Notice of Introduction for House Bill 2098 - Update: 10 Year Analysis Complete

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UPDATE: The 10 year analysis for HB 2098, titled AN ACT Relating to higher education funding, has been completed. The Office of Financial Management has identified this bill as requiring a ten-year projection of increased cost to the taxpayers or affected fee payers.

Ten-year projection:

Fiscal Year			Net Tuition	Resident Undergraduate Tui Operating Fee	Tuition Operating Fee	Total
2026		$0	$0	$0	$0	$0
2027		$0	$0	$0	$0	$0
2028		($23,207,781)	($2,338,000)	($6,198,205)	($48,583,071)	($80,327,057)
2029		($44,860,640)	($4,518,000)	($11,987,368)	($93,909,894)	($155,275,902)
2030		($65,139,344)	($6,561,000)	($17,397,037)	($136,360,824)	($225,458,205)
2031		($67,288,942)	($6,777,000)	($17,974,265)	($140,860,919)	($232,901,126)
2032		($69,509,477)	($7,001,000)	($18,568,486)	($145,509,236)	($240,588,199)
2033		($71,803,290)	($7,232,000)	($19,184,998)	($150,310,743)	($248,531,031)
2034		($74,172,799)	($7,471,000)	($19,816,262)	($155,271,538)	($256,731,599)
2035		($76,620,501)	($7,717,000)	($20,470,132)	($160,395,853)	($265,203,486)
Total:		($492,602,774)	($49,615,000)	($131,596,753)	($1,031,202,078)	($1,705,016,605)

Community/Technical College System:

Section 3

Reduces tuition operating fees for resident undergraduate students by 10% each academic year beginning with 2027-28 through 2029-30. 

A determinate fiscal impact of anticipated negative cash receipts cannot be provided due to the following unknowns.

•           Future resident undergraduate enrollment cannot be accurately predicted. Flat enrollment is used for the purposes of this fiscal note.

•           Tuition is charged based on credit load or what level of course (lower division or upper division). It cannot be accurately predicted credit load or level of courses for future enrollment.

For the purposes of this fiscal note we assume:

•           Resident undergraduate enrollment remains flat at the academic year 2024-25 level (103,071 FTE resident lower division and 4,386 FTE resident upper division).

•           The operating fee portion of tuition for a full-time resident undergraduate student taking 15 credits per quarter in academic year 2026-27 are: $3,994 for lower division and $7,033 for upper division.

•           Maximum allowable tuition operating fee increase of 3.3% in years not reduced by this bill.

•           The bill does not change building fee rates, which are a component of tuition.

Est Op Fee Revenue Proposed Reduction - Est Op Fee Revenue with Current Law = Est foregone operating fee revenue

FY26 $428,332,374 - $428,332,374 = (0) 

FY27 $442,467,342 - $442,467,342 = (0)

FY28 $398,220,608 - $457,068,765 = $(58,484,157) year one of 10% reduction to tuition operating fee rate/year

FY29 $358,398,547 - $472,152,034 = $(113,753,487) year two of 10% reduction to tuition operating fee rate/year

FY30 $322,558,693 - $487,733,051 = $(165,174,358) year three of 10% reduction to tuition operating fee rate/year

FY31 $333,203,129 - $503,828,242 = $(170,625,112) 

FY32 $344,198,833 - $520,454,574 = $(176,255,741)             

FY33 $355,557,374 - $537,629,575 = $(182,072,180)             

FY34 $367,290,788 - $555,371,351 = $(188,080,562)             

FY35 $379,411,384 - $573,698,605 = $(194,287,221)

Total estimated foregone operating fee revenue for 10-year analysis $(1,249,096,818)

RCW 28B.15.031 requires a minimum of three and one-half percent of operating fees be retained by the community and technical colleges for institutional financial aid and up to three percent of operating fees charged to students at community and technical colleges shall be transferred to the innovation account. A reduction in tuition operating fees would reduce the funding going into these two accounts. 

Additionally, RCW 28B.15.069 requires institutions of higher education to charge to and collect from each student a services and activities fee. Annually this fee may increase by a percentage not to exceed the annual percentage increase in tuition fees (operating and building fees) for resident undergraduate students. The proposed reduction would freeze the services and activities fee rate at 2026-27 amounts for the three year period.

Western Washington University:

I-960 Implications

HB 2098 reduces resident undergraduate tuition operating fees by 10 percent annually for three academic years beginning in AY 2027-28 and expands Washington College Grant eligibility beginning in AY 2026-27. The tuition reductions decrease state-authorized tuition fees collected by WWU and therefore trigger I-960 reporting requirements.

Section 2: Expands Washington College Grant eligibility thresholds.

Section 3: Reduces resident undergraduate tuition operating fees by 10 percent annually for three academic years.

Cash Receipts Impact

The bill results in negative cash receipts for Western Washington University due to mandatory tuition operating fee reductions.

Key assumptions include:

-Flat resident undergraduate enrollment across the analysis period due to high uncertainty and historical trends in enrollment elasticity in response to tuition rate changes.

-Resident undergraduate operating tuition fee would increase by 3.3% in each year other than the three years it is being reduced by 10%.

-For purposes of this analysis, we calculate net operating tuition revenue (excluding WWU’s 4 percent financial aid set-aside and building fee revenue).

-Building fees are assumed not to be subject to the same mandatory reductions as operating fees, although historically, WWU often aligns fee adjustments.

Because future tuition rates and enrollment cannot be reliably projected over the 10-year analysis period, the total cash receipts impact is indeterminate but expected to result in significant revenue losses over the 10-year period as estimated below:

FY28: $(9,251,000)

FY29: $(17,881,000)

FY30: $(25,964,000)

FY31: $(26,821,000)

FY32: $(27,706,000)

FY33: $(28,620,000)

FY34: $(29,565,000)

FY35: $(30,541,000)

For a total of $196,349,000 impact to Western Washington University.

Central Washington University:

In the proposed HB 2098, section 3 will have negative impacts to cash receipts. This proposed legislation would force Central Washington University to address significant budget shortfalls if undergraduate tuition were reduced by 10% over a three-year period. Student and academic services would be negatively impacted as our tuition revenue supports compensation costs. Likely, there would be significant cuts to our workforce, student programming, and academic supports.

When determining the loss of tuition revenue in the prescribed three-year period, CWU assumes flat enrollment numbers using 2026 as a baseline. Tuition rates for 2027 have been approved by our Board of Trustees. In our calculations we have assumed flat enrollment and a 3.3% increase in 2027. CWU used what we would have expected as a 3.3% tuition increase over the same three-year period to compare losses that would be realized if a 10% tuition reduction were to be implemented over that same time period. In 2028 CWU anticipates losses to resident undergraduate tuition operating fees of $6.2 million, $12 million in 2029, and $17.4 million in 2030 totaling $35.6 million over the prescribed three-year period. In 2031, once we are allowed to raise tuition rates again and assuming the authorized rate of increase calculated by OFM remains constant at 3.3% annually, it would take approximately 10 years to return to 2027 tuition levels.

In the required 10-year analysis, based on the assumptions mentioned, cWU calculates approximately $132 million in forgone undergraduate resident tuition operating fees.

The proposed bill explicitly states changes to the operating fee, thus we are assuming building fees will continue to be de-coupled from operating fees for the purposes of allowed increases. If reductions in the operating fee were to have impacts to the building fee, it would reduce our ability to fund critical minor works projects around campus.

Eastern Washington University:

A determinate fiscal impact of anticipated negative cash receipts cannot be provided due to unknowns such as future resident undergraduate enrollment cannot be accurately predicted, so we are assuming flat enrollment for the purposes of this exercise, students are charged a per-credit tuition rate, and not all resident undergraduate students attend full-time.

Negative cash receipts due to the requirements in this bill, given the above assumptions, would result in the following:

- AY 2027-28 = $(4,687,000)

- AY 2028-29 = $(9,060,000)

- AY 2029-30 = $(13,155,000)

- AY2030-31 = $(13,589,000)

- Total foregone tuition revenue over the period of this six-year fiscal note: $(40,491,000)

- Total foregone tuition revenue over the 10-year analysis (required for this fiscal note): $(99,483,000)

University of Washington:

SECTION 3

As mentioned above, Section 3 reduces tuition operating fees for resident undergraduate students at the UW by 10% each academic year beginning with AY 2027-28 through AY 2029-30. 

For the purpose of this fiscal note, we assume:

•           The resident undergraduate operating tuition fee would increase by 3.3% (the maximum allowable rate) for AY 2026-27, resulting in an annual tuition operating fee of $11,928 for full-time students in the base year. 

•           The operating fee would increase by 3.3% in any year other than the three years being reduced.

•           No enrollment increases over the 2026-27 baseline.

•           The bill does not require any changes to building fees, which are the other component of tuition, so we assume building fees will continue to be de-coupled from operating fees for the purposes of allowable increases.

Over a 3-year period, resident undergraduate tuition would have been effectively reduced by 27.1% from AY 2026-27 levels, or $8,696 for full-time students in AY 2029-30.  

A determinate fiscal impact of anticipated negative cash receipts cannot be provided due to the following unknowns:

•           As noted, tuition operating fees for AY2026-27 have not yet been set. Tuition rates are reviewed and approved by the UW Board of Regents in June of each fiscal year.

•           Future resident undergraduate enrollment cannot be accurately predicted, so we are assuming flat enrollment for the purposes of this exercise. 

•           UW students are charged a per-credit tuition rate, and not all resident undergraduate students attend full-time. 

Given that enrollment growth alone would result in additional negative cash receipts, we anticipate at least the following negative cash receipts in reduced tuition revenue by year:

•           AY 2027-28 = $(39,332,071)

•           AY 2028-29 = $(76,028,894)

•           AY 2029-30 = $(110,396,824)

•           AY 2030-31 = $(114,039,919)

•           AY 2031-32 = $(117,803,236)

•           AY 2032-33 = $(121,690,743)

•           AY 2033-34 = $(125,706,538)

•           AY 2034-35 = $(129,854,853)

•           Total foregone tuition revenue over the 10-year analysis (required for this fiscal note): $(834,853,078)

Department of Revenue:

This fiscal note only addresses section 1 of the bill, which impacts the Department of Revenue (department).

CURRENT LAW:

Select advanced computing businesses pay the workforce education investment advanced computing surcharge (ACS) at a rate of 7.5%. 

This surcharge applies to service and other activities business and occupation (B&O) income. 

The surcharge is in addition to the service and other activities B&O tax. 

The amount of ACS paid by all members of an affiliated group is capped at $75 million per calendar year.

Hospitals and provider clinics are exempt from the ACS. 

The Workforce Education Investment Account receives the revenues from the ACS.

PROPOSAL:

This proposal removes the ACS cap. 

EFFECTIVE DATE:

The bill takes effect 90 days after the final adjournment of the session. However, due to the time it will take to program this bill's changes, the department cannot implement the bill until January 1, 2027.

This bill has a positive revenue impact; however, that impact cannot be disclosed because the legislation impacts fewer than three taxpayers.

Ten-year projection prepared in consultation with the following agencies:

Department of Revenue
University of Washington
Washington State University
Eastern Washington University
Central Washington University
The Evergreen State College
Western Washington University
Community/Technical College System


Bill sponsors and contact information:

Representative Julia Reed, Prime Sponsor
Democrat
(360) 786-7814
Julia.Reed@leg.wa.gov

Representative Lisa Parshley
Democrat
(360) 786-7992
Lisa.Parshley@leg.wa.gov

Representative Natasha Hill
Democrat
(360) 786-7888
Natasha.Hill@leg.wa.gov

Representative Brianna Thomas
Democrat
(360) 786-7978
THOMAS_BR@leg.wa.gov

Representative Cindy Ryu
Democrat
(360) 786-7880
cindy.ryu@leg.wa.gov

Representative Janice Zahn
Democrat
(360) 786-7894
Janice.Zahn@leg.wa.gov

Representative Gerry Pollet
Democrat
(360) 786-7886
gerry.pollet@leg.wa.gov

Representative Alex Ramel
Democrat
(360) 786-7970
alex.ramel@leg.wa.gov

Representative Beth Doglio
Democrat
(360) 786-7940
beth.doglio@leg.wa.gov

Representative Liz Berry
Democrat
(360) 786-7860
Liz.Berry@leg.wa.gov

Representative Sharlett Mena
Democrat
(360) 786-7996
sharlett.mena@leg.wa.gov

Representative Edwin Obras
Democrat
(360) 786-7834
Edwin.Obras@leg.wa.gov

Representative Shaun Scott
Democrat
(360) 786-7920
Shaun.Scott@leg.wa.gov

Representative Julio Cortes
Democrat
(360) 786-7840
Julio.Cortes@leg.wa.gov

Representative Chipalo Street
Democrat
(360) 786-7838
Chipalo.Street@leg.wa.gov

Representative Mia Gregerson
Democrat
(360) 786-7868
mia.gregerson@leg.wa.gov

Representative My-Linh Thai
Democrat
(360) 786-7926
my-linh.thai@leg.wa.gov

Representative Nicole Macri
Democrat
(360) 786-7826
nicole.macri@leg.wa.gov

Representative Mary Fosse
Democrat
(360) 786-7864
Mary.Fosse@leg.wa.gov




Legislative Bill Information Website: http://apps.leg.wa.gov/billinfo/

Initiative 960 Website: http://www.ofm.wa.gov/tax/default.asp