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F I S C A L I M P A C T R E P O R T

SPONSOR Nava

ORIGINAL DATE

LAST UPDATED

2/10/06

HB

SHORT TITLE Study Uniform College Tuition Rate

SJM 69

ANALYST Earp

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

Substantial Substantial Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Higher Education Department (HED)

SUMMARY

Synopsis of Senate Joint Memorial 69

Senate Joint Memorial 69 requests the Higher Education Department (HED), in conjunction with

the state public institutions of higher education, to study the potential benefits and feasibility of

charging nonresident and resident college students a uniform tuition rate. The department is di-

rected to report its findings to the Legislative Education Study Committee (LESC) during the

2006 interim.

FISCAL IMPLICATIONS

While the proposed study would, in itself, have no significant fiscal impact, it is noted that im-

plementation of a uniform tuition rate (if established at or near current resident student rates)

would have a substantial impact on the state general fund in future years. This impact would re-

sult from two primary causes:

1.

There would be an immediate loss of tuition revenue collected from currently-enrolled

students who are paying non-resident tuition rates. Tuition revenue is an offset against

the state general fund appropriation in the New Mexico higher education funding for-

mula, so the reduced tuition revenue would be replaced by increased state general fund

appropriations. For example, included in the fiscal year 2007 formula calculations for the

Senate Joint Memorial 69 – Page

2

New Mexico universities is approximately $13.5 million in non-resident tuition revenue.

This revenue would drop by roughly three-fourths if these students were assessed tuition

at resident rates, resulting in an increased general fund obligation of about $10 million.

(Non-resident rates at most of the universities are about four times the resident rate.)

2.

There would be a significant financial incentive for additional non-resident students to

enroll in New Mexico institutions of higher education. At current resident tuition rates,

tuition revenue constitutes roughly 20 to 25 percent of the average I&G expenditure level

per student. The state general fund is the only other variable revenue source in the higher

education funding formula; therefore, the general fund would assume approximately 75

to 80% of the cost of educating all the additional non-resident students who are attracted

to attend the New Mexico institutions.

SIGNIFICANT ISSUES

In addition to the potential fiscal implications identified above, this joint memorial raises a num-

ber of important public policy issues which could be addressed during the course of developing

the report:

•

What impact would increasing numbers of non-resident students at our public colleges

and universities have on the quality of our institutions. On the economy of the local

communities.

•

What responsibility does/should the state have to financially support the post-secondary

education of students from outside the state’s borders.

•

What portion of the cost of post-secondary education should be paid by the direct benefi-

ciaries (students) versus the general public (taxpayers) of the state. Should this portion

be different for resident and non-resident students.

•

What impact could a uniform tuition rate have on the long-term capacity of the state

higher education system.

•

What incentives should the state put in place for institutions to grow. Should the state

have the responsibility to increase capacity beyond the level required to support the en-

rollment of state residents.

•

How should the potential economic development impacts of higher education institutions

be factored into the public policy decisions relating to appropriate resident and non-

resident tuition charges.

•

What authority should the governing boards of the individuals institutions retain with re-

gard to establishing tuition rates.

Senate Joint Memorial 69 – Page

3

ADMINISTRATIVE IMPLICATIONS

HED would be responsible for consulting with the higher education institutions regarding the

proposed study and developing the report. The proposed study would require significant staff

effort during the 2006 interim.

OTHER SUBSTANTIVE ISSUES

HED reports that SJM69 potentially encroaches upon the statutory and constitutional authority of

the respective boards of regents at New Mexico’s public higher education institutions. Section

21-1-2 NMSA 1978 authorizes the boards of regents at the state’s educational institutions to es-

tablish and charge matriculation and tuition fees; while Section 21-1-3 gives a clear definition for

“resident student” in New Mexico. Further, Article XII, Section 13 of the New Mexico Constitu-

tion established the control and management of each institution by a board of regents.

DKE/nt