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Month: June 2013

Federally Subsidized Student Loan Interest Rates Set to Double on July 1

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Thursday night, time ran out for Congress to reach a deal to keep federally subsidized student loan interest rates from doubling. The Senate adjourned for its Fourth of July recess without voting on a plan; thus, the interest rates on new federally subsidized loans will double to 6.8 percent on Monday July 1st (the same rate as unsubsidized federal student loans).

It is possible, however, that students won’t end up paying the increased rates.  There has been a push from some legislators to enact a one-year fix that would temporarily adjust/lower the interest rates after the fact.  As the lender of the student loans, it is within the federal government’s power to apply such a solution retroactively.

The increase was originally scheduled to occur a year ago.  But, thanks to an election-year alliance of student advocates and the Obama administration, the rate increase was delayed by a year.

For more information, see the Inside Higher Ed article and please stay tuned to the Federal Relations website for updates.

Supreme Court Decision on Fisher v. University of Texas

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On Monday, the Supreme Court ruled that Fisher v. University of Texas (UT), the case on UT Austin’s race-conscious admissions policy, be sent back to an appeals court for further scrutiny. The case stemmed from a lawsuit by Abigail Fisher, a white applicant to the university who claimed she was unfairly rejected due to UT Austin’s affirmative action admissions program. For more background on this case, please see our previous two posts, found here and here.

The court’s 7-to-1 decision did not provide a direct answer about the constitutionality of UT Austin’s admissions practices. Instead, it ordered the U.S. Court of Appeals for the Fifth Circuit to reconsider the case on the grounds that the appeals court had failed to apply “strict scrutiny” (a rigorous standard requiring that both an important goal and a close fit between means and ends be identified) in its review of the case and subsequent ruling in favor of UT. Justice Ruth Bader Ginsburg was the only dissenting voice; she argued that the appeals court was right to support UT’s policies.

According to the NY Times, Justice Kennedy wrote for the majority that courts reviewing affirmative action programs must, “verify that it is necessary for a university to use race to achieve the educational benefits of diversity.” This necessitates, he said, “a careful judicial inquiry into whether a university could achieve sufficient diversity without using racial classifications.”

The Supreme Court’s ruling did not displace its 2003 decision in Grutter v. Bollinger, which found educational diversity to be of sufficient importance to overcome the government’s standard ban on racial consideration. However, as Inside Higher Ed reports, legal experts believe the court’s demanding “strict scrutiny” requirements will make it difficult for UT and many other institutions to successfully defend their use of race in admissions.

The debates surrounding Fisher v. UT and affirmative action in higher education as a whole are far from over. Many expect the Texas case to return to the Supreme Court after a new review by the appeals court.  We will keep you posted with any updates.

Washington’s June Revenue Forecast Shows Small Improvements

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On Tuesday, June 18, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of General Fund-State (GFS) revenues. Compared with the March forecast, expected GFS revenues are up $110 million for the current biennium (2011-13) and $121 million for the next biennium (2013-15), meaning legislators have an additional $231 million to factor into their budget negotiations.

While these changes are positive, they represent very minor adjustments. Under the updated forecast, the state is expected to take in $30.65 billion in the current biennium and $32.66 billion in the next, thus the increases represent adjustments of less than 0.5 percent each.

Most of the positive variance came from increases in forecasted housing construction, taxable real estate activity, and Revenue Act taxes. Real estate excise taxes came in $34 million (34 percent) higher than forecasted and Revenue Act taxes came in $54 million (2 percent) higher—exceeding the January 2008 pre-recession peak. Lower than expected inflation and employment worked against these gains, but weren’t enough to negate them.  Although Washington employment has been slowly increasing in most sectors (especially construction), aerospace and government employment are in decline.

It is important to note that much uncertainty surrounds the council’s 2013-15 baseline forecast due to the Federal sequester, Europe’s recession, and China’s slowing economic growth. The ERFC gives its baseline a 50 percent probability and its optimistic and pessimistic alternative forecasts 20 percent and 30 percent respectively. The optimistic forecast is $2.5 billion above the baseline and the pessimistic forecast is $2.5 billion below.

In addition, it should be noted that, like the March forecast, the June update did not assume any revenue from taxable marijuana sales as the Federal Government’s response to Initiative 502 is still unclear.

Some state lawmakers are optimistic that the new forecast will expedite their budget negotiations; however, the two sides’ have a ways to go before the end of the fiscal year on June 30th (12 days from now). “We’ll get closer as a result of this,” said Representative Ross Hunter during a press conference Tuesday morning.

Senate Releases Revised Budget Proposal

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On Saturday, the Senate released a revised budget proposal, which closely resembles the budget they passed in April. For the UW, the two budgets differ in just a few ways:

  • Unlike the original Senate budget, the revised budget does not include a $12.5M transfer away from the UW Hospital Account;
  • The revised budget does not cut the UW by $3.2M for “administrative efficiencies” that were assumed in the original budget; but
  • Compared to the original proposal, the revised budget provides the UW with $3.2M less in new funding.

The latter two changes essentially nullify each other. A few additional changes occurred with regards to state employee health benefits; we are working to interpret the effects and will provide more information as soon as possible.

As mentioned, the revised Senate budget doesn’t stray far from the original. Just like the Senate’s original proposal, its revised budget:

  • Provides the UW with $479.6M (General Fund and Education Legacy Trust funds) for the 2013-15 biennium—$10.2M of which is one-time performance-based funding;
  • Assumes 0% tuition increases for resident undergraduates;
  • Preserves tuition setting authority, but nullifies that authority if either SB 5883 or SB 5941 pass (the bills would require the UW to decrease resident undergraduate tuition rates by 3 percent for the 2013-15 biennium and limit future resident undergrad tuition growth to the rate of inflation); and
  • Generates “new” funding for higher education by imposing a 20 percent tuition surcharge on international students at the state’s public colleges and universities.

For more information about the original Senate proposal, please see the full OPB brief.

Closed Presidential Searches Meet Opposition from Students, Press

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A student journalist and two newspapers are filing lawsuits challenging Louisiana State University (LSU) for choosing a new president in a closed search process. LSU’s presidential search committee released just one finalist, F. King Alexander (the current president of California State University at Long Beach) for consideration. The suits claim that the closed search denied the public the right to participate in the search and violated the state’s public-records laws, which guarantee open access to public documents. The plaintiffs claim the list of candidates for a university president position should be open to the public under Louisiana’s Public Records Act.

Concern over closed searches has been mounting elsewhere, as well. While many states have laws that guarantee access to public records, others allow universities to withhold information on candidates until a certain point in the process. Universities argue that closed searches are necessary because many prestigious applicants are currently presidents of other institutions and would be uncomfortable with publically acknowledging their candidacy, for fear of retribution or embarrassment if they do not land the job. Advocates of open searches say that students and faculty have a right to be informed about the process and will be more confident in the eventual choice if they see all of the options upfront.

Washington is currently considering amending its own public records law with HB 1298. The bill would require the “applications of finalists applying for the highest management position in an agency”, such as a university president, to be released to the public. The information would need to be provided before the agency could make its hiring decision. Until now, applications for public employment were exempt from public disclosure under Washington law. The bill passed unanimously out of the House and is currently being considered in the Senate.

To read more about the Louisiana case, check out the Chronicle’s article. To read HB 1298, please follow this link.

House Chair Releases Revised Budget Proposal

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House Ways & Means Chair Ross Hunter released a revised House budget proposal today. The proposal represents Democrats’ updated negotiating position as budget discussions intensify in the last few weeks of the current biennium. We expect the revised House chair budget to pass the floor later this week, after which leaders of both parties and chambers will continue their budget negotiations. It is likely that the UW will not have a clear sense of its actual anticipated state funding level until the end of June.

The revised House budget provides approximately $5 million less for the UW than the previous House budget.  In addition, the revised House budget assumes tuition increases of only 3 percent per year for resident undergraduates, compared to 5 percent per year in the House engrossed budget. Thus, even less revenue is available.

Additional differences between the revised House budget and the House engrossed budget:

  • Clean Energy Institute Proviso – Unlike the previous House budget, which allocated $12 million of the UW’s general fund for the creation and staffing of a Clean Energy Institute, the revised budget only directs $9 million to that purpose.
  • Center on Ocean Acidification – Identical to the budgets of Governor Inslee and the Senate, the House now provides $1.82 million for a new Center on Ocean Acidification.
  • Forestry Program – The revised House budget states that the UW shall establish a Forestry Program “within existing resources.”  In the accompanying budget spreadsheet, $450,000 in “tuition resources” is set aside for this purpose.

Some similarities between the two budgets (this list is not exhaustive):

  • Computer Science & Engineering Proviso – Both House budgets stipulate that $14.5 million of the $20.8 million in Education Legacy Trust funding appropriated to the UW for the biennium must be reserved for the expansion of computer science and engineering enrollments.
  • College of Engineering Proviso – Like the prior House budget, the revised budget appropriates $2 million in new state funds to expand College of Engineering enrollments.
  • O&M Funding – Both House budgets provide funding to cover operation and maintenance (O&M) costs for the UW’s new Molecular Engineering building and Balmer Hall.
  • Compensation – Both budgets restore the 3 percent salary cut imposed on state agencies in the last biennium.  And, as neither budget explicitly extends the current salary freeze for state employees, which is set to expire on June 30 of this year, we assume the freeze will be lifted under both.

Please see the full OPB brief for more information.

Washington Roundtable Urges Legislators to Prioritize Higher Education

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A recent update on our state’s progress toward meeting the Washington Roundtable’s Benchmarks for a Better Washington emphasizes the need for legislative action on education, including protecting funding for our public universities, as well as transportation and business costs.  The Roundtable – a nonprofit, public policy organization comprised of major, local business executives – created the Benchmarks in 2011 as a means to measure and track Washington’s economic vitality and quality of life. The organization publishes annual updates that examine state-by-state comparative data (primarily from federal sources like the U.S. Dept. of Education); assess Washington’s position in key categories; and highlight opportunities for improvement.

The May 2013 update showed that:

  • Washington trails most states in high school graduation rates (ranking 32nd nationally) and bachelor’s degrees awarded per capita (39th nationally).
  • Washington’s road condition rankings have dropped from 16th (2012 ranking based on 2008 data) to 29th (2013 ranking based on 2011 data) and our state continues to rank poorly on bridge conditions (41st).
  • Washington ranks in the bottom third of states for business tax burden (36th), unemployment insurance tax rates (40th) and workers’ compensation benefits paid (50th).
  • However, Washington has held onto its lead in patent generation (5th) and in low commercial and industrial electricity rates (3rd).

The authors argue that Washington must move quickly to improve its education pipeline and align with workforce needs. As 70 percent of Washington jobs will require postsecondary training by 2020, they assert, “It is imperative that Washington prioritizes higher education and does a better job of preparing its citizens to succeed.”

In Monday’s edition of CrossCut, Roundtable President, Steve Mullin, urged lawmakers to focus on two key topics during the remaining weeks of session:  education and transportation. He specifically called for legislators to ensure our colleges and niversities have the funding they need to develop necessary talent. “Decision time is here,” he wrote, “Education is the driver of prosperity and individual quality of life. Transportation is the backbone of commerce. Both need attention before the 2013 Legislature adjourns.”

Georgetown Sheds Light on Unemployment and Earnings Trends for Recent Grads

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To understand how graduates of different majors are faring in the current job market, a new Georgetown Center on Education and the Workforce report examines unemployment rates and median earnings by degree for “recent college graduates” (ages 22-26 with bachelor’s degrees), “experienced college graduates” (ages 30-54), and “graduate degree holders” (ages 30-54 with at least a master’s degree).

 The report, entitled Hard Times 2013, finds that the overall unemployment rate for recent graduates is 7.9 percent, with a range of about 7 to 9 percent depending on degree, excepting some notable outliers. Experienced graduates’ unemployment percentage hovered around 4 to 6 percent, while those with graduate degrees had unemployment rates of just 2 to 4 percent. 

 The report finds that undergraduate majors do matter—but not in the way we might expect. Some unemployment rates were surprising: a recent graduate majoring in music (8.6 percent) is slightly more likely to find a job than a recent computer science grad (8.7 percent). Recently graduated journalism and general engineering majors have the same unemployment rate, at 7 percent. The highest unemployment rates were among recent grads in information systems (14.7 percent) and architecture (12.8 percent), while the lowest were nursing (4.8 percent), elementary education (5 percent), physical fitness/parks and recreation (5.2 percent), chemistry (5.8 percent), and mathematics (5.9 percent).

 Furthermore, earnings differentials between recent graduates’ majors are smaller than we might think: the median salary for most is between 30K and 40K per year. Recent grads in computer science and math make slightly more (45K), while recent engineering grads have the highest earnings (54K).

 In many cases, what matters most is not degree field, but degree level and experience.  For an experienced college graduate, median earnings typically increase by 20K to 30K, depending on degree.  And, in most fields, getting a graduate degree pushes median earnings up an additional 10K to 20K.   

 Of course, it is important to take these findings with a grain of salt: while field of study and level of experience can certainly influence the likelihood of finding a job and the amount of money a graduate will make, they are not the only factors. The institution attended, year of graduation, location, and much more can significantly impact earnings and unemployment. 

 To read the full report and see a complete breakdown of earnings and unemployment rates by major and experience level, click here.