HD8 - Trends in Higher Education Funding, Enrollment, and Student Costs

Executive Summary:
Key Findings

• Most spending at public four-year higher education institutions in Virginia and nationally is on activities other than direct instruction. Spending on student housing, dining, and intercollegiate athletics—through auxiliary enterprises— has been the largest driver of spending increases at Virginia institutions. (Chapter 2)

• State funding as a percentage of total revenue at institutions in Virginia and nationally has declined. In Virginia, State general funding per student (adjusted for inflation) declined 22 percent between 1991-92 and 2011-12. (Chapter 3)

• The price of higher education has increased substantially over the last two decades, though slightly less in Virginia than nationally. In Virginia, tuition and fees plus charges for student housing and dining increased, on average, 150 percent between 1992-93 and 2011-12. (Chapter 5)

• Average annual income increased far less than the price of higher education, necessitating a large increase in the percentage of students who borrow and the amount they borrow. The average annual student loan amount in Virginia almost tripled between 1992-93 and 2011-12 to nearly $10,000. (Chapter 6)

House Joint Resolution 108 (2012) directs the Joint Legislative Audit and Review Commission (JLARC) to study the cost efficiency of the Commonwealth’s institutions of higher education and to identify opportunities to reduce the cost of public higher education in Virginia. The resolution identifies 14 items related to the cost and operations of public four-year higher education institutions in Virginia. Given the scope of this review, JLARC staff will release a series of reports under HJR 108 during 2013 and 2014. This first report in the series includes context that will be relevant to topics addressed in the subsequent JLARC reports on key topics, such as faculty activities and non-academic student fees and costs.

Virginia’s 15 Public Four-year Higher Education Institutions Vary Widely

Virginia has 15 four-year public higher education institutions. Collectively, these 15 institutions offer a wide range of educational experiences for students. For example, Virginia’s colleges and universities collectively offer more than 1,400 academic programs across dozens of subjects culminating in bachelor’s degrees, master’s degrees, doctorates, and certificates.

In 2012, there were more than 200,000 students at Virginia’s 15 public institutions. These students included undergraduate, graduate, and professional students. They also included full-time and part-time; in-state and out-of-state; and those who live on and off campus. Virginia’s public institutions also include highly selective institutions and those that are not as selective.

Virginia’s public institutions also have a wide range of tuition and fees. For example, in-state tuition and fees in 2012-13 ranged from just under $3,400 to more than $9,200. Similarly, other mandatory fees ranged from about $1,600 to nearly $4,900.

Most Spending Is on Activities Other Than Direct Instruction and Largest Driver of Spending Increase in Virginia Has Been Auxiliary Enterprises

During the last two decades, total spending by Virginia’s 15 public higher education institutions increased from $2.6 billion to nearly $6 billion, a 130 percent increase. As total spending increased, the proportion of spending on instruction (consisting of instructional staff salaries and benefits, and educational facility operations and maintenance) has remained relatively steady at about one-third. This has also generally been the case nationally during the same time period. The remaining two-thirds of institutional spending is on functions such as research, student services, academic and institutional support, and auxiliary enterprises such as student housing, dining, and intercollegiate athletics.

During the last decade, total spending per student (in inflation-adjusted dollars) increased about two percent at Virginia’s six research institutions, and about 11 percent at Virginia’s other nine institutions. Spending on auxiliary enterprises funded by students was the largest driver of spending increases. Auxiliary enterprise spending per student, after inflation, increased $821 at Virginia’s six research institutions and $906 at the other nine institutions.

Virginia Institutions Derive Less of Their Total Revenue From the State Than National Average

Virginia’s public four-year higher education institutions collect, on average, more total revenue per student than the nationwide average. This was the case in 1991 and was still the case in 2011. In 1991, Virginia’s 15 public four-year higher education institutions collected, on average, $16,229 in revenue per student, which was substantially more than the national average of $10,952. By 2011, total revenue per student had increased in Virginia to more than $35,000, while the national average had risen to about $27,000.

The State’s portion of this higher total revenue, however, has declined during the last two decades and is lower than the average for institutions nationwide and in the Southeast. Virginia’s 15 institutions received, on average, 15 percent of their total revenue from State appropriations in 2011, down from 27 percent in 1991. Nationwide, institutions received 20 percent of their total revenue from state appropriations in 2011, down from 39 percent in 1991.

State General Funding Per Student Has Declined by One-Fifth in Inflation-Adjusted Dollars

During the last two decades, enrollment growth and inflation have eroded the value of general fund support to Virginia’s 15 public four-year higher education institutions (see figure on page iii). During the 1991-92 academic year, Virginia’s institutions received, on average, $4,332 in State appropriations per full-time equivalent (FTE) student. By the 2011-12 academic year, this amount had dropped 22 percent in inflation-adjusted dollars to $3,382. However, in inflation-adjusted dollars, total revenue per FTE student still grew about 40 percent.

Public Higher Education Institutions Now Raise More Revenue Through Charges to Students

The reduction in the percentage of total revenue derived from states has coincided with increased reliance on tuition and fees provided by students. Virginia’s institutions derived, on average, 23 percent of their total revenue from tuition and fees in 2011, up from 16 percent in 1991. This increase is similar to what occurred nationwide and among public four-year institutions in the Southeast. Consequently, students are now funding more of their educational experience through tuition and fees, and payments for services such as housing and dining.

Virginia’s institutions have historically relied slightly more on revenue from auxiliary enterprises funded by students, such as housing and dining, than other institutions. This was the case in 1991 and was still the case in 2011. Virginia’s institutions derived, on average, 14 percent of their total revenue from auxiliary enterprises in 2011, the same proportion as in 1991. During this time period, revenue from auxiliary enterprises at public four-year institutions in the Southeast and nationally has fluctuated between 10 and 12 percent of total revenue.

Virginia Institutions Have Increased Enrollment More and Graduated Students Faster Than National Average

The number of students enrolled at higher education institutions has increased nationally, and to an even greater extent in Virginia, during the last 20 years. However, largely because of the faster growth in private four-year and public two-year enrollment, public four-year institutions now educate a slightly smaller percentage of all higher education students. In Virginia, private institution enrollment has grown substantially since 1991, and by 2011 more than one-fifth of all higher education students in Virginia attended a private four-year institution.

Virginia’s 15 public four-year institutions graduated, on average, 46 percent of their students in four years and 63 percent in six years during the 2011-12 academic year. These graduation rates were considerably better than the rate nationally and among public four-year institutions in the Southeast. Several Virginia institutions also graduated a substantially higher percentage than a statistical model would predict based on certain student and school characteristics.

Price of Attending Virginia Institutions Increased Less Than National Average, but Is Generally Higher in Virginia

Between the 1991-92 and the 2011-12 academic years, tuition and fees nationwide at public four-year institutions increased 256 percent—even more than the cost of hospital services. Tuition and fees at Virginia’s institutions increased slightly less, 217 percent, during this time period and averaged $9,452 for the 2011-12 academic year. However, Virginia’s 15 public four-year higher education institutions, on average, increased their tuition and fees more on a percentage basis than other institutions in the same Carnegie classification. Virginia’s institutions also charge more in tuition and fees, on average, than the average of other public institutions in the same Carnegie classification.

Other student charges, in particular housing and dining, have also increased nationally and in Virginia, but less than tuition and fees. Average charges for these services have risen far more than average rent and meal costs during the last two decades. Student fees for on-campus housing across Virginia’s institutions increased 134 percent between 1992 and 2011, and averaged about $4,800 for the 2011-12 academic year. Student fees for on-campus meal plans increased by 107 percent in Virginia during the same time period, and averaged about $3,700 for the 2011-12 academic year.

In 1992, Virginia’s public institutions charged, on average, $7,165 for tuition and fees, room, and board. By 2011, these major components of the cost of attendance averaged nearly $18,000—an increase of about 150 percent. However, these charges increased less on a percentage basis in Virginia than across public four-year institutions in the Southeast and nationwide. Despite this smaller percentage increase, these combined charges at Virginia’s 15 public institutions increased more in nominal dollars. Virginia’s 15 public institutions still charge more, on average, for these major components of higher education than public institutions nationwide.

Tuition and Fee Increases Nationally and in Virginia Substantially Outpaced Increases in Income

Average annual income nationwide increased 86 percent between 1991 and 2011, to about $54,000. However, because tuition and fees increased three times as much during the same time period, tuition and fees now consume a higher portion of this average annual income. Average tuition and fees in Virginia consumed ten percent of average annual income in 1991, and this portion had grown to 17 percent by 2011.

The above trend is similar when viewed in terms of income of those who have graduated with a four-year degree. In 2001, the average worker with a bachelor’s degree made about $42,900 annually. By 2011, this had increased 23 percent to about $52,700. In contrast, average tuition and fees in Virginia increased 170 percent during this time period—seven times more than the average income of college graduates.

More Virginia Students Borrow to Attend Institutions of Higher Education, and Borrow Increasingly Larger Amounts

The above disparity between the price of higher education and income has necessitated a substantial increase in the number of students who borrow to pay for their higher education. In 1991-92, about 30 percent of students at Virginia’s 15 public four-year higher education institutions used student loans. By 2011-12, more than half the students in Virginia borrowed to cover at least some of the cost of higher education.

As more students used student loans, the amount of the average loan also increased substantially across Virginia’s 15 public institutions. In the 1992-93 academic year, the average student using loans borrowed $3,318 to attend one year at a Virginia institutions. By the 2011-12 academic year, the average student using loans borrowed $9,893 per year, or $6,575 more than in 1992-93 (see figure on page vi). Of this increase, inflation only accounted for about $2,000, less than one-third of the total increase. The average loan amount jumped considerably as the most recent recession took hold. Between 2008 and 2009, the average loan amount increased nearly $1,000, an increase of 13 percent.