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Compensation tops WSU legislative priorities, among other operating and capital requests

Washington State University has identified cost-of-living adjustments for faculty, staff and graduate students as its top priority in advance of the 2023 legislative session and has submitted a number of other requests to support high demand degree production and the university’s physical infrastructure. You can find WSU’s 2023 legislative agenda here.

WSU has requested $34.5 million in the state’ 2023-25 biennial operating budget to provide salary increases of 4 percent and 3 percent for fiscal years 2024 and 2025, respectively. This would improve upon the funding formula used to calculate funding needs for higher education institutions. That model relies on an assumption that new tuition revenues will cover part of the costs of compensation enhancements, maintaining health benefits, a higher minimum wage and other such maintenance level costs. All such costs must be covered except the cost-of-living adjustment for faculty, professional staff and graduate students, bearing the full brunt of any funding shortfall. In recent years, actual tuition revenues have not kept pace with state assumptions.

In addition to the cost-of-living adjustment, WSU is requesting $4.4 million to support the College of Nursing’s reaccreditation effort. Until recently, salaries in the College had been at the 25th percentile of peer institutions and 25th percentile among nurses with similar credentials. The university used reserve funds to temporarily cover the cost of salary enhancements to improve that standing to 50th percentile. WSU is asking the state to fund those enhancements on an ongoing basis. Poor salaries has been noted by accreditors during the past two College of Nursing accreditation cycles. Accreditors could limit nursing enrollment at WSU if certain improvements are not made. The request also includes funding for equipment modernization within the college, which offers degrees in Spokane, Tri-Cities, Yakima and Vancouver.

WSU has further requested $2.3 million in biennial funds to support the creation of a social work program at WSU Tri-Cities and $2.5 million to establish a new public health degree program with an emphasis in infectious disease in Pullman and on behavioral health in Spokane and Vancouver.

In the capital budget — where WSU is prioritizing projects that reduce deferred maintenance —$40 million is requested to match with another $40 million in donor funds to construct an engineering student services building for the Voiland College of Engineering and Architecture in Pullman. Another $22 million is requested to begin the process of securing a new Science Building in Pullman by first renovating other buildings to house programming to be moved out of Heald Hall. WSU’s capital request also includes $10 million for the Phase I renovation of the Knott Dairy Center and $8 million to renovate Bustad Hall with simulation space for the College of Veterinary Medicine. In Spokane, WSU is seeking $7 million to design the Spokane Team Health Building, which will provide simulation and clinical research space for the colleges of Medicine, Nursing and Pharmacy on the space-constrained campus.

The university’s top capital budget request is $40 million in minor works preservation dollars to fund dozens of small maintenance projects, such as roof and boiler replacements, across the WSU system.

WSU submitted these priorities to the state’s Office of Financial Management in September for consideration in the governor’s budget, set to release in mid-December. The Legislature convenes the 105-day 2023 session on Monday, January 9th.

Revenue collections expected to increase, forecast still projects slowing

The Washington State Economic and Revenue Forecast Council released its quarterly revenue forecast this afternoon, which projects where state revenues are potentially heading as state lawmakers get ready to reconvene for the 2023 legislative session in January. In the current 2021-23 biennial budget, forecasters projected revenues to increase by $762 million above their most recent forecast, increasing the budget’s baseline to $63.9 billion. Revenue projections for the 2023-25 biennium were increased by $681 million, strengthening the baseline of the upcoming budget to $66.2 billion.

The shift in the projected growth is likely a result of increased Revenue Act collections, in particular, business and occupation taxes contributing partly to inflation. While the increases are encouraging, state economist Steve Lerch shared that state tax collections are still expected to slow as previously forecasted, just later.

Governor Inslee will now use this budget to craft his 2023-25 biennial budget proposal, which the state Legislature will contemplate when they convene for the 2023 legislative session in January. Another forecast of projected revenues by the Council will be released in March, informing state lawmakers’ budget proposal.

Tax revenues from state increase slightly

Following September’s revenue forecast which projected a shrinking of the upcoming 2023-25 biennial budget, state tax collections for the month of September came in slightly higher than expected.

State revenues for the period of September 11th to October 10th came in $126 million or 6.3 percent higher than expected in last month’s forecast, according to the September Economic & Revenue report produced by the state’s Economic & Revenue Forecast Council. The increase was represented by a large increase in Revenue Act collections which includes sales, business and occupation, and utility taxes in addition to interest payments. These revenues were up $131.6 million or 7.4 percent, with $20.5 million or 1.1 percent being from several large tax payments that the ERFC did not anticipate in the last forecast.

While Revenue Act collections were strong, other revenues such as property tax, cigarette tax receipts, and unclaimed property resulted in a decrease of non-Revenue Act collections by $7.1 million or 3.4 percent.

A new revenue forecast will be released later next month, ahead of the governor’s budget proposal release in December before the 2023 legislative session begins in January.

State revenue forecast dips

While projected revenues for the current 2021-23 state biennial budget were increased, projections from the Washington State Economic and Revenue Forecast Council released this afternoon lowered expected collections by $495 million in the 2023-25 biennium. The Council’s forecast projects revenues in the current biennium to increase by about $43 million, bolstering the underlying budget to $63.2 billion.

Lower personal income was a driving factor in the concerning outlook, which has prompted a reduction in retail sales. Additionally, the shortfall can be contributed to a slowing in residential construction has reduced construction employment and construction sales. As interest rates have increased to combat inflation, they too have negatively impacted the forecast as real estate activity and associated taxes have slowed. Finally, $117 million of the $495 million revenues reduction is related to a decision from the state’s Board of Tax Appeals which granted a sales tax exemption to certain machinery and equipment sales related to research and development work.

The forecast does not project a recession. However, downside risks outweigh upside risks. The report projects a 35 percent likelihood of a budget deficit of $5 billion.

The forecast was not all bad news, as projected employment in the state saw improvements. It noted improvement could be realized with increased supply chain recovery, a faster resolution to the Russian invasion of Ukraine, and increases in consumer spending.

Another revenue forecast will be released in November, which will be used by the governor to craft his budget proposal to be considered by the state Legislature when it convenes for the 2023 legislative session in January.

Additional funding provided for Vancouver Life Sciences Building to mitigate inflationary costs

Facing escalating costs for construction materials, WSU has received $2.2 million in requested funding announced this week by the state’s budget office to mitigate this unanticipated increase associated with the construction of the Life Sciences Building on the WSU Vancouver campus.

The building will house labs and lecture spaces primarily for STEM-disciplines and was first approved for design and costing in 2018, prior to the current inflationary period. Since then, structural steel and drywall have seen a 30 percent increase with some materials seeing even greater increases. The total value of these escalated costs has reached approximately $10 million and in response the project team has implemented several cost-mitigating strategies such as reducing the building height and overall square footage as well as combining utility and foundation excavations.

The funding provided by the Office of Financial Management was allocated from the Capital Community Assistance Account, an account established to help address inflationary costs associated with state construction projects. This necessary support will help furnish 12,000 square feet that would otherwise be left unfinished.

The 60,000 square foot Sciences Building on the WSU Vancouver campus is set to open in Spring 2024.

State revenue projects slowing growth

In the first economic forecast since the adjournment of the Legislature this year, the Washington State Economic and Revenue Forecast Council released their quarterly revenue estimates yesterday that project an increase of $1.4 billion in the current 2021-2023 baseline. This bolsters the budget to total $64.1 billion, an 18.9 percent increase in revenue over the last budget in 2019-2021.

While this initial increase in the current budget is encouraging, the outlook for the upcoming 2023-2025 biennium saw a modest increase of $642 million, a 4.5 percent increase in revenue from the current budget totaling nearly $66 billion.

The modest increase in the next biennium may be concerning when considering the threats to the economy that have occurred since the February forecast, including supply chain issues in addition to inflation and subsequent interest rate hikes. The potential risks to the budget identified by the June forecast include the continuation of rising interest rates that push the economy into recession, which has often occurred in similar historical circumstances, and the potential intensification in Russia’s invasion of Ukraine. Despite these potential risks, the forecast suggested upsides that include the easing of supply chains and the slowing of inflation as well as a de-escalation of the Ukraine invasion.

In addition to their primary forecast, the ERFC produces two alternative forecasts seen through an optimistic and pessimistic outlook that are most often weighed with a 15 percent chance of occurring. While the optimistic forecast showed an even greater increase in 2023-2025 budget than the primary forecast, the pessimistic forecast projected a $6 billion deficit in the upcoming budget and the ERFC increased the likelihood of that realization to 35 percent because of the accumulating downside risks.

The next forecast will be released in September and will be followed by the final forecast of the year in November which the governor will use to craft his 2023-2025 budget proposal.

Lind Field Day makes triumphant return

Following a two year interruption because of the pandemic, wheat growers and industry partners gathered in Lind, Washington last week for the 104th Lind Field Day, organized by WSU’s College of Agricultural, Human, and Natural Resource Sciences. The group converged at WSU’s 1,300-acre Dryland Research Station in Lind, first established in 1915 to support dryland farming with research on hundreds of wheat varieties, alternative crops such as legumes and oilseed crops, soil fertility, and erosion control.

The Field Day included tours in spring and winter wheat plots, where participants visited with university experts to hear about their work in breeding new varieties, testing for yields, resistance to drought and disease, and their effectiveness as a final product in baking, nutrition, and other commercial considerations. While it’s been a largely disease-free year to date, in part thanks to the abundance of rain, growers were asked to monitor their fields for stripe rust and other diseases and to send samples to WSU for disease diagnosis.

Researchers also presented on the latest in weed sensing sprayer technology that utilizes blue light sensors to separate crop from weed. WSU researchers have witnessed a 70 to 90 percent reduction in herbicide and pesticide application at its research farm in Davenport. The new sprayer technology utilizes a series of sensors that have hundreds of small sensors to analyze the plants. Researchers reported there are still bugs to be worked out of these systems and that more technological improvements are on the way.

The Washington agricultural economy recorded exports of nearly $1 billion in wheat alone last year. The experimentation, counsel, and trial and error offered by WSU through the work of the Lind Station helps the industry feed the world and generate economic activity for their communities.

Lind Field Day has been cancelled only three times in 107 years, twice for the COVID-19 pandemic and once for the Mount St. Helens eruption. WSU holds field day events at multiple locations across the state and for multiple crops as part of its efforts to bring the research it conducts in the lab and in the field to producers directly and answer their questions.

Attendees spotting cool names for experimental & released varieties: Stingray, Curiosity, Pirahna, Dynamic, Sockeye, Hulk, Sonic, Norwest Duet, Guardian, Whistler.

Inflation driving tax collections ever higher

State revenues continued to exceed expectations in the May Economic & Revenue update released by the state Economic and Revenue Forecast Council late last week.

The May report shows collections up $173.2 million for the most recent monthly reporting period, or 7.6 percent higher than what was forecasted in February. Including the months since February, the cumulative total is now $428.5 million or 7.5 percent above the forecast. The influx of tax revenue is in part due to a considerable increase in inflation that was unforeseen by the February revenue forecast.

On inflation, the report showed Seattle-area consumer price inflation rate up 9.1 percent between April 2021 and 2022, compared to the national average of 8.2 percent. The greatest increase of inflation has been among food and energy costs, while core prices that exclude those have also increased 7.8 percent. Despite these increases, the report indicated that a historically high accumulation of savings and healthy personal income growth has to date offset changes in consumer and business spending behavior.

Meanwhile, the retail trade sectors saw increased revenues from gas stations and convenience stores where collections were up 17 percent and 9.1 percent at electronics and appliances stores. Real estate excise taxes also grew considerably, up 39 percent above projections.

The housing market remained hot in the first quarter of the year, as construction permits for multi-family homes continued a three quarter streak of record highs. Home prices continued to climb rapidly in Seattle, up 26.6 percent over the year.

A new revenue forecast will be released next month, with two more in September and November. The governor will use the November forecast to construct his budget proposal for the state Legislature to consider when it convenes for the 2023 legislative session.

Higher education bills signed into law

Gov. Jay Inslee has signed a fleet of WSU-supported bills into law.

House Bill 1751, in part, requires anti-hazing training for new students and institutes new transparency requirements for institutions of higher education and social fraternity and sorority organizations for violations of hazing laws, codes of conduct, and other protocols. WSU issued a statement this afternoon hailing the bill’s passage, which can be found here.

House Bill 1835 in part establishes a marketing campaign to promote the Washington College Grant in an attempt to encourage more low-income students to pursue college post-secondary credentials. House Bill 1736 establishes a state-run low income student loan program.

Last week the governor signed House Bill 1622, directing the WSU College of Nursing to offer training for nurses seeking to become certified as Sexual Assault Nurse Examiners. WSU testified in support of the bill and plans to offer in-person simulation training in Spokane and Yakima.

Capital budget compromise funds Holland Library shelving

The state Senate and House released their compromise capital budget this afternoon, providing $2 million to WSU for high-density compact shelving in Holland library on the Pullman campus.

The shelving would start a broader effort to consolidate some library collections and reclaim space in the campus core that could be repurposed at a later date. The reclaimed space could serve as a venue for new student study spaces.

The funding was previously proposed in the separate Senate and House capital budget proposals, in addition to the governor’s proposal which in December proposed $8 million for the effort. The compromise budget now awaits a vote by both chambers before it goes to the governor for consideration.

Legislative leaders said today that agreements on operating and transportation budgets will be revealed tomorrow in advance of floor votes in the House and Senate. The Legislature is scheduled to adjourn this year’s session Thursday night.