November 19, 2009

Addressing the Latest State Revenue Shortfall

By pres

Dear Members of the University of Washington Community:

The condition of the Washington economy and the revenue it generates in state taxes continue to concern everyone watching the state budget. All of us at the University are still dealing with the aftermath of the 2009 legislative session and the budget cuts resulting from a historically large revenue shortfall. The most recent revenue forecast from Olympia unfortunately reflects a continuing downward spiral in state tax revenues and an even larger budget hole the state will need to address in the 2010 session. Though the nation’s economy in recent months has shown welcome signs of recovery in various sectors, unemployment continues to be a nagging problem. And with our state’s heavy reliance on the sales tax, people’s confidence level and willingness to make purchases directly affect the condition of the state budget. The turnaround in state tax revenues we have all been hoping for has yet to materialize.

How the state will address what is now estimated to be a $2.6 billion problem is unclear. As all of us know, the 26% cut in our budget this biennium was unprecedented and took our state funding to a level we have not seen since 1999. To manage the cut, we had to make many hard decisions, among them, eliminating 850 mostly administrative and staff jobs, closing branch libraries and writing centers, freezing pay, dramatically reducing faculty hiring, and impacting the experience our students have in their academic programs.

The impacts of the budget reduction were offset partly by a 14% increase in tuition, continuing a 20-year trend of relying more and more on student tuition to fund the UW while the state shrank its share of funding. For the first time in our history, total revenue from tuition is larger than revenue from state tax dollars, a trend that is very likely to continue.

What all of this means is that we may be in for further budget reductions in the second year of this biennium. The Governor will release her 2010 supplemental budget proposal in early December, and the Legislature will take up consideration of its budget proposals when it convenes in mid-January. Whether the budget crisis in the state has reached such proportions that additional sources of revenue are considered is also at this point unknown.

What we do know with absolute certainty is that we will continue to make a forceful and passionate case in Olympia for additional state investment in the UW. The work all of us do is essential to Washington’s future. Working together with faculty, staff, and students and with the support of the thousands of UW alumni and retirees throughout the state, we will do everything in our power to ensure that work is supported. People in our state need to understand the role this University plays in the health and vitality of our region and that further disinvestment in the University of Washington is bad public policy and bad for the citizens of the state.

In the meantime, in this new era of declining state investment in the University, there are some things both the University and the state can do to enable us to be more effective in the way we manage ourselves:

1. Use our existing resources as efficiently as possible: Research shows that Washington’s public universities are already among the most efficient in the nation in producing bachelor’s degree graduates despite being among the most poorly funded. The UW awards more bachelor’s degrees per student than research universities in any other state, and we are second in the nation in degree productivity at the graduate level. The six-year graduation rate for freshmen in the state of Washington ranks third in the nation and has improved by 9% in the last decade. The UW’s six year graduation rate now stands at 81%, up from 71% six years ago. Bottom line: The state is getting extraordinary efficiency in the investment of its dollars in Washington’s public universities.

2. Manage undergraduate resident tuition: Now that the UW receives more of its core instructional budget support from students and their families than from the state, we need to be in a better position to manage all of our tuition revenues. Since 2003, we have been responsible for managing tuition for all graduate and professional programs, as well as undergraduate nonresident tuition. These tuition rates continue to remain at or below the average of our peer institutions. While UW undergraduate tuition is still the lowest among that of its global challenge state peers, future growth can be benchmarked in a fashion similar to those for graduate and professional programs. Further, the UW is deeply committed to increasing financial aid to continue to honor the Husky Promise program for low and lower middle income families. Bottom line: The UW needs to have greater control over its revenue.

3. Greater management and business process flexibility: There are numerous examples of millions of dollars that can be saved in operating our University if we had more flexibility over business processes and had to spend less money complying with a number of regulations in the way we operate basic management systems and processes. These include public works procurement, debt financing costs, purchasing authority, and relief from paying for state systems that we do not use. We want to use all of our resources as wisely and effectively as possible. Bottom line: The UW needs to be granted greater flexibility in costly and time-consuming regulations and processes.

The University of Washington is at a turning point. We must find a way to replace critical state dollars that are gone and no longer available to support our instructional activities. A new financial model and new, more entrepreneurial approaches to doing business are called for. Greater management flexibility is required to fulfill the University’s commitment to serving the citizens of Washington. If we are able to make these changes, the UW can continue to serve the state for decades to come in the exemplary manner we all expect.

Sincerely,

President Emmert's signature

Mark A. Emmert
President

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