its committees. A bill allowing protection for private investment information submitted to the UW endowment is likely to pass out of committee. Other bills that could give universities the ability to streamline their business operations have reasonable chance of passage.

The governor’s stimulus bill (which contains funding for the new Molecular Engineering Building and partial funding of the UW Phase 3 expansion) is stalled for now. These projects still have a good chance of being funded, but perhaps not until later in the session. Financing plans for the remodel of Denny and Balmer halls are being deliberated. A possible large bond issue to fund the state’s capital needs is a topic for discussion in the legislature’s hallways, but no specific proposal has surfaced.

The fate of partial funding for Husky Stadium renovation through King County’s locally-generated taxes is likely to hang on discussions between leadership in both houses. The House is working on a bill that would limit county funding to a very specific set of projects (not including the stadium), while the Senate might be willing to give the county much more discretion in how to use its taxing authority.

Tuition increases will undoubtedly be in play as the legislature attempts to solve the budget problems. The discussion has a number of facets. For example, while keeping resident undergraduate tuition low has been a staple in Olympia’s deliberations for years, legislators have became aware that one effect of severe budget cuts could be to increase the time to receive a degree, effectively nullifying the effects of limiting tuition increases. Then there is the state’s Guaranteed Education Tuition program, which promises that contributors will receive a return that is roughly equal to the rate at which tuition increases. But as investment returns have declined and the legislature considers its options for preventing severe cuts to higher education, the state may need to re-examine the assumptions underlying the program. Any changes could affect only those who join the program in the future, however.

Hodgins posts frequent updates to his blog at http://depts.washington.edu/staterel/wordpress/.