A note on TPAC and tuition increases at UT Austin

In 2011 the Tuition Policy Advisory Committee of UT Austin recommended increasing tuition for in-state and out-of state students. The increases were shot down by the regents in a bid to make the republicans look more populist than Powers. A few weeks ago an email was sent out by our “student leaders” explaining that the TPAC recommendations would now be implemented. Tuition would now increase, except graduate students would be excluded. According to the “student leaders” the original TPAC recommendation was “supported by students”, but a 2011 referendum found that 64% of the student body was against the tuition increase [1]. Furthermore there is “no time” to have any formal process of feedback with the campus. Only a few student legislative body meetings will be used for town hall meetings before the recommendations are due.

There are a lot of issues to be discussed in relation to tuition and the budget, but in this article I comment on only one aspect of their argument which I viewed as extremely flawed. It is commonly stated that the amount of state appropriations that cover UT Austin’s total budget has shrunk dramatically over the years. A UT Austin website called “Budget 101” states that “In the 1984-85 fiscal year, the State of Texas provided 47 percent of the university’s total budget. For the 2010-11 fiscal year it has dropped to 14 percent.” [2] The TPAC committee is fond of presenting graphs such as the following which “demonstrate” the necessity to increase tuition.

tpac graph

The following graph was presented in 2011 with the caption “Tuition Increases have not fully offset declines in State General Revenue; efficiency improvements, administrative and programmatic reductions and other revenue enhancements have made up the difference.” This idea is intuitively convincing in that there were fairly large declines in the 2011-2012 biennial for state appropriations. However there is a severe problem with arguing that because state appropriations have declined as a percentage of overall revenue tuition needs to be increased to off-set that cost. First, the decline in percentage is partly (actually mostly) due to increases in overall revenue rather than a lack of state funding. In 1999 the overall revenue  for UT Austin was $1.36 billion dollars (adjusted for inflation to 2014), while in 2014 it is $2.35 billion dollars [3,4].

In fact if nothing else changed except tuition increased then we would expect the percentage coming from state appropriations in relation to overall revenue to decrease because increased tuition increases overall revenue. The TPAC argument is not only dishonest but viciously circular.

A more obvious way of comparing the relationship between state appropriations and tuition is by considering the real dollar numbers (adjusted for inflation) over time. The first thing one notices when one takes this perspective is that while state appropriations have decreased in recent years, they fluctuate over time in ways that suggest that they could increase again. According to Mr. Hegarty in an interview with the Daily Texan

“But they’re working on five-year forecasts under some very specific assumptions: One, that their revenues for the next five years that they have to spend are, at best case, flat. Why? You can’t deny 26 years of funding trends in funding from the state. Funding’s actually declining, not growing.” [5]

There has been a decrease in recent years, however, this statement is questionable at best. The following chart graphs inflation adjusted state appropriations over time (1986-2015). (Data are from the legislative appropriation bills available online [6]).

State appropriations

What these data demonstrate is that state appropriations were increasing overall from approximately 1992 until approximately 2005, but even then they only went down to 1996-1997 levels before the financial crisis. It is hard to detect strong trends because of the huge amount of fluctuations. Although there is a decline based a shortfall in appropriations in 2011 and 2012, the number has started to increase again. Furthermore, a decline is to be expected given the onset of the financial crisis in 2008-2009. According to a Grapevine survey of state appropriations in higher education 31 states increased appropriations a few years after the financial crisis. According to James Palmer, professor of higher education at Illinois state university; “Historically there have been ups and downs in state funding. The Great Recession created a huge trough, but barring further or unexpected declines, I think we’re beginning to climb out of the trough, at least at a national level”  [7, 8]. For example, in 1988 it seems there was a massive decline to $267 million (inflation adjusted to 2014). However in the coming years increases followed. The CFO is extrapolating based on too little data.

The argument of TPAC is that declines in state appropriations justify tuition increases. Tuition should compensate for a shortfall in state revenue. This argument is rendered problematic when one compares inflation adjusted tuition in relation to inflation adjusted state appropriations overtime for more than a few years [9]. The following graph charts growth in tuition revenue (red) and growth in state appropriations (blue).

appropriations and tuition

The CFO is not lying when he states that state revenues have decreased overall in the years, however the slope is extremely shallow and difficult to extrapolate from because of the high degree of fluctuation. A regression analysis shows that the decline in state revenue is not even statistically significant (p= 0.549).

Taking the CFO’s argument for granted, we find that state appropriations have decreased $564,000 on average each year. Here’s the problem with the tuition based argument. From the data, tuition and fee revenue has increased by an average of $15,435,000 a year. Tuition revenue has increased 27.4 times faster than state appropriations have decreased [10].

If one wanted to make an honest argument about the relation of state appropriations to tuition and fee revenue, one would also argue that when state appropriations increase, tuition should also decrease, but this has never happened. Historically, every fluctuation downward of state appropriations have been used to justify tuition increases, but the converse is never true [11].

Given the actual trends, the real question is not how do we recover state appropriations through tuition, but rather; Why does revenue need to constantly increase far above inflation? And why are these costs pushed onto students? If one is actually interested in lobbying for state funding, at the end of the day the party to convince is the tax payer. But an administrator that advocates tuition increases at every turn, thus making University less accessible to the public, is shooting himself in the foot if he is interested in acquiring more state funding, which will ultimately involve convincing the public.

—–

[1] http://www.dailytexanonline.com/news/2012/03/02/university-sg-election-results-announced-tuition-referendum-also-attached

[2] http://www.utexas.edu/finances/money-from.html

[3] http://www.utsystem.edu/cont/reports_publications/RevExp/RevExpAnalysis.pdf

[4] http://www.utsystem.edu/cont/Reports_Publications/summaries/2014/FY14BudgetSummaries.pdf

[5] http://www.dailytexanonline.com/opinion/2013/10/21/qa-kevin-hegarty-on-shared-services-and-uts-declining-funding

[6] http://www.lrl.state.tx.us/legis/approBills.cfm

[7] http://www.insidehighered.com/news/2013/01/21/state-appropriations-higher-education-31-states-report-says

[8] http://www.sheeo.org/resources/publications/grapevine-compilation-state-fiscal-support-higher-education-results-fiscal

[9] Data for tuition revenue are from the following sources

http://www.utsystem.edu/cont/reports_publications/RevExp/RevExpAnalysis.pdf

http://www.utsystem.edu/cont/Reports_Publications/summaries/2012/FY14BudgetSummaries.pdf

http://www.utsystem.edu/cont/Reports_Publications/summaries/2013/FY14BudgetSummaries.pdf

http://www.utsystem.edu/cont/Reports_Publications/summaries/2014/FY14BudgetSummaries.pdf

[10] To a certain extent the increase in tuition revenue can be associated with an increase in enrollment. But not by very much. In 1988 enrollment was 50,107 students, while in 2003 it was 50,616. In fall 2013 the number was 52,059 (a decline from 2012). A more rigorous study would weight tuition increases in relation to enrollment, in addition to charting cost of living increases and other possible expenses.

http://www.utwatch.org/finances/budget.pdf

http://www.txhighereddata.org/Interactive/Accountability/UNIV_Complete_PDF.cfm?FICE=003658

[11] This phenomenon has been documented extensively see Ovetz (1996) and the sources cited therein.

http://www.utwatch.org/archives/ovetz/ovetzdissertation.html

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One thought on “A note on TPAC and tuition increases at UT Austin

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