Tuition, fees used to pay off skyrocketing university IOUs

August 2, 2018

Investigative Reports

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SC State agencies defy budget law

By RICK BRUNDRETT

If you’re a parent of a student attending a South Carolina public college or university, you probably haven’t been told how a good chunk of rising tuition and fees is being spent.

Under state law, tuition and other student fees can be used by schools to pay off certain bonds that typically are issued for construction projects. Over the past 10 years at four-year schools, tuition and required fees for undergraduates jumped by about 40 percent on average, state records show.

The total debt incurred mostly by those schools – primarily for building projects – shot up nearly 93 percent to $2 billion from fiscal 2008 through fiscal 2017, according to S.C. Commission on Higher Education (CHE) records. By law, most of that amount is supposed to be paid off with non-tax revenues, which include tuition and other student fees, a review by The Nerve found.

The school debt load per full-time student, including graduate students, as of June 30, 2017, averaged $17,583 – a nearly 60 percent hike from fiscal 2008, CHE records show. Another collective $130.4 million, or $2,464 per full-time student, was owed as the end of fiscal 2017 by the state’s technical colleges.

Next year, lawmakers reportedly plan to introduce a bill authorizing the borrowing of hundreds of millions more – the repayment of which would fall on taxpayers – for repairs at colleges and universities, and at other state buildings. A nearly $500 million, taxpayer-backed bond bill, about half of which was designated for higher education projects, died last year in the Legislature.

Yet colleges and universities have other pots of money to pay off their debts. For example, the University of South Carolina – the state’s largest university with eight campuses statewide – listed a total of $415 million as of June 30, 2016, that could be used for “any lawful purpose,” according to its most recent annual financial report.

Those reserves represented well more than half of the overall debt listed for the USC system at the end of fiscal 2016 in Commission on Higher Education records. And it wasn’t a one-time windfall: In the previous four fiscal years, that amount averaged nearly $356 million, according to the annual financial report.

Of the overall $2 billion in debt listed by the CHE for mostly four-year schools, at least $1.4 billion in “state institution” and revenue bonds, or nearly 70 percent of the total, is supposed to be repaid with non-tax revenues, which include tuition and other student fees.

Under state law, S.C. taxpayers are on the hook for all or part of $211 million of the $1.4 billion if tuition falls short.

And the CHE figures don’t include interest. A state treasurer’s report issued in January shows a total of $2.7 billion in principal and interest owed by 11 colleges and universities through 2047 on various school bonds to be repaid with tuition, fees or other non-tax revenue sources. Another nearly $100 million in principal and interest is owed through 2029 on a type of bond paid back exclusively by taxpayers.

Following is a top-10 ranking of outstanding school debt per full-time student as of June 30, 2017, based on CHE records:

  • S.C. State University: $26,335
  • Clemson University: $26,309
  • Coastal Carolina University: $26,057
  • Medical University of South Carolina: $23,153
  • College of Charleston: $21,654
  • USC Columbia (includes the School of Medicine and four other smaller campuses): $14,623
  • USC Upstate: $10,668
  • USC Aiken: $10,622
  • Winthrop University: $9,422
  • Lander University: $8,899

The Nerve this week sent written requests to USC, Clemson, MUSC, the College of Charleston and Coastal Carolina University for specifics on revenue sources used to pay off their bonds. USC and the College of Charleston did not respond by publication of this story; MUSC and Coastal Carolina could not immediately provide information.

In a written response, Mark Land, Clemson’s vice president of university relations, said tuition is used to pay off state institution bonds issued to “construct classroom buildings, make upgrades to key infrastructure like life safety and utility systems, and enhance the educational experience of its students.”

He noted those bonds make up a “modest portion” of the university’s overall debt, and that repayment of the bonds is “not a large driver of student costs.”

But according to the state treasurer’s annual debt report, those bonds make up $203.5 million, or about 23 percent, of the total $897.3 million in principal and interest owed by Clemson from this year through 2046 on bonds to be repaid with non-tax sources.

Billion-dollar budgets

College and university officials contend they have been forced to raise tuition and fees in recent years to offset a loss of state funding with the Great Recession. Tuition and student fees are included in “other” funds, typically the largest part of school budgets.

The South Carolina Policy Council, The Nerve’s parent organization, revealed in June that lawmakers voted to move a collective $3.7 billion in higher education “other” funds off-budget, making the overall state budget look smaller than it really is. Republican Gov. Henry McMaster vetoed a budget proviso authorizing the accounting change; lawmakers are expected to return next month to Columbia to take up the governor’s vetoes.

From fiscal 2009 through last fiscal year, the average tuition and required fees for a full-time, in-state undergraduate student at a four-year school, excluding MUSC, jumped by 39.5 percent, from $8,569 to $11,956, CHE records show.

“For 10 years, USC has offset drastic cuts to higher education and held tuition growth for South Carolina residents in check … The time has come for state government to re-engage with higher education,” USC president Harris Pastides wrote in last year’s university annual financial report.

State budget records show, however, that ratified state funding for USC’s eight campuses has grown by $65.6 million, or about 52 percent, since fiscal 2012. Its ratified total budget grew during the same period by $288.2 million, or about 26 percent, to nearly $1.4 billion for this fiscal year, including $986.4 million in “other” funds.

Tuition and required fees for a full-time, in-state undergraduate student at USC’s main campus in Columbia totaled $12,262 last school year, about a 39 percent jump from fiscal 2009, CHE records show.

The university’s annual financial report last year noted that its “overall financial position remains strong.”

Clemson University also belongs to the billion-dollar budget club: Its ratified $1 billion budget for this fiscal year, which includes $801.4 million in “other” funds, grew about 26 percent from fiscal 2012, state budget records show.

Tuition and required fees for a full-time, in-state undergraduate last school year totaled $14,712, about a 39 percent jump from fiscal 2009, according to CHE records.

The boards of trustees for Clemson and USC last month approved tuition increases ranging from 1.75 percent to about 3 percent for in-state undergraduates for the 2018-19 school year, according to media reports.

Brundrett is the news editor of The Nerve. Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter @thenervesc.

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