RD447 - Alternative Tuition or Fee Structures – November 2016

Executive Summary:

The 2016 General Assembly enacted House Bill 961 (HB961) and amended the Code of Virginia to enable institutions to offer “alternative tuition or fee structures to students that result in lower costs of attendance….” HB961 has two main components. One is to encourage Virginia public institutions to lower the cost of attendance through features such as flat-rate tuition, discounted student fees or student fee and student services flexibility. The second is to task SCHEV with recommending financial incentives and benefits to public institutions that offer such tuition plans.

Purview and Definitions of Alternative Tuition Fee Structures

Students must pay various kinds of costs when attending a college. They must pay the institution for the cost of instruction and the cost of student life such as intercollegiate athletics, student activities and, if they live on campus, room and board. In addition, students incur personal expenses for books, supplies, transportation and other necessities.

The Chart of Accounts developed jointly by the Department of Accounts and SCHEV standardizes the financial accounting and reporting of the institutional operations by program based on sources of revenue and usage. The Educational and General (E&G) program is a term used to describe the operations related to an institution’s instructional activities. Tuition revenue is used strictly in E&G. In addition, by statute the Commonwealth seeks to cover at least 67% of the E&G cost for in-state students with state general-fund revenue.

The Auxiliary Enterprise program is an entity that provides service to students, faculty or staff, and charges a fee directly related to, but not necessarily equal to, the cost of the service. Auxiliary operations include food service, residential operations, student health service, student unions, parking and intercollegiate athletics. Revenues are to be expended within the program in which they were generated. Therefore, auxiliary operations should be self-supporting. Revenues from mandatory non-E&G fees for auxiliary services and user fees such as ticket sales are used strictly in the auxiliary program.

As revenues between E&G and auxiliary programs are not interchangeable, financial incentives and benefits to institutions also must be kept separate. For example, for purposes of this study SCHEV would not recommend that the state provide additional state general fund to lower auxiliary enterprise fees. Should the state wish to provide incentives or benefits for institutions to discount auxiliary fees, they would need to be in a form other than state funding.

HB961 sets several parameters for participation eligibility. To be eligible for incentives or benefits, institutions would be required to make alternative tuition and fee structures available to any first-time incoming freshman student who has established domicile as defined in Section 23-7.4 in the Code of Virginia and who is enrolled full-time with the intent to earn a degree that leads to employment in a high-demand field in the region. The tuition and fee rates may be renewed each year if the recipient maintains eligibility for the alternative tuition or fee structure. Therefore, for the purposes of this legislation SCHEV defines that alternative tuition or fee structures shall be designed for and offered to in-state first-time full-time incoming freshmen; that the tuition must be designed for a specific academic program; and that the tuition or fee plan shall be offered for multiple years and renewable annually with eligibility requirements. Tuition or fee plans for other types of students and for shorter terms are excluded from the discussion.

Finally, while some Virginia public institutions use the term “tuition” to cover all charges to students within the E&G program, others choose to charge students both tuition and mandatory E&G fees. SCHEV considers the difference between tuition and mandatory E&G fees to be semantic and uses the term tuition only in this discussion.

In summary, this proposal discusses the financial incentives and benefits that might be offered to public institutions of higher education for providing innovative tuition or fee strategies to in-state first-time full-time incoming freshmen in specific programs for multiple years that will lower costs of attendance.