RD178 - 2009-10 Tuition and Fees at Virginia’s State-Supported Colleges and Universities


Executive Summary:
INTRODUCTION AND OVERVIEW

In fall 2008, the United States experienced the worst economic downturn since the great depression of the 1930s. Triggered by the collapse of the housing market, the worldwide financial markets crashed with a decline of more than 30 percentage points in a single week. Nationwide, more than 2 million people lost their jobs last year and companies went bankrupt and closed in a relatively short period of time. State governments had to cut budgets, reduce services, and lay off state employees due to rapidly shrinking tax revenue collections.

The Commonwealth of Virginia, like the rest of the nation, is once again enduring a deep economic recession. Virginia’s economy was weakened more than expected in FY2008, prompting the Governor to make budget reductions to all state agencies in October 2008. State funding to higher education institutions was reduced, on average, by 5% in FY2009 and another 9% in FY2010 for a total reduction of 14% from FY2008 to FY2010 (institutional reductions ranged from 10% to 15%). And these budget reductions were in addition to the 5% average budget cut taken in FY2008. Our public institutions will endure at least 3 consecutive years of general fund reductions. Institutions faced great pressure to increase tuition in order to deliver adequate instructional services while not jeopardizing access and affordability.

In order to speed the national economic recovery, create and save jobs, and provide services to people affected by the recession, the 111th United States Congress enacted and President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA) -- an economic stimulus package worth $787 billion -- on February 17, 2009. Virginia will receive approximately $4.8 billion in direct appropriations from the ARRA over the next two years, excluding tax cuts that go directly to Virginia citizens. The 2009 General Assembly allocated $126.7 million of Virginia’s ARRA funds to public institutions, intending to mitigate the need to raise in-state tuition at the colleges and universities in FY2010. The ARRA funding offsets the general fund reduction in FY2010 and keeps the higher education budget cut at the FY2009 level. Due primarily to the availability of ARRA funding, tuition and mandatory E&G fees for in-state undergraduate students will increase by an average of 5.1% next year. These charges increased by 6.5% in 2008-09. Tuition and all mandatory fees, including both educational and general and non-educational and general fees, will increase by 5.2% in 2009-10, as compared to an increase of over 7% in 2008-09. The FY2010 tuition increase will be the lowest annual increase since FY2002.

This report, focusing on tuition and fees for in-state undergraduates, provides a summary of: 1) board-approved tuition and fee increases for the 2009-10 academic year; 2) tuition and fee trends in Virginia over the past 25 years; 3) the cost-sharing relationship between the state and students; and 4) trends in tuition increases nationally. Additionally, a comparison of planned and actual tuition increases is provided. Comparisons of changes in tuition and fees for other student groups, including in-state graduate, out-of-state undergraduate, out-of-state graduate, in-state first professional, and out-of-state first professional, are provided in the appendices.

In order to assess trends in tuition and fees, it is important to understand higher education pricing. A student planning to attend a public college or university in Virginia can expect to pay the charges defined below:

1. Tuition and Mandatory E&G Fees: Mandatory student charges used to support instruction and related education activities included in the Education and General (E&G) program. E&G subprograms include instruction, research and public service, academic support, student services, institutional support, and the operation and maintenance of physical plants.

2. Mandatory Non-E&G Fees: Mandatory student charges used to support non-instructional activities such as student health services, athletics, recreational activities, campus transportation, and capital debt service.

3. Tuition and All Fees: Sum of tuition, mandatory E&G fees, and mandatory non-E&G fees.

4. Room and Board: Optional charges used to support the dormitory and dining functions for students choosing to live on campus. Students living off campus are exempt from these charges.

5. Total Cost: The total cost to students and parents – absent student financial aid. It includes the sum of tuition, all mandatory fees, and room and board.

KEY FINDINGS

* Three consecutive years of general fund (state tax revenue) budget reductions have put the affordability and accessibility of Virginia’s nationally acclaimed system of public higher education at risk. Measurements of the student cost share of education and the cost as a percent of per capita disposable income at Virginia institutions have both reached their highest historical levels. Without the help of the State Fiscal Stabilization Fund provided by the federal government through the American Recovery and Reinvestment Act of 2009 (ARRA), the risk would be much greater. The ARRA funding, provided over a two-year period, will not be available after fiscal year 2011.

* The 2009 General Assembly allocated $126.7 million from Virginia’s share of the American Recovery and Reinvestment Act of 2009 (ARRA) to public institutions of higher education to offset the general fund reductions and to mitigate the need to increase the tuition of Virginia students in FY2010.

* The average (mean) increase for in-state undergraduate tuition and mandatory E&G fees from 2008-09 to 2009-10 is 5.1% at four-year institutions, 4.8% at two-year institutions (7.7% at the VCCS), and 5.1% at all institution levels.

* The average annual increase in tuition and mandatory E&G fees for in-state undergraduate students in FY2010 is the lowest in the past eight years due primarily to the effects of the ARRA funding.

* In addition to tuition and mandatory E&G fees, institutions charge fees to support non-instructional or related activities, such as student health services, athletics, campus transportation, and debt service. These required charges (often referred to as mandatory non-E&G fees) will increase, on average, 5.5% for in-state undergraduate students next year. Although the increases exceed the 5% limit stipulated in the 2009 Appropriation Act, the primary uses of the increased charges are for the institutions’ debt service for capital projects. These increases are permitted under the tuition policy set forth by the General Assembly.

* Virginia undergraduate students can expect to pay on average 5.2% more in 2009-10 than they did the prior year in tuition and all fees, including mandatory E&G and mandatory non-E&G fees. Students at four-year institutions will pay about $401 more in 2009-10. Community college students will pay about $197 more in the upcoming year.

* In 2008-09, in-state undergraduate tuition and fees at the University of Virginia, Virginia’s flagship institution, ranked 10th highest nationally. Tuition and fees at other public colleges and universities ranked 10th. Charges at the community colleges remained below the national average, ranking 29th. It is anticipated that Virginia’s tuition and fee increases will be generally comparable to increases around the country in FY2010 – keeping Virginia’s tuition and fees ranked well below their FY1990 and FY1994 levels.

* The 2005 General Assembly enacted the Higher Education Restructuring Act to provide more autonomy to higher education institutions. In return, institutions are required to commit to meeting the state’s goals and performance standards for higher education. As part of the Restructuring Act, institutions are required to develop six-year academic, financial, and enrollment plans biennially. A major component of the six-year financial plan requires the institutions to provide estimates of the tuition and fee increases that would be necessary to achieve certain funding goals. The purpose of such estimates is to assist policymakers, students, and parents in planning for the future. All public institutions submitted their six-year plans for FY09-FY14 in October 2007. Most of the institutions’ actual tuition and fee increases are less than the rates in the six-year plan for 2009-10. This can be attributed to the effect of the ARRA funds.

* The average total cost for an in-state undergraduate student living on campus is estimated to be 40.2% of per capita disposable income next year at the four-year institutions. Since reaching the low point (33.1%) in 2001-02 after several years of state-mandated tuition controls, this measure of affordability has crept steadily higher and is now almost back to the peak (the low point in terms of average affordability) of 40.3% in 1994-95.

* The gap between Virginia and the national average in the percentage of personal income consumed by the cost of higher education has narrowed significantly over the last decade. In the mid-1990s, Virginia undergraduates were paying approximately eight percentage points more in average income to attend college full-time and reside on campus. Since 2000-01, the gap between Virginia and the national average has been two percentage points or less. However, it should be noted that the data of recent years reveal that the gap is beginning to widen again.

* Over the past 10 years, tuition charges to in-state undergraduate students in Virginia have largely been influenced by the state’s economic condition. The Commonwealth restricted tuition increases during a period of strong economic growth, and allowed institutions to assess double-digit tuition increases to offset general fund reductions when growth in the economy was in decline. Affordability was achieved through dramatic shifts in the state’s cost-sharing policy with varying degrees of equity depending on when a student entered into the system. The lack of continuity and predictability has limited students’ and their families’ ability to save effectively for college and has not provided equity for taxpayers in terms of meeting the cost of education.