ISSUES IN-DEPTH: Senators skeptical as universities praise tuition deregulation

by James A. Bernsen
The Lone Star Report
July 23, 2004
Volume 8, Issue 44

The Legislature took the training wheels off higher education tuition last session by passing a landmark tuition deregulation bill, in effect telling universities they were free to go where they wanted.

The effect — massive tuition increases at many colleges — took legislators by surprise, like the parents who took the training wheels off a kid’s bicycle only to have the tyke drive all over the neighbor’s begonias.

Stepping back to review the effects and the fallout, the Senate Finance Committee and the Subcommittee on Higher Education this week examined what Texas is getting for that money.

According to University Chancellors, Texas is getting professors. Lots of them. And scholarships, services and facilities.

The largest tuition increase (by dollar amount) was at the University of Texas; the lowest, at Texas A&M-Texarkana. Twelve colleges are still at the statutory tuition level of $48 a credit hour. The average tuition for the Fall 2004 semester is $58.

Teri Flack, deputy commissioner of the Texas Higher Education Coordinating Board (HECB) said that fees are rising as well. Combining the two, the average of tuitions and fees for students went up from $1,862 to $2,189 per semester.

Flack said that one of the effects of these increases is an increase in “sticker shock” for students and parents. There is a concern, she said, that some students will be discouraged from attending college, even though few students actually pay the full “sticker price” once exemptions, rebates, financial aid, and tax credits are factored in.

“We do believe that with the first-generation students, sticker shock is likely to have a greater impact on those students,” she said.

Flack said that while students are paying a higher percentage of their college costs than before, the state since 1985 has been progressively shifting the burden of college costs from appropriations to tuition.

The University of Texas increased its tuition by a flat rate of $360 across the board, regardless of how many hours a student takes. UT System Chancellor Mark Yudof said that strategy was to address one of the biggest cost-drivers in the system.

“That was a step to encourage students to take more classes to graduate on time, because we all know that every additional semester in college dwarfs these tuition increases,” Yudof said.

Although tuition deregulation has had its share of critics, university administrators aren’t second-guessing it, at least not those appearing before the committee.

“I think the feeling in general is that this flexibility was appreciated and was needed,” said Texas Tech University System Chancellor David Smith. “Clearly, we’re all concerned about shifting costs to families. We’re going to be interested to see the impact of tuition deregulation.”

Smith said that it was important for administrators to show how the money is being used.

“Texas Tech felt that it was critical,” Smith said, “that we make several clear statements about the use of tuition deregulation, that related to the increase of faculty at the university and also putting 30 percent of that money into scholarships, both in the areas of need-based and merit, based on the access issues.”

In terms of those scholarships, and other financial aid programs, HB 3015, which deregulated tuition, required 20 percent of the increase to be dedicated for financial aid. Some schools, however, went beyond that. The UT System designated 23 percent of its increase to scholarships. The Texas Tech System set aside 30 percent, A&M 28 percent. The University of Houston System set aside only the statutory 20 percent.

Sen. Steve Ogden said that he’s bothered by the use of tuition increases for non-classroom purposes.

“As we raise tuition I’ve always viewed it as a fee, every dollar of higher tuition, ought to be a dollar that goes into the classroom,” he said, adding that the use of the money for scholarships amounts to “basically rais[ing] tuition on one group of students so you can give money to another group.”

Dr. Jay Gogue, UH System chancellor, said students have a “tremendous amount of empathy” for fellow students who benefit from such scholarships, and therefore, haven’t complained.

Another huge piece of the tuition deregulation pie is for new professors. The UT System has hired 365 new professors - almost one for every dollar of tuition increase. Most other schools also have hiring as their largest expenditure with the extra funds.

Despite the positive reports of the system chancellors, some senators weren’t buying it. Sen. Tommy Williams (R-The Woodlands) said schools should have considered other sources, such as the Available University Fund, which has a surplus.

“The board of regents decided it was more important to leave $80 million in the Available University Fund” than to give families a break, Williams said. Yudof disagreed, saying those funds were pledged for other uses. Williams replied that he was not convinced that it was necessary to put the burden of increased funding for universities “on the backs of hardworking Texans who are educating their children.”

Sen. Gonzalo Barrientos (D-Austin) lamented the effect that tuition deregulation has had on the Texas Tomorrow Fund, the pre-paid tuition system that has currently had its new enrollment suspended as a result of rising college costs. Barrientos said Texas ultimately would have to pick up the tab. Yudof replied that the universities would somehow “absorb” the costs.

“If I had to do it over again, I would still vote against tuition deregulation,” Barrientos said, adding that he would vote instead for the state’s paying its fair share of the costs.

University systems, several senators suggested, should do more to encourage donations and grants, but as Yudof explained, no donor wants to pay for a copier.

Smith, the Texas Tech chancellor, said that tuition deregulation is not, and will not be, the last word on funding higher education.

“It may be more effective in the short run to meet our goals to increase faculty, but if we’re going to sustain growth…tuition dereg may not be a great strategy for growth of a university, because you’re going to have increased fixed costs.”

Smith said in the long-term, formula funding would be a better source of new dollars for cash-starved universities.