Tag Archives: VCU

In Placid Session, VCU Board OKs 3.8% Tuition Increase

The Virginia Commonwealth University Board of Visitors approved a 3.8% tuition & fee increase for in-state undergraduate students today, which, along with increases on out-of-state students and dentistry students will yield a 6.4% increase in overall tuition & fees — an increase of $25.7 million.

The increases help offset an $11 million reduction in state support in the 2017-2018 budget and cover other rising costs. The budget provides a $5.1 million increase in financial aid to students, $12 million for a 3% raise for faculty and staff, $8.3 million in “unavoidable” operational and academic costs, and millions more in “highest priority” needs.

“This is a lean budget that addresses unavoidable and operational costs and focuses on our highest priority needs,” said VCU President Michael Rao in a prepared statement. “We are mindful of the cost and burden on students and their families and have increased the amount of university financial aid to students. We are also mindful that we must provide a quality education expected by high-performing students at a major public research university. This is what our students expect and deserve.”

The tuition increase will add about $494 to the annual cost of attendance for a full-time in-state undergraduate student. Smaller increases in dormitories, dining and parking will add even more.

Robert Holsworth, a former dean of the College of Humanities and Sciences, was the only board member to question the tuition increase. Referring to the budget presentation by Karol Kain Gray, vice president of finance, he noted, “There hasn’t been a slide that deals with student debt. We now have the largest student debt of any public university in the state. Other universities have done a better job with affordability.”

VCU is “doing a lot of good things,” Holsworth said, but “I am concerned that we’re … losing our commitment to affordability.”

There followed a train of comments by other board members deploring tuition increases and high student indebtedness but justifying the hikes as necessary to maintain academic quality in the face of state budget cuts and increasing expenses.

The one concrete proposal from that exchange came from G. Richard Wagoner Jr., former CEO of General Motors. Instead of budgeting in one-year cycles, he suggested, perhaps VCU could adopt a longer perspective and ask what kind of tuition policy it wants to have. “What’s a desirable policy?” he asked. Zero increases in tuition? Tuition increases that keep place with inflation? Tuition increases that equal inflation plus two percent?

“I could not agree with you more,” said Rector John A. Luke, Jr., former CEO of MeadWestvaco, although he noted that over the long term the increase in tuition “almost mirrors exactly” cuts in state support. He said VCU needs to find a way to avoid being “held hostage” to the state’s budgetary needs.

William M. Ginther,  a retired banking executive, suggested that VCU needs a “business strategic plan” to accompany its budget plan to develop new revenue options and identify cost-cutting opportunities.

No action was taken on any of these ideas. But the board did vote to adopt the budget and tuition increases. Holsworth voted no.

Bacon’s bottom line: I have attempted to fairly describe the meeting highlights above. Now for some analysis. The board meeting saw little substantive discussion about the budget. Other than Holsworth, not one board member pushed back on the administration’s presentation of the budget or its justification for raising fees. I did not attend the earlier finance committee hearings in which the budget was examined in greater detail, but no one alluded to any disagreements in those meetings either.

VCU’s “unavoidable costs.” Click the thumbnail for a legible image.

The administration almost pre-determined the outcome by the way it framed the budget presentation. The FY 2017 budget was taken as a baseline — nothing was questioned — and new costs and programs were layered on top. Click on the thumbnail to the left to see the list of $8.3 million in “unavoidable” costs: everything from shuttle service and library journals to faculty promotions to operations & maintenance on new buildings.

Highest-priority needs. Click for legible image.

To those costs VCU added “highest priority needs” such as $1.8 million in merit-based financial aid, $3 million in need-based financial aid, and implementing a 3% increase in salary and compensation for faculty and staff. These and other priorities amounted to $19.3 million.

VCU picked a tuition increase — 3.8% — that closed most of the gap. A $3.8 million budget shortfall remains, which will be addressed “at the unit level across the university,” according to the press release.

VCU administrators provided data showing how state funding is chintzy compared to that of other states — as, in fact it is. Virginia’s $4,930 per student ranks 44th among the states, far less than the $6,966 national average.

But in a nearly $1.2 billion budget, there are many ways that VCU did not explore to make up the loss of $8 million in state support. For example, the administration provided no analysis of what private businesses would call product line profitability. VCU supports a wide variety of schools and departments — academic product lines — but the public, and board members, have no way of telling whether the courses are fully subscribed or ill attended. Businesses sell or shut down unprofitable product lines. VCU’s approach to the budget effectively treats every budget and department as sacrosanct. Continue reading

Probing the Limits of Tuition Hikes at VCU

VCU is going where no Virginia university has gone before: high tuition, needy student body, low financial aid.

VCU is going where no Virginia university has gone before: high tuition, needy student body, low financial aid.

Virginia Commonwealth University is pondering a tuition increase of between 3% and 5% — over and above a 2.8% increase for the current academic year — to compensate for an $8 million reduction in state appropriations and a 3% salary raise authorized by the General Assembly, reports the Richmond Times-Dispatch.

Meanwhile, the university plans to hire a firm to recruit more international students to bolster revenue with lucrative out-of-state tuition payments. (The total cost of attendance for an out-of-state student is about $19,000 higher than for an in-state student).

If the VCU board of visitors OKs the tuition hike, Virginians will get to observe an interesting experiment in higher-ed economics — how high can a second-tier university push tuition before diminishing enrollment? Is there an upper bound to the cost of attendance at which point students say, “No more!”?

VCU has increased its tuition aggressively over the past decade. By the 2015-16 academic year, the Richmond university had the second highest in-state cost of attendance of any public, four-year institution in the state: $26,700. That was higher than the University of Virginia’s and second only to the College of William & Mary’s. Likewise, VCU’s out-of-state cost of attendance, at $48,500, was the third highest. (I draw these numbers from the SCHEV’s higher education database.)

Two Virginia universities with stellar national reputations, the University of Virginia and the College of William & Mary, arguably have the latitude to boost their tuition & fees should they choose to do so. Perceived as near-Ivy League in quality, they likely could get away with charging near-Ivy League prices. Virginia Tech is not quite in the same league, but its undergraduate engineering school is one of the top rated in the country, so the institution probably has some pricing leeway, especially considering that its cost of attendance is lower than the state average.

Although VCU has a rising reputation among state universities, it has not reached the rarefied atmosphere where it can charge top dollar. Demand for a VCU education is more “elastic,” meaning that students are more sensitive to price increases. Here’s my question: Will higher prices at VCU push down enrollment by discouraging students from applying?

The chart below compares VCU to two peer institutions — big research universities located in large metropolitan areas — George Mason University and Old Dominion University — and adjusts the sticker price by the amount of financial aid provided.

“Financial aid per student” was derived by dividing total in-state financial aid by total in-state undergraduate enrollment. All numbers are for undergraduate students.

VCU is not a bargain: Its net cost of attendance per year is almost $2,500 higher than George Mason’s and about $11,000 higher than Old Dominion’s.

Now consider that VCU draws from a less affluent demographic base than, say, UVa or W&M. Sixty-eight percent of its students graduate with debt. Indeed, 29% of VCU students receive federal Pell grants reserved for lower-income students. Needless to say, these students are highly price sensitive.

How much in higher expenses can VCU’s less-affluent demographic absorb? At what point will enrollment numbers start declining? VCU’s board of visitors seems determined to probe the outer limit. Continue reading