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Otter’s higher ed budget could lead to tuition increase

A graph on higher education funding by the Legislative Services Office, compiled from State Board of Education data

Credit: Legislative Services Office
A graph on higher education funding by the Legislative Services Office, compiled from State Board of Education data

— Gov. C.L. “Butch” Otter rejected a line item in his budget proposal that college administrators predict would help slow tuition increases at Idaho four-year public universities.

Otter left this and most higher education line items out of his budget to focus on funding “student-centric and system-wide needs,” as recommended by the higher education taskforce.


Contributed photo

Idaho Capitol Building

The line item not recommended by Otter would move personnel costs from a pool of funds primarily comprised of tuition and student fees to one funded through state taxes. Operating costs, which are less subject to fluctuation, would also be moved from the student-paid pool, called the dedicated fund, to the pool funded by state taxes, called the general fund.

If the personnel costs were moved, colleges could more easily accommodate state mandated pay increase for employees without increasing tuition. For the past three years, the legislature has approved these pay increases, called a change in employee compensation (CEC.)

For fiscal year 2019, Otter recommended a three percent merit-based CEC. This is the same rate as was funded for the past three years.

The pay increase often falls partly on state colleges to fund and partly on the state to fund.

If approved as it stands in the executive budget, the 2019 CEC would be funded 61.7 percent by the legislature and 38.3 percent by University of Idaho’s tuition and student fees. Similar rates apply for Idaho State University and Lewis-Clark State College. Funds from the legislature, in the general fund, and those from tuition and student fees, in the dedicated fund, are both appropriated by the state legislature.

The Joint Finance-Appropriations Committee (JFAC) still needs to vote on the budget proposal that will be sent to the legislature in the coming weeks. The budget hearings for public colleges are Tuesday, Feb. 27. Until then, and until the legislature votes on the proposal from JFAC, funding for higher education is not final.

‘Unfortunately, tuition is the other main funding source’

“The purpose of this shift was to reduce the amount of salaries that are on the tuition side, which would therefore reduce the amount of CEC on the tuition side.” said Trina Mahoney, UI Budget Director. “It wouldn’t mean that we wouldn’t need tuition increases in the future, but it would try to mitigate the impact that a CEC has on tuition and put a little less of the burden on students.”

She continued, “When the state only funds maybe half or 60 percent of the CEC, it does put us in a position where we have to go to another funding source to fund the rest. Unfortunately, tuition is the other main funding source.”

For roughly four decades, there has been a relative decrease in funds to Idaho four-year public colleges from the state in relation to student-paid funds. During this same time, these institutions have increasingly relied on revenue from tuition and fees.

Idaho’s institutions, like many public colleges, have experienced high tuition hikes. UI felt a nearly 70 percent tuition rate increase between 2008 and 2016.

“(The line item) is a relatively small matter, but it will add into the probable need for a tuition increase as we see change in employee compensation,” said Chuck Staben, UI President.

Mahoney said the proposed line item could shift more of the fund burden of CEC requests to more on the state. But, a state analyst said more is behind tuition increases.

“Every year that there has been a recommended appropriated CEC, there has been a tuition increase (at Idaho public colleges) because it takes money to pay salary… But, if you look back at every year there was not a CEC, many of those years had tuition increases as well,” said Jani Revier, State Division of Financial Management Administrator. “There’s not always a direct link between tuition increases and CEC. Sometimes there’s other things that drive the tuition increase.”

While Mahoney agreed with the state budget analyst’s statement that other factors drive tuition increases, the UI Budget Director said, “CEC is a major driver.”

At a budget hearing before the JFAC, UI Vice President of Finance Brian Foisy said the line item would help reduce the institution’s need to increase tuition.

“When a CEC is proposed, the institution — in order to fully fund that — must impose a tuition rate increase on students,” he said. “If we moved a portion of these funds from the dedicated credits to the general fund, then that would certainly, maybe not eliminate the need, but reduce the need for a tuition increase on students.”

Universities need permission from the State Board of Education to change tuition rates.

Mahoney said the state board “is most sympathetic to our need to our need for tuition increases for CEC and benefit costs because they know that we need to do those things and that tuition is needed in order to fund them.”

Mike Keckler, Director of Communications for the State Board of Education, said the board has no comment on the likelihood of a tuition increase until higher education funding appropriations are decided by JFAC, and until the colleges submit their tuition plans to the board.

The governor’s reasoning


Governor Butch Otter

Unlike most other state agencies, a cap in full time personnel (FTP) does not apply to universities.

Jon Hanion, Otter’s spokesperson, said the governor did not recommend the line item because, “in essence, the university could put people on and obligate us, going forward, to pay for those costs we didn’t necessarily agree to initially.”

Revier, who works for Otter’s finance division, said similar proposals have been made in the past. Otter did not recommend funding the line item, she said, to avoid setting that precedent to fully fund FTP increases.

But, UI’s Budget Director offered a different view.

“It doesn’t really lock the state into funding that because it’s done on the tuition side and they’ve already set the appropriation for how much we’re going to get from the state general fund,” Mahoney said. “They’ve already had a practice of only funding CEC on the state general fund. So, if we increase the FTP… it’s on us to figure out the funding on the tuition side.”

A history of decreased state funds and increased tuition rates

From fall 2014 to fall 2017, UI’s annual undergraduate tuition and student fee rates increased 10.3 percent or $704 — from $6,784 to $7,488 annually in 2017.

According to the Legislative Services Office, state funds for Idaho four-year colleges over the past 39 years have increased one and a half percent lower than these institution’s tuition and fee revenue.

This means that Idaho four-year public colleges have increased revenues collected from students at a higher rate than funds from the legislature. This reliance has held consistent.

In 2016, state funding for public four-year colleges just met the level it was at in 2008: roughly $272 million. During this same span of eight years, revenue from tuition and student fees has nearly doubled: from $126.9 million to $247.7 million.

Revier said the decrease of state funding was likely due to the Great Recession, during which time enrollment slightly increased.

While increases in enrollment factored for some of the increase in revenue from tuition and student fees, it is likely primarily caused by rising tuition rates. UI’s 2016 tuition rate was nearly 70 percent higher than its 2008 rate.

Idaho four-year college saw a decrease in state funding and endowments in fiscal years 2010, 2011 and 2012, by 10.5, 13.6 and 3.4 percent respectively. The colleges also experienced commensurate hikes to tuition and student fee revenue in 2011, 2012 and 2013 respectively, according to data from the Legislative Services Office.

In general, when funds from the legislature decreased, universities increased revenue from tuition and student fees — either indicating increases in enrollment and in tuition. But, enrollment numbers from the State Board of Education show that during the biggest relative total enrollment spike, in 2012, UI’s enrollment was 12,493. That is roughly six percent over 2008 and 2017’s enrollment numbers.

– Kyle Pfannenstiel covers the 2018 Idaho Legislature for the University of Idaho McClure Center for Public Policy Research.


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