Corporate Outsourcing of our Public Universities
Since I first wrote this report in July 2009, State Funding for Higher Education has gone from dismal and unwise to immoral and non-existent. As just one example of how bad the lack of access has gotten in our State for even the most worthy of college bound high school seniors, the Seattle Times published a story on April 2, 2011, about Chief Sealth Valedictorian Brandon Stover. Despite achieving a perfect 4.0 GPA, Brandon was rejected by the University of Washington. The reason he was rejected was because he was an IN STATE student. The UW needs the money so they now vastly prefer OUT OF STATE – and even OUT OF THE US students. Next year, one in three Freshman will be from out of State. Our legislature is not only rewarding the outsourcing of jobs, they are rewarding the outsourcing of our Universities.
Even if through some miracle your son or daughter gets into one of our State Universities, they will discover they often can not get in to the classes they want or need to graduate. At the UW alone, over 100 courses and 200 labs were cancelled in the past 2 years. WSU cut 500 instructors last year and will likely cut another 500 this year. So degrees that use to take 4 years to complete, now take 5 years or more. Since the total cost to attend a State University is now over $15,000 per year, this means the lucky few who get in will graduate with $75,000 in debt instead of $60,000 in debt. And because of the Great Recession, your new College Graduate’s chances of getting a job will be slim to none. They are more likely to wind up sleeping on your couch. And if your parents are poor, forget it. 22,000 students who qualified for State Need Grants did not get the aid they qualified for because the legislature did not provide the funds.
Let’s be clear. Nearly every building at every University in our State was paid for with our tax dollars. These are our Universities. It is criminal conduct that even the best and brightest of our children are being denied admission to Universities built with our tax dollars so that the spot can go to a child with wealthy parents living in another country.
In the interest of full disclosure, I should note that I was the first and only child in the history of my family to get a college degree. I went to WSU in the 1970’s when the State paid for 75% of my tuition. Because I scored in the top 1% on the Math SAT, I got scholarships for the remaining 25%. My parents could barely pay their own expenses, much less send me to college. Going to college made a huge difference in my life. So much so that when my daughter was born, the first sentence I taught her to say was “I go to college.” She could say it before she turned One. So as a parent of a very bright 5th Grader, I am angered and appalled by what I have written below – I hope you are too and I hope you take action to correct this problem when the next election is held in 2012.
Sources: Data for the original report was complied primarily from the annual legislative reports of Washington State University. (http://olympia.wsu.edu/News). I used WSU because their documentation was more complete than the UW. Additional information was from a May 9, 2009 article in the Seattle Times “WSU approves 30% increase in tuition over 2 years”, as well as supplemental data from the National Center for Education Statistics and annual reports from the Higher Education Finance Report (see higheredinfo.org). This updated report includes information from the 2011 House Budget proposal as well as information from a Seattle PI article: http://www.seattlepi.com/local/connelly/article/Connelly-Ed-cuts-sabotage-state-s-future-1332642.php#ixzz1JZiSryN and associated graphs: http://www.seattlepi.com/local/gallery/Education-graphics-14469/photo-938223.php.
So when and how did things ever get this bad?
In 2000, just 11 years ago, annual tuition at Washington State University was only $3.800. As a direct result of the 2009 legislature’s budget cuts, in May 2009, the Washington State University Board of Regents voted to increase tuition for WSU undergraduates to $7200 for the 2009-2010 academic year and $8,600 the current 2010-2011 year.
A recent report in the Seattle PI indicates that by 2012, tuition will be over $11,000 per year and increase of almost 200% over the past 12 years . There will be parallel increases at the University of Washington and other Higher Ed institutions in our State during the next two years. So this report is not just about Washington State University, but about the state of Higher Education funding in Washington State.
12 Years of Out of Control Corporate Tax Breaks Lead to Declining State Revenue
The Legislature and the corporate media would like you to believe that the cause of our legislature’s failure to support Higher Education is the Great Recession. This is not the REAL cause. As the following graphs show, support for higher education was declining in our State even when our economy was booming – and support for higher education has declined sharply during each of the past 10 years. As with the problem in K12 funding, the dramatic drop in State support for Higher Education is associated with the dramatic plunge in State revenue resulting primarily from dramatically increasing tax exemptions for wealthy corporations in the past 12 years.
State Revenue compared to Tax Exemptions (to nearest Billion)
Washington State Office of Financial Management, 10 Year Financial Trends, Schedule 5: Near General Fund. Annual Tax Breaks extrapolated from DOR Tax Exemption Reports 2000, 2004 & 2008. See also http://leap.leg.wa.gov/leap/Oversight/histongf.pdf
Tax breaks for billionaires and major corporations in our State have skyrocketed 250% during the past 10 years (from $22 billion per year in 2000 to $50 billion by 2010): Over 90% of these tax exemptions benefit the richest one percent, with much of this wealth being shipped out of State and even out of the country, creating jobs overseas instead of here in Washington State. In shifting the tax burden to our middle class, and causing the firing of thousands of public servants, these massive tax exemptions for billionaires do not create jobs. Instead, they cost jobs.
Tax exemptions for millionaires and major corporations have become so popular that there are now more than 567 tax exemptions totaling over $50 billion dollars a year. This “invisible budget” is now much bigger than the entire visible State budget (which is currently $16 billion per year or $32 billion per biennium). Our current public school budget is about $7 billion dollars per year. This means that for every dollar we spend on teachers for our children, we spend $7 on tax breaks for millionaires.
Tax breaks for millionaires are skyrocketing at a rate of $3 billion dollars per year. Given the dire consequences of the 2009 budget cuts and the likelihood of even greater budget cuts in 2010, there is no rational reason to continue this massive tax give away. If we cut back on corporate tax breaks for the rich by even 10%, we could be hiring back thousands of teachers and doctors and health care workers instead of firing them. And we could cut tuition for college students by 50%. And paying their fair share of State taxes would not harm wealthy corporations because they could deduct their State taxes from their federal taxes.
As a direct result if these billions in tax breaks to wealthy corporations, Washington State revenue fell from 11th in the nation in 1997 to 37th in the nation by 2005 – even though our State remained 16th in the nation in total income! Our State revenue, as a percent of income, fell over 20% in 10 years.
Source: Washington State Department of Revenue http://dor.wa.gov/docs/reports/2008/Compare06/Table3.pdf
In 2009, Washington State had the 8th highest per capita income in the US ($47,361)
The National Average Per Capita Income was $42,539.
Source: Tax Foundation, 2009 Report 163 http://www.taxfoundation.org/taxdata/show/290.html
So we make about 10% more than the national average. But we are investing about 10% less than the national average on public schools and on higher education. This was even before the billions in additional cuts to education during the 2009 legislative session and the billions more in cuts in the 2010 and 2011 legislative sessions. Meanwhile, not one penny has been cut in tax breaks for wealthy corporations.
As a result of this massive tax break for millionaires, as well as over-reliance on sales taxes, the State of Washington has the most unfair tax structure in America The richest 1% pay 3% of their income in State taxes while our middle class pays more than 10%. Those who can afford to pay
the most pay the least, while those who can afford to pay the least pay the most. Our middle class pays some of the highest State taxes in America, even though we have some of the lowest funded schools in America.
Note: In some States, like Oregon and California, millionaires actually pay State taxes at a higher rate than the poor and the middle class.
If millionaires in our State paid State taxes at the national average, it would generate several billion dollars a year. This would not harm millionaires as they could deduct their State taxes from their federal taxes. But this additional revenue would be enough to restore K12 school funding in our State to the national average, and restore funding for other important State programs such as Higher Education and health care for low income children.
These ever-increasing “tax shifts” of the tax burden away from millionaires and onto our middle class have led to increases in middle class taxes. In particular, the property tax burden on our middle class has skyrocketed in the past ten years.
As a consequence of these tax break for millionaires, and tax shifts to our middle class, our middle class now pay much more than the national average in State taxes while millionaires in our State pay much less than the national average. Working families see their tax bills go through the roof and they naturally assume that State spending is “Out of control.” But what is really out of control is tax breaks for millionaires.
As a direct result of massive tax breaks for millionaires, and the resulting plunge in State revenue, State support for our Universities has also plunged dramatically.
In 1975, Washington State supplied over 75% of annual tuition costs. For more than 30 years, Washington State supplied more than 67% of annual tuition costs. As recent as 1996, State support was 67% of total annual tuition costs.
In 2004, for the first time in our history, State support for annual tuition costs fell to less than 50%.
The 2009 legislature reduced State support to less than 30% of the total cost by 2010.
The 2011 legislature reduced State support to less than 20%.
Currently, our State spends about 10% less than the national average supporting Higher Education. This is almost as bad as our lack of support of K12 funding which is also about 20% below the national average. Source: Higher Education Finance 2007 Report, page 45. (higheredinfo.org).
Note: The total student cost is much greater. There are over $1,000 in additional required fees not included in tuition. Books, room and board raise actual cost to over $15,000 per year or $60,000 for a 4 year degree.
In 10 years, tuition at WSU has more than doubled, from $3,800 in 2000 to more
than $8,000 per year by 2010. The 2011 legislature has now further increased tuition so
that by 2012, it will be over $11,000 per year. This means that working class families, already struggling to make their mortgage payments, will be forced to spend an extra $7,000 per year over
2000 levels if they want their child to attend WSU.
As Tuition has skyrocketed, State support has plummeted. Even though tuition has skyrocketed by $7,000 in the past 10 years, State support per student has fallen by $4,000 per student.
Ten years ago, only one in ten students at our State Universities were from out of state.
Today, it is one out of four – leaving thousands fewer slots for our own State’s children.
Our State is already near the bottom of the nation in the percent of 9th Graders who go on to complete college. Many blame this problem on low WASL scores or inadequate High School course requirements. But this report raises another possibility. Namely, that our State’s abandonment of financial support for Higher Education has put the cost of higher education out of reach for many, if not most, working class families.
Sacrificing the future of our children as well as the vitality of our economy is a heavy price to pay just to preserve tax breaks for millionaires. The solution to this problem is not to further increase taxes on our middle class, or to further cut funding for Higher Education, but to move towards a fairer tax structure so we can have fairer national average school funding and national average support for Higher Education. We need a tax fairness reform package passed in the 2012 legislative session to restore national average K12 and Higher Ed funding and to preserve the future of our State. A good first step would be to close tax loopholes for any corporation making more than one billion in profit per year (see the Resolution and sign the petition on our website: realwashingtonstatebudget.info).
Adding insult to injury: 2009 legislature grants huge tuition breaks to the super rich!
While the legislature cut funding and spaces for students at our Universities for in-state students, it granted hundreds of millions of dollars in new expanded Higher Ed subsidies for thousands of high income out-of country professionals working at Microsoft. Thus, thousands of middle class Instate students will be forced to spend hundreds of millions of dollars more on their education while thousands of out-of country professionals with high paying jobs will be see their Higher Ed cost cut in have by being allowed to pay in-state tuition rather than out-of state tuition. This huge subsidy for foreign millionaires was made possible by House Bill 1487 sponsored by Ross Hunter and Glenn Anderson. So not only is Microsoft being given almost one billion dollars per year in State tax breaks for shipping our jobs overseas, but we are now going to allow them to outsource our State Universities to rob our children of a reasonable education.
A state resident who is a full-time undergraduate at UW will pay $10,000 in tuition, books and fees next year, compared with $24,000 for a full-time nonresident student.
Just ten years ago, the in-state student was paying one $5,000. So, our kids tuition bills are being more than doubled so the tuition bills of rich foreign nationals can be cut more than half.
Rep. Bob Hasegawa, D-Seattle, opposed the measure, calling it unfair to resident students at a time when the state is making it more difficult for everyone to afford to go to school in the state.
“It’s a diversion of limited resources,” Hasegawa said. “We only allow X amount of slots for resident tuition rates and we are displacing those residents with H-1B visa holders, their families and dependents. Microsoft can well afford out-of-state tuition for its people.”
Each year, the U.S. government issues at least 85,000 H-1B visas to foreign professional workers who have at least a four-year degree. Congress created the H-1B visa program so an employer could hire a foreign guest-worker without having to prove that a qualified American worker could not be found. However, the H-1B visa program is plagued with fraud and abuse and is now a vehicle for outsourcing that deprives qualified American workers of their jobs. Under current law, an outsourcing company can use American workers to train H-1B guest-workers, fire the American workers and outsource the H-1B workers to a foreign country where they will do the same job for a much lower wage. There are over 10,000 H1B holders in our State, with more than half working for Microsoft. This change in policy will create a flood of new foreign applicants at Washington State corporations and State colleges.
Source: Microsoft, the #1 sponsor of visa workers, sponsored 22,726 H-1b visas and 6,074 green cards since 2001. Foreign workers comprise 1/3 of the Microsoft Puget Sound workforce.
In summary, the 2009 legislature: Cut UW’s budget by 29%.
Offset this cut by authorizing a 30% increase in tuition for in-state students.
Followed this by giving more than a 50% tuition reduction to a small number of individuals (by moving them from the non-resident to the resident tuition rate). – The individuals who are benefiting from this new subsidy, unlike most students, are in well-compensated professional occupations, and many of them are already receiving tuition reimbursement from their employers. Microsoft, for example, offers $7500/year tuition reimbursement. If a corporation wants foreign workers to gain this type of benefit then they should reimburse educational cost rather than expect the tax payer to carry this burden. When legislators are axing programs for U.S. citizens to balance budgets, offering additional benefits to highly paid foreigners is unconscionable.
How much does this new tax break for millionaires cost us?
Assuming that each of the 10,000 out-of-country professionals has one family member attending school here, and assuming there is no increase in out-of-country workers as a result of this bill (a bad assumption given that the whole reason to pass this bill was to as a recruiting benefit to bring in more out-of country workers),
The initial cost of this bill is: 10,000 out –of country students times $14,000 revenue lost per student = $140 Million dollars per year. If the program succeeds in attracting more out-of-country workers to displace in-state employees working at Microsoft, the cost could easily double to more than $300 million dollars per year.
Outsourcing the University of Washington
The University of Washington is already turning down 30% of In-state freshman applicants due to lack of space. These are high GPA good students with a laundry list of notable achievements. Meanwhile, UW foreign applications are up 40% from last year. The number of international freshmen who have confirmed at WSU is up 80 percent. According to UW the increase is “due to the cheap U.S. dollar and increased demand from places like India and China”. We should admit some foreign students, but not at the exclusion of students from our own State. Microsoft complains that they hire foreigners because there is not enough talent in America to fit their needs. Well, how can our kids compete when they are excluded from college entry in preference to foreigners?
Who voted for such an unfair shifting in taxes from Microsoft millionaires to middle class kids?
The bill was sponsored by Ross Hunter, Glenn Anderson, Deb Eddy, Lynn Kessler and Deb Wallace in the State House of Representatives. It was publicly opposed by Representatives Hasegawa, Driscoll and Rolfes. It passed in the House 59 to 38:
Voting Yea: Representatives Alexander, Anderson, Angel, Appleton, Armstrong, Bailey, Blake, Campbell, Carlyle, Chandler, Clibborn, Condotta, Conway, Cox, Crouse, Dammeier, DeBolt, Eddy, Ericksen, Ericks, Flannigan, Goodman, Haigh, Haler, Herrera, Hinkle, Hudgins, Hunt, Hunter, Jacks, Johnson, Kagi, Kessler, Kirby, Kretz, Maxwell, McCoy, McCune, Miloscia, Morris, O’Brien, Pedersen, Pettigrew, Priest, Probst, Rodne, Ross, Santos, Sells, Shea, Schmick, Smith, Springer, Sullivan, Wallace, Walsh, Warnick, White, and Mr. Speaker
Voting Nay: Representatives Chase, Cody, Darneille, Dickerson, Driscoll, Dunshee, Finn, Grant-Herriot, Green, Hasegawa, Hope, Hurst, Kelley, Kenney, Klippert, Kristiansen, Liias, Linville, Moeller, Morrell, Nelson, Orcutt, Ormsby, Orwall, Parker, Pearson, Quall, Roach, Roberts, Rolfes, Seaquist, Short, Simpson, Takko, Upthegrove, Van De Wege, Williams, and Wood
In the Senate, the vote was 31 to 13::
Voting Yea: Senators Berkey, Brandland, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Haugen, Hobbs, Jacobsen, Jarrett, Keiser, Kilmer, Kline, Kohl-Welles, Marr, McAuliffe, McDermott, Murray, Oemig, Prentice, Pridemore, Ranker, Regala, Schoesler, Sheldon, Shin, Tom, and Zarelli
Voting Nay: Senators Becker, Benton, Carrell, Hewitt, Holmquist, Honeyford, Kauffman, King, McCaslin, Parlette, Pflug, Stevens, and Swecker
Absent: Senator Roach Excused: Senators Brown, Kastama, Morton, and Rockefeller
It is likely that many legislators were misled about the harm this bill will inflict on our middle class children. But clearly, middle class families need to re-examine who we are sending to the State legislature if our kids are to have a fair chance at competing in public schools and succeeding in college and beyond.
John Burbank, Director of the Economic Opportunity Institute understands how important providing our children with a college education is for the future economic prosperity of our State. He recently wrote:
“It’s time to ask ourselves whether billions of dollars in corporate tax giveaways should be subsidizing private business at the expense of educational and economic opportunity for generations to come. Instead of throwing money at private business, we should invest in people like Brandon Stover – which will pay dividends for generations to come. “
I agree. The time has come to suspend corporate tax breaks so that we can invest in our real future: our children. Please, go to our website: realwashingtonstatebudget.info and sign our petition!
Regards, David Spring M. Ed., firstname.lastname@example.org fairschoolfundingcoalition.org