Reduce Competitive Academic Scholarship Waiver Cap

Texas should reduce the Competitive Academic Scholarship Waiver Cap from 5 percent to 2 percent of enrollment.


Background
In fiscal 1991, 20 tuition fee exemptions and waivers at higher education institutions reduced the state s tuition and fee revenue by more than $65 million, representing a loss of nearly 14 percent in tuition fee revenue. 1 According to the Texas Higher Education Coordinating Board, an exemption allows a student to enroll at an institution of higher education without paying tuition and/or fees. A waiver allows a student classified as a nonresident to enroll at an institution and pay resident tuition rates. 2

Of all 1990-91 exemptions and waivers awarded by institutions of higher education in Texas, nearly 53 percent was given to military, teacher/professor dependents and research/teaching assistants. Waivers for military personnel and their dependents are base d o n the idea that individuals should not be forced to pay out-of-state tuition fee rates just because military duty placed them in Texas. Waivers for teacher/professor dependents and research/teaching assistants are granted because they move to Texas to acce pt employment at a state institution of higher education. Effectively, waivers supplement their salaries.

Another 31 percent of the exemptions and waivers, or $20 million, was awarded in the form of competitive academic scholarship waivers to nearly 7,500 out-of-state students. Colleges and universities support the competitive academic scholarship waiver because it helps attract some of the best students in the United States and beyond. The question is whether Texas should be educating them at a reduced c ost. Nonresidents already benefit from a relatively low tuition, since Texas ranks 42nd in the nation in nonresident tuition and fees. 3 The Texas Higher Education Coordinating Board is not aware of such a reduced-fee program in any other state. 4

The competitive academic scholarship waiver was created in 1971. 5 Nonresident students who receive competitive academic scholarships of at least $200 from a Texas public college or university for the academic year or summer in which they are enrolled only pay the fees and charges required of Texas residents. The number of out-of-state students receiving this waiver at an institution may not exceed 5 percent of the total registered at the institution for the same semester of the preceding year. 6

Eighty-six percent, or more than $17 million of the competitive academic scholarship waivers, was granted by senior institutions.

In fiscal 1988, the number of competitive academic scholarship waivers at the ten Texas universities granting the most such waivers totaled 7,086, worth $17,525,386. By fiscal 1991, the number of waivers had decreased by 20.9 percent, and their total worth had dropped by 19.4 percent.

At the same time, nonresident enrollment increased by 94 percent at those same schools. 7 It appears that institutions in Texas are increasing nonresident enrollment without having to waive nonresident tuition.


Recommendation
Effective with fiscal 1995, the 5-percent cap on the total number of nonresident students at an institution paying resident tuition under the competitive academic scholarship provision should be lowered to 2 percent. 8

Implementation would reduce the number of competitive academic scholarship waivers at the top ten institutions by approximately 1,288. 9 (See below.)


Estimated Reduction in the Number of Competitive Academic Scholarship Waivers
at the Top Ten Texas Universities Based on Waivers Granted in 1990-91

Number of Competitive Reduction in
Competitive Scholarships Competitive
Total Scholarship as Percent of Scholarships if
University Enrollment Waivers Total Enrollment 2% Maximum

University of Texas at Austin 49,617 1,806 3.64 % 814
Texas A&M University 39,346 962 2.44 175
Texas Tech University 25,363 611 2.41 104
University of Houston 33,108 423 1.28 0
University of Texas at Arlington 24,783 422 1.70 0
University of North Texas 27,160 402 1.48 0
West Texas State University 6,193 286 4.62 162
University of Texas at El Paso 16,524 275 1.66 0
Texas Woman s University 9,841 213 2.16 16
Texas Southern University 9,334 204 2.19 17

Total 241,269 5,604 2.32 % 1,288

Additional waivers and/or exemptions created by the Legislature should be funded in total to compensate the institutions of higher education for lost tuition fee revenue.


Implications
No matter what assumptions are made about how students will be affected by the recommended change, the state will experience a financial benefit. The recommended policy will affect about 1,402 nonresident students currently receiving competitive academic s cholarships. The state appropriates approximately $4,867 per Full Time Student Equivalent (FTSE) statewide, which includes about $720 per year in tuition revenue. 10

Institutions would experience a loss of resident tuition and fee revenue due to declines in enrollment attributable to the cap on the competitive academic scholarship waiver. However, institutions would gain out-of-state tuition and fee revenue from students that attend without the benefit of the waiver. Estimated r esident tuition and fees per student would be:
FY 1995 $1,344
FY 1996 $1,422
FY 1997 $1,502
FY 1998 $1,522

Out-of-state tuition and fees per student would be approximately:
FY 1995 $5,364
FY 1996 $5,382
FY 1997 $5,402
FY 1998 $5,422 11


Fiscal Impact
The fiscal impact presented below assumes half of the 1,402 affected students 701 would continue to attend institutions in Texas and pay nonresident tuition rates beginning in fiscal 1995.

Savings to General Tuition & Fee
Fiscal Revenue Gain to the Change in
Year Fund 001 Universities FTEs

1994 $ 0 $ 0 0
1995 2,907,000 1,876,000 0
1996 2,907,000 1,779,000 0
1997 2,907,000 1,681,000 0
1998 2,907,000 1,667,000 0

Total $ 11,628,000 $ 7,003,000


The worst-case scenario would result in a loss of all 1,402 nonresident students affected by the proposed changes to the waiver rules. The fiscal impact presented below assumes a loss of 1,402 nonresident students with implementation of the recommendation in fiscal 1995.

Savings to General Tuition & Fee
Fiscal Revenue Loss to the Change in
Year Fund 001 Universities FTEs

1994 $ 0 $ 0 0
1995 5,814,000 (1,884,000) 0
1996 5,814,000 (1,994,000) 0
1997 5,814,000 (2,106,000) 0
1998 5,814,000 (2,134,000) 0

Total $23,256,000 $ (8,118,000)




Endnotes
1 Texas Higher Education Coordinating Board, Division of Student Services, Fiscal Activities Report: FY 1991 (Austin, Texas, January 1992).
2 Texas Higher Education Coordinating Board, Division of Student Services, Financial Aid for Texas Students (Austin, Texas, 1990).
3 Texas Higher Education Coordinating Board, Tuition and Fee Rates A National Comparison (State of Washington, November 1991).
4 Telephone interview with Mack C. Adams, Assistant Commissioner for Student Services, Texas Higher Education Coordinating Board, Austin, Texas, November 10, 1992.
5 Tex. Ed. Code Ann. ch. 54, sec. 54.051 (Vernon 1987).
6 Tex. Ed. Code Ann. ch. 54, sec. 54.064 (Vernon Supp. 1992).
7 Texas Higher Education Coordinating Board, Fiscal Activities Report: FY 1991; and Texas Higher Education Coordinating Board, Division of Student Services, Fiscal Activities Report: FY 1988 (Austin, Texas, January 1989).
8 Tex. Ed. Code Ann. ch. 54, sec. 54.064 (Vernon 1987).
9 Texas Higher Education Coordinating Board, Fiscal Activities Report: FY 1991.
10 Memorandum from Kenneth H. Ashworth, Commissioner of Education, to Chief Executive Officers, January 15, 1992.
11 Memorandum from Kenneth H. Ashworth, January 15, 1992; Higher Education Coordinating Board, Tuition and Fee Rates A National Comparison; and Legislative Budget Board, Fiscal Size Up: 1992-93 Biennium (Austin, Texas, February 1992), pp. 4-17.