| TO: | Honorable Royce West, Chair, Senate Committee on S/C on Higher Education |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | SB1528 by Zaffirini (Relating to the payment of tuition and fees at public institutions of higher education and the determination of Texas residency for that purpose.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | $0 |
| 2007 | $0 |
| 2008 | $3,765,678 |
| 2009 | $3,765,678 |
| 2010 | $3,765,678 |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
|---|---|
| 2006 | $0 |
| 2007 | $0 |
| 2008 | $3,765,678 |
| 2009 | $3,765,678 |
| 2010 | $3,765,678 |
The Texas Higher Education Coordinating Board (THECB) estimates there is only one group of students on which the bill will have a significant impact. Those are international students who are currently eligible through 54.057(a), Education Code, for treatment as US permanent residents as soon as they have submitted their initial petition for residency to the Bureau of Citizenship and Immigration Services (BCIS). The proposed statutes would have such students’ eligibility for residency rely on Coordinating Board rules, which can be flexible in tracking changes in BCIS policies. THECB anticipates the rules will concur with policies followed prior to statutory changes in 2001. Those policies required international students to wait for domiciliary privileges until BCIS allowed them to submit the final application for permanent residence. This, essentially, made the students’ ability to establish Texas residency subject to the federal quota system used by BCIS. Students who can now establish a domicile as soon as their initial petition is filed with BCIS will have to wait until BCIS allows them to submit their final application for permanent resident status.
As a result, it is estimated that some students, rather than pay the nonresident tuition rate while their BCIS paperwork is pending, will choose not to attend college in Texas. Others will continue to attend and pay the higher tuition rate. Those who drop out of school because they will no longer be paying the resident rate will represent saved formula funding for the state beginning in fall 2006, when the provisions of the bill go into effect.
The state will also experience formula funding savings for students who attend universities in Texas and begin to pay the nonresident tuition rate. The nonresident tuition university students pay is sufficient to meet the full cost of attending college and therefore exempts the state from having to pay formula funding for university students paying the nonresident rate.
Community college general revenue allotments, on the other hand, are not sensitive to the tuition paid by the students, so they will continue to receive formula funding for students who pay the nonresident rate because of this provision.
Beginning in fiscal year 2008, the state will save approximately $420,000 per year in formula funding costs for students who drop out of community colleges. It will save a total of $2.8 million per year in general revenue funds for students dropping out of universities and students attending but paying full nonresident tuition at universities.
Institutions will receive additional tuition revenues from the students who are now paying the nonresident tuition rate totaling approximately $1.3 million for community colleges and $3.5 million for universities in fiscal 2007. In fiscal year 2008 and later these additional revenues from the students will be partially offset by the lowered general revenue funds from the state. The net result for community colleges will equal an annual increase of $893,000 and for universities an annual increase of $696,450 in the out years.
The elimination of the waivers for military personnel of the North Atlantic Treaty Organization (NATO) and their families and for persons transferred to Texas as a part of the state’s plan for economic diversification is expected to save institutions approximately $1.6 million in foregone tuition per year. Students who drop out of college because of higher nonresident tuition charges and students who enroll and begin paying the nonresident tuition rate should save the state approximately $500,612 in General Revenue formula funding per year.
Total General Revenue savings for the state will equal $3,765,678 per year in fiscal year 2008, fiscal year 2009 and fiscal year 2010.
The Coordinating Board records indicate that in fiscal year 2004, 2,673 community college students and 1,934 university students were international students who qualified as residents as a result of wording added to 54.057(a) education code in fiscal year 2001. This wording would be eliminated by the proposed bill. The community college students mentioned above took a total of 37,624 hours (showing an average annual load of 14 hours). The university students took a total of 30,060 hours (showing an average annual load of 16 hours). Using 30 hours as the measure, the community college students equal 1,254 full time student equivalents (FTSEs) and the university students represent 1,002 FTSEs. The state’s General Revenue formula funding per FTSE at community colleges averages $3,368. The General Revenue formula funding per FTSE at universities is $2837. According to institution student budgets on file at the Coordinating Board, the average nonresident paid $2,549 in tuition and fees at a community college or $10,918 at a university in fiscal year 2004. The average resident paid $1,245 at a community college or $3,783 at a university. We assumed fees were basically the same for residents and nonresidents, thus, the FTSE difference in nonresident and resident tuition at public community colleges is $1,304; at universities it is $7,135.
The Coordinating Board assumed that 1/3 of the university students would choose to drop out of college in fiscal year 2006 because of the $7,135/year increase and that 10 percent of the community college students would drop out. The balance of the students would pay the nonresident tuition rate and remain in college.
The students who drop out of college represent a formula funding savings to the state (beginning in 2008).
University students who remain in college and pay nonresident tuition also generate formula funding savings to the state since the tuition they pay is in excess of the total cost of education. Since formula funding at universities is based, in part, on anticipated tuition revenues and nonresident tuition is so much higher than resident tuition, the state will not need to provide formula funding for nonresidents paying the nonresident tuition rate at universities. This is not true for community college nonresidents, since community college General Revenue funding is not sensitive to local tuition and fee revenues.
Formula funding costs to the state, if these students continued to pay nonresident tuition and the schools continued to receive formula funding, would equal $4.2 million per year at community colleges and $2.8 million per year at universities. The anticipated formula funding costs and tuition revenues under the new provisions were calculated. The Coordinating Board decreased the number of FTSEs by 33 percent for universities and 10 percent for community colleges (to allow for students dropping out of school) and adjusted tuition revenues to reflect the remaining students’ paying nonresident tuition. The formula funding changes were expected to begin in fiscal year 2008. The tuition revenue changes were expected to begin in 2007. The Coordinating Board further reduced the formula funding costs for the university students to zero beginning in fiscal year 2008 in recognition of nonresident tuition covering total student costs.
In comparing the two scenarios we determined formula funding savings to the state will be $3,265,066 per year, beginning in 2008.
To estimate institutional tuition savings resulting from the elimination of the two waiver programs for NATO Families, the Coordinating Board used data from fiscal 2004 reports from the institutions. 470 individuals used these programs in 2004, for a total of $1.6 million in foregone tuition. If these students begin to pay the nonresident rate, the institutions will no longer face this loss of tuition. To calculate the formula funding savings from the elimination of these waivers, we assumed the savings would be proportionate to the savings for international students calculated above. The community college waiver headcount of 145 students equals 5.42 percent of the headcount for the international students impacted by changes in the residency statute; the university waiver headcount of 325 equals 16.8 percent of the university international students who are impacted. We multiplied these percentages against the projected formula funding savings from international students and generated a formula funding savings for the waiver elimination of $500,612 per year, beginning in 2008.
| Source Agencies: | 720 The University of Texas System Administration, 758 Board of Regents, Texas State University System Central Office, 768 Texas Tech University System Administration, 769 University of North Texas System Administration, 781 Higher Education Coordinating Board, 783 University of Houston System Administration
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| LBB Staff: | JOB, CT, RT, GO
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