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February Revenue Forecast Shows Largest Increase since Recession

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Today, the Washington state Economic and Revenue Forecast Council (ERFC) released their February revenue forecast. The projected General Fund-State (GF-S) revenue forecast for the 2017-19 biennium increased by $647 million. Projected revenue collections for the 2019-21 biennium have also increased by $671 million. According to the Governor’s Office of Financial Management (OFM), this forecast is the “largest quarterly increase for the state since before the Great Recession.”

Here is a quick summary of the total projected GF-S revenue for each biennium:

  • $44.213 billion for the 2017-19 biennium, 15.4% more than that of the 2015-17 biennium.
  • $48.253 billion for the 2019-21 biennium, 9.1% more than expected 2017-19 biennial.
  • The initial forecast for the 2021-23 biennium is $51.932 billion, an increase of 7.6% over that of the 2019-21 biennium

Behind the numbers:

  • Cumulative major General Fund-State (GF-S) revenue collections from November 11, 2017 through February 10, 2018 were $185 million (3.5%) higher than forecasted in November.
  • The Washington economy saw strong housing construction and home price appreciation. Cumulative real estate excise taxes (REET) came in $44 million (21.1%) higher than forecasted. Projected property tax receipts are also 3% higher than expected.
  • For the first time in nearly three years, Washington exports increased (0.6%) in the fourth quarter of 2017.
  • The forecast anticipates continued but slowing growth in employment (2.2%) and personal income (4.6%). Disposable personal income is also higher than assumed (5.0%) than November because of federal tax cuts.

We expect that the majority leadership in the House and Senate will release budget proposals early next week. Stay tuned to the OPBlog for updates!

Capital Budget Moving Through Senate

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A proposed state capital budget, SB 6090, passed out of the Senate Committee on Ways & Means with substitutes and may be voted on soon.  Last session, lawmakers came to a compromise on a proposed capital budget, but it was ultimately not passed due to a disagreement over a rural water rights issue. This proposal is the same as that proposed compromise, except it includes language proposed by the Governor before this session that would allow the UW and other agencies to be reimbursed for capital expenditures that occurred on or after July 1, 2017 in the absence of an approved capital budget last year.  A similar process is occurring in the House with HB 1075.  OPB will monitor any changes that occur on the House or Senate floor on passage of the budget(s).

Stay tuned to the OPBlog for updates on the legislative session, including the capital budget.

New OPB Briefs: Published Price vs. Net Price, Differential Tuition, and Activity Based Budgeting

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OPB has released two new briefs.

The Published Price vs. Net Price brief is an updated version of a brief we posted in June, reflecting the newest available data.  The brief includes sector-wide data on trends in published price and net price for public and private four-year colleges and institutions, a description of how declining state investment in higher education has spurred tuition increases, and a table comparing the UW’s net price for resident undergraduates receiving grant or scholarship aid to its U.S. News & World Report top 25 research university peers.

OPB also has a new brief on policy and programmatic trends for differential tuition in higher education, and a recent brief on the Activity Based Budgeting (ABB) model used at the UW and other institutions.

Governor Inslee’s 2018 Supplemental Operating and Capital Budgets

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Governor Jay Inslee released supplemental operating and capital budget proposals on Thursday. For more information, please see OPB’s brief. The Governor’s operating budget proposal includes technical corrections and minor appropriation changes to the current 2017-19 biennial budget (fiscal years 2018 and 2019). Because the legislature did not pass a capital budget in 2017, the Governor’s capital budget is a two-year budget covering the entire biennium.

Despite moderate growth predicted in the November Revenue Forecast, lawmakers in Olympia face significant challenges. Most notably, the Washington State Supreme Court recently ruled that the legislature has still not met its obligations to fully fund K-12 education required by their ruling in McCleary v. State of Washington. Governor Inslee’s proposal reflects this budgetary reality, proposing increases for K-12 education but only minor changes in overall funding for higher education institutions compared to the enacted 2017-19 biennial budget. New investments directed at the UW include additional funding for computer science enrollments.

On the capital side, the Governor’s proposal is similar to the proposed final capital budget that was negotiated, but ultimately not approved, in the 2017 session. That budget was not passed due to a disagreement over a fix to a different Washington Supreme Court decision regarding water rights (Whatcom County v. Hirst).

The Governor’s budget release marks the first step of the 2018 legislative session – set to begin on Monday, January 8, 2018. As a reminder, the House and the Senate will propose their own budgets throughout this short 60-day session as they work toward compromise supplemental budgets.

Stay tuned to the OPBlog for updates during the 2018 legislative session.

November Revenue Forecast Shows Incremental Growth

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Today, the Washington state Economic and Revenue Forecast Council (ERFC) released November revenue forecast. The forecast increased projected General Fund-State (GF-S) revenue for the 2017-19 biennium by $304 million. Projected revenue collections for the 2019-21 biennium have also increased by $186 million. These new projections show a slight increase from the September revenue forecast.

Here is a quick summary of the total projected GF-S revenue for each biennium:

  • Final GF-S revenue collections for the 2015-17 biennium, which ended June 30, 2017, were $38.317 billion, an increase of 13.8 percent over the 2013-15 biennium ($6 million higher than what was estimated in September 2017).
  • $43.566 billion for the 2017-19 biennium, 13.7 percent more than the 2015-17 biennium.
  • $47.582 billion for the 2019-21 biennium, 9.2 percent more than the 2017-19 biennium.

Behind the numbers:

  • Cumulative major GF-S revenue collections from September 11, 2017 through November 10, 2017 were $119 million (3.9%) higher than forecasted in September.
  • Forecasted personal income in Washington is slightly higher than September.
  • The forecast attributes most changes in revenue to property taxes. Under legislation passed in the 2017 special sessions, property taxes for the next four years will increase by a new formula that will lead to more revenue collection.
  • Similar to the September forecast, concerns cited in this forecast include slow U.S. economic growth, weak labor productivity growth, and international trade concerns.

This is the last revenue forecast of the year. Governor Jay Inslee will use the November revenue forecast to craft his 2018 supplemental budget proposal (amending the 2017-19 biennial budget), which is expected to be released in December. Stay tuned to the OPBlog for updates on the Governor’s budget proposal when it is released.

September Revenue Forecast Indicates Moderate Increase in Projected Revenue

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Last month, the Economic and Revenue Forecast Council (ERFC) released their September revenue forecast, the first forecast of the current fiscal year. The forecast increased projected General Fund-State (GF-S) collections by $279 million for the current 2017-19 biennium and $243 million for the upcoming 2019-21 biennium. These increases are on top of increases projected in the June revenue forecast.

Here is a quick summary of the total projected GF-S revenue for each biennium:

  • $38.311 billion for the 2015-17 biennium, 13.8 percent more than the 2013-15 biennium
  • $43.262 billion for the 2017-19 biennium, 12.9 percent more than the 2015-17 biennium
  • $47.396 billion for the 2019-21 biennium, 9.6 percent more than the 2017-19 biennium

Behind the numbers:

  • The forecast is similar to the June forecast, but with slightly higher revenue projections. Most of the extra collections are projected to occur in the current biennium, which began on July 1, 2017.
  • The forecast attributes most changes in revenue to legislation that was passed in 2017 session, after the June forecast. The largest increases came from an increase to the state property tax levy for basic education and from an extension of retail sales and B&O tax liability to more categories of online sales. The legislature also repealed a sales tax exemption for bottled water. These legislative changes accounted for an additional $2.4 billion in the current biennium.
  • Similar to the June forecast, concerns cited in this forecast include slow U.S. economic growth, weak labor productivity growth, and international trade concerns.

As a reminder, there will be one more forecast in November, on which the Governor will base his proposed 2018 supplemental budget (amending the enacted 2017-19 biennial budget).

Stay tuned to the OPBlog for updates on revenue forecasts and the upcoming 2018 legislative session.

2017 Legislative Session: OPB Brief on 2017-19 Compromise Operating and Capital Budgets

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Leadership in the House and Senate released a 2017-19 compromise state operating budget on June 30, 2017 in the form of Substitute Senate Bill 5883. The Governor signed the budget less than an hour before midnight, narrowly avoiding a partial state government shutdown. Lawmakers also passed a partial capital budget that reappropriates unspent capital funding from the 2015-17 biennium, which allows previously authorized projects to continue into the new biennium, but does not make new appropriations for 2017-19.

A brief from the Office of Planning & Budgeting provides a detailed overview of the final compromise operating budget and partial capital budget. We expect that a compromise 2017-19 capital budget will be released within a couple weeks, and will update the brief at that time.

The final compromise operating budget represents a middle ground between budget proposals released by the Governor, House and Senate earlier this session. The budget maintains current tuition policy, allowing for a 2.2 percent resident undergraduate tuition increase in FY18. Lawmakers made significant investments to maintain and expand state programs, especially in K-12 education. As a reminder, this budget cycle largely focused on meeting the state’s K-12 funding obligations, due to the state Supreme Court’s ruling in McCleary v. State of Washington.

Investments directed at the UW include funding for employee compensation, medical education, STEM enrollments, and several research initiatives across academic disciplines. However, lawmakers also reduced the UW’s state funding and assumed an offsetting reduction in tuition waived for graduate students. They also instituted a new charge to state agencies for services provided by the Governor’s Office of Financial Management (OFM), which will result in the UW having to use $3 million in student tuition revenue over the biennium to support OFM instead of the University’s academic mission.

 

Please contact Jed Bradley if you have any questions.

June Revenue Forecast Predicts Slight Growth

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Earlier today, the Economic and Revenue Forecast Council (ERFC) released its June revenue forecast, which increased projected General Fund-State (GF-S) collections by $81 million for the current 2015-17 biennium and by $87 million for the upcoming 2017-19 biennium. These increases are on top of the more significant increases projected in the March revenue forecast.

Here is a quick summary of the total projected GF-S revenue for each biennium:

  • $38.308 billion for the 2015-17 biennium, 13.8 percent more than the 2013-15 biennium
  • $40.903 billion for the 2017-19 biennium, 6.8 percent more than the 2015-17 biennium
  • $43.875 billion for the 2019-21 biennium, 7.3 percent more than the 2017-19 biennium

Behind the numbers:

  • The forecast is similar to the March forecast, but with slightly higher revenue projections.
  • The forecast attributes these changes to slightly lower personal income growth but slightly higher residential building permits.
  • Similar to the March forecast, concerns cited in this forecast include slow U.S. economic growth, weak labor productivity growth, and international trade concerns.

This is the final revenue forecast before the end of the biennium. The legislature will soon enter the third special session of the year, and budget negotiators in the Senate and House will use this updated forecast of 2017-19 revenues as a baseline for their final budget compromise.

If state lawmakers are unable to pass an operating budget by June 30, the state government will enter a shutdown. The University of Washington is preparing for this possibility and has been in touch with the Governor’s Office of Financial Management (OFM) regarding contingency planning and possible implications for university operations. All agency contingency plans, including the UW’s, are available on the OFM website here.

Stay tuned to the OPBlog for updates on the final budget compromise when that is available.

 

Two New OPB Briefs: Resident Undergraduate Tuition Trends and Net Price

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OPB has released two new briefs.

The first brief focuses on trends in Resident Undergraduate (RUG) tuition rates and state funding environments across the United States, based on the most recent “Trends in College Pricing” report, which is released by the College Board each year. The report identifies Washington as the only state to have lower RUG tuition and fee rates than it did five years ago.

The report serves as a basis for a deep dive into the funding environments of some other case studies. The brief looks at Louisiana, Florida and Ohio as comparisons to Washington, as they are the three other states whose legislatures retain RUG tuition setting authority. Despite this fact, each state has had a variety of outcomes regarding tuition policy. California and Maine are also highlighted as case study comparisons because they are the only two other states to show a decrease in tuition over the past five years, though theirs are due to inflation-adjusted tuition freezes.

The second brief is an updated version of previous “Published Price vs. Net Price” briefs, which reflects the newest available data. The brief includes sector-wide data on increases in published price and net price for public and private four-year colleges, a description of how declining state investment in higher education has spurred tuition increases, and a table comparing the UW’s net price net price for resident undergraduates receiving grant or scholarship aid to its U.S. News & World Report top 25 research university peers.

Finally, it is with subdued excited that to announce that these two briefs and blog post will be my last contribution to OPB as an intern. I am graduating tomorrow from the Evans School of Public Policy and Governance, while taking a job down at the State Capitol in Olympia. Thanks to all for reading!

2017 Legislative Session– OPB Brief on House Appropriations Operating Budget Proposal

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On Monday, leadership in the House Appropriations Committee released their initial operating budget proposal. This proposal follows last week’s release of the Senate operating proposal and December’s release of the Governor’s operating and capital proposals.

See the new OPB brief here for information regarding the House proposal, as well as a full comparison between current budget proposals.

Some noteworthy items in the House Appropriations operating budget proposal include:

  • Compensation: Partially funds a 2 percent increase in FY18 and two 2 percent increases in FY19 for non-represented employees, and partially funds collective bargaining agreements for represented employees.
  • Tuition Policy: Like the Governor’s proposal, the House would freeze resident undergraduate tuition across all public higher education institutions for two years, and would provide funding to cover the difference between the tuition freeze and incremental revenue expected under current policy.
  • Undergraduate Enrollment: Adds $6 million to the UW over the biennium to increase degree production in the Department of Computer Science and Engineering.
  • Financial Aid: Appropriates $49.2 million to the State Need Grant to reduce the number of unserved, eligible students, by 25 percent (around 6000 students).
  • Provisos: Adds new funding for several targeted efforts, including funding for the Regional Initiatives in Dental Education (RIDE Program)

In addition, the Senate Ways & Means committee released its proposed capital budget on Tuesday, and the OPB brief on the Senate’s proposals has been updated. Some highlights include:

  • Funding to complete the Burke Museum ($24.2 million)
  • Minor Works and Preventative Maintenance ($70.8 million from the UW Building Account)
  • Major Infrastructure – Seismic Upgrades ($10 million)
  • Population Health Sciences Building ($15 million)
  • Health Sciences Education – T-wing Renovation ($10 million)
  • Center for Advanced Materials and Clean Energy ($10 million)
  • Evans School – Parrington Hall Renovation ($10 million)

The House has not released a capital budget as of the time of this posting, but that brief will be updated once that information is available.

 

Stay tuned to the OPBlog for updates on proposed budgets.