Special Examination Report No.

16-16 December 2016

Georgia Department of Audits and Accounts

Performance Audit Division
Greg S. Griffin, State Auditor
Leslie McGuire, Director

Why we did this review

This special examination of the cost of Board of Regents
higher education was requested by the
Senate Appropriations Committee.
The Committee asked that we review Requested Information on Higher
the cost drivers of public higher
education and the extent to which
Education Cost Drivers
fees cover associated expenditures at
University System of Georgia (USG) What we found
institutions.
Over the last ten years, decreased levels of state appropriations and
We reviewed how has funding of USG
changes to the HOPE scholarship have shifted a larger portion of
institutions changed over time and
how have these changes impacted the the cost of public higher education to USG students in the form of
cost of attendance. We identified both increased tuition. Students cost of attendance has further
the state and institution-level factors increased as a result of institution-level policy decisions to expand
driving cost. We compared the cost of requirements to live on campus and purchase meal plans and to
attendance at USG institutions to increase mandatory fees to fund such items as new facilities and
peer institutions in other states. Also, expanded athletics programs. From fiscal year 2006 to 2015, USG
we reviewed what expenditures are students average cost of attendance increased 77% from $8,361 to
covered by fees and to what degree do $14,791 per year.1 When adjusted for enrollment growth and
these fees offset these costs inflation, these changes have not significantly impacted USG total
About Higher Education revenues.2
Costs
USG Funding
A students cost of attendance
includes tuition, mandatory fees, USG revenue increased from $4.8 billion in fiscal year 2006 to $7.6
housing, dining, books and supplies billion in fiscal year 2015 (a 5.9% average annual increase). When
and personal expenses. The average adjusted for enrollment growth, USG revenue per FTE increased
published tuition and mandatory fees by 2.6% annually, which tracks closely with the rate of inflation
at USG institutions for 2016-17 was over the ten-year period shown below.
$6,633 annually. The average lowest
cost housing and dining rates at USG
institutions was $8,302 annually.
USG students may receive grant or
scholarship aid which reduces the
cost of attendance. The average net
cost of attendance for USG students
considering tuition, fees, housing and
dining minus financial aid in 2013-
142 was $8,290.

1 These costs include tuition, fees, room and board only.

2 The data presented is the most recent available.

270 Washington Street, SW, Suite 1-156 Atlanta, Georgia 30334 Phone: (404)656-2180 www.audits.ga.gov
Between fiscal years 2006 and 2015, state appropriations failed to keep pace with enrollment, which
effectively resulted in a 15% decrease (or a $1,288 per FTE decrease) in USG funding. To offset this decrease,
USG increased tuition and instituted a special institutional fee, which did not fully offset the loss in state
appropriations when considering inflation. Increases in the average tuition rate (including the special
institutional fee) ranged from 86% at USGs state colleges to 55% at its comprehensive universities over
the 10-year period.

Cost of Attendance
In addition to tuition increases, changes to the HOPE Scholarship and institution-level decisions to
increase mandatory fees and expand auxiliary programs have also played a role in students increased cost
of attendance. The average HOPE Scholarship award decreased by 22% ($1,087 per year) and changes in
eligibility criteria reduced the number of awards made. Additionally, USG institutions have increased
mandatory fees, excluding the special institutional fee, by an average of $218 (75%) per semester from $292
to $510 since 2006. Increases in elective fees for auxiliary programs such as housing and dining have also
had an impact on student costs. Over the past ten years, seven USG institutions have added on-campus
housing, shifting from commuter-only to residential campuses. Nineteen USG institutions mandate first-
year students reside in on-campus housing and 18 of these institutions require students to purchase meal-
plans. Typical housing expenses for USG students have increased 56% and typical dining expenses have
increased 60%, both more than double the inflation rate.

Despite these increases, the cost of attendance remains lower at most USG institutions than at peer
institutions in other states. In fiscal year 2014, tuition and fee rates charged by USG institutions averaged
25% less than the rates charged by peer institutions in other states. In addition, for students residing in
on-campus housing, the total price of attendance was lower at 23 of the 26 USG institutions with on-
campus housing than at peer institutions in other states.

Auxiliary Enterprises
Auxiliary enterprises are used to manage non-academic services provided to students, such as housing and
dining, parking and intercollegiate athletics. BOR policies state that auxiliary enterprises should be
operated on a self-supporting basis, where the combination of fees and other revenues is sufficient to meet
costs of the service. However, institutions are allowed to have a deficit in an auxiliary enterprise if the
deficit is covered by a surplus in another auxiliary enterprise. In fiscal year 2015, 19 of 29 USG institutions
had a negative fund balance in at least one auxiliary enterprise. In addition, USG institutions are allowed
to retain unexpended revenues from year to year creating fund balances. BOR does not have a policy
limiting growth in fund balances, or require USG institutions to provide specific plans for the use of these
fund balances.

BORs Response: BOR noted that the report provides useful and relevant information. The Chancellor stated that he and
BOR recognize the importance of providing their students an affordable, accessible, and high quality education. To meet those
goals, BOR has taken multiple actions to balance providing access to students across Georgia while maintaining quality in
resident instruction and core functional areas. Strategic actions taken include measures to reduce and to control costs to
students while also better managing expenses incurred in performing their mission.
BOR also noted that even though the report does not make formal recommendations, it does highlight several opportunities for
BOR to further enhance affordability to students. To that end, the Chancellor-Elect plans to introduce policy changes in early
2017 to address some of the issues noted around dining and other areas associated with auxiliary services.
BOR: Cost Drivers of Higher Education i

Table of Contents
Purpose of the Special Examination 1

Background
University System of Georgia 1
Enrollment 2
Cost of Attendance 6
Financial Information 7
U.S. Higher Education Data 7

Requested Information
How has funding of USG institutions changed over time and how have these changes
impacted cost of attendance? 9
What are the state-level factors driving increases to students cost of attendance at
USG institutions? 10
What are the USG institution-level factors driving student cost increases? 14
How does the cost of attendance for students at USG institutions compare to peer
institutions in other states? 21
What additional factors impact the cost of attending a USG institution? 24
What are the academic versus non-academic expenditure trends at USG
institutions? 26
What expenditures are covered by fees and to what extent do the fees offset program
costs? 29

Appendices
Appendix A: Objectives, Scope, and Methodology 31
BOR: Cost Drivers of Higher Education ii
BOR: Cost Drivers of Higher Education 1

Purpose of the Special Examination

This review was conducted at the request of the Senate Appropriations Committee.
The Committee requested that we identify the factors driving cost increases focusing
on academic versus non-academic expenditures at University System of Georgia
(USG) institutions and the extent to which fees cover associated expenditures at the
institutions. Based on this request we addressed the following questions:

1. How has funding of USG institutions changed over time and how have these
changes impacted the cost of attendance?
2. What are the state-level factors driving increases to the cost of attendance at
USG institutions?
3. What are the institution-level factors driving increases to the cost of
attendance at USG institutions?
4. How does the cost of attendance at USG institutions compare to peer
institutions in other states?
5. What additional factors impact the cost of attending a USG institution?
6. What are the academic versus non-academic expenditure trends at USG
institutions?
7. What expenditures are covered by fees and to what degree do fees offset
these costs?
A description of the objectives, scope, and methodology used in this review is included
in Appendix A. A draft of the report was provided to the University System of Georgia
for its review, and pertinent responses were incorporated into the report.

Background

University System of Georgia

Under the Constitution and laws of the state of Georgia, the Board of Regents (BOR)
of the University System of Georgia (USG) was created to govern, control and manage
a system of public institutions providing quality higher education for the benefit of
Georgia citizens. BOR oversees 29 colleges and universities, including four research
universities, four comprehensive universities, 10 state universities, and 11 state
colleges. Exhibit 1 on the following page shows the name and location of each
institution. The collective mission of the USG institutions is to drive economic
development and produce more educated individuals contributing to a better quality
of life in the state.
BOR: Cost Drivers of Higher Education 2

Exhibit 1
Locations of Institutions within University System of Georgia

Enrollment
Total full-time equivalent (FTE) enrollment at USG institutions increased from
approximately 219,000 to 277,000 between 2006 and 2015, an increase of 27%. This
growth rate exceeds national trends for public institutions, which shows enrollment
growth of 13%. As shown in Exhibit 2, USG enrollment growth has consistently
outpaced average growth in public institutions nationally. USGs enrollment
continued to increase to its peak level in 2012 after which enrollment declined 1.8% by
fiscal year 2015.
Exhibit 2
USG FTE Enrollment Percentage Growth Surpassed Public Institutions
Nationally, Fall 2006- Fall 2015
40%

30% 27%
USG

20%

13%
10% National

0%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: USG enrollment data, NCES IPEDS data
BOR: Cost Drivers of Higher Education 3

As shown in Exhibit 3, for the most recent five-year period enrollment trends vary
from institution to institution with the majority of growth concentrated among a
few institutions.

Exhibit 3
Fall FTE Enrollment Declined at a Majority of USG Institutions,
Fiscal Years 2011- 2016
4,000 3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000

Georgia Gwinnett College 5,339

Kennesaw State University 3,819

Georgia Institute of Technology 2,815

University of North Georgia 2,103

University of Georgia 1,551

University of West Georgia 1,318

Georgia State University 853

Georgia Southern University 785

Savannah State University 684

Georgia College & State University 280

Georgia Highlands State College 220

Clayton College & State University 169

Columbus State University 111

Abraham Baldwin Agricultural College 89

-74 East Georgia College

-99 Atlanta Metropolitan College
-104 Darton College
-168 College of Coastal Georgia
-361 Georgia Southwestern State University
-487 Armstrong Atlantic State University
-538 South Georgia State University
-694 Dalton College
-939 Gordon College
-983 Fort Valley State University
-1,120 Albany State University
-1,186 Augusta State University
-1,304 Bainbridge College
-1,643 Middle Georgia State University
-1,866 Valdosta State University
-3,948 Georgia Perimeter College1

4,000 3,000 2,000 1,000 0 1,000 2,000 3,000 4,000 5,000

(1) Georgia Perimeter College consolidated with Georgia State University in fiscal year 2017.
Source: USG enrollment data

Public Higher Education Funding

USG institutions are funded through multiple revenue sources including state
appropriations, tuition, grants and contracts, donations, mandatory and other student
fees, and auxiliary service fees, such as housing and dining fees. Annual state
appropriation levels are determined through a funding formula. The formula
approximates the total cost of educating students based on credit hour production
(number of students being educated). Generally, the portion of the cost of educating
BOR: Cost Drivers of Higher Education 4

students not funded by state appropriations is funded by tuition and fees. The
majority of formula funds support instruction, research, public service, student
services, institutional support and technology. The formula also provides funding for
operation and maintenance costs of the physical plant, which is calculated on a per
square foot basis.

While the General Assembly appropriates state funds to the USG, BOR determines
the amount of state funds to be allocated to each institution. In addition, BOR
establishes the tuition rates for each type of institution and approves mandatory fees
requested by individual institutions.

Tuition
Tuition supports the academic mission of USG institutions and is used to fund:

Instruction- activities associated with an institutions instruction program;

Research- activities specifically organized to produce research;
Public Service- activities established primarily to provide non-instructional
services beneficial to individuals and groups external to the institutions such
as community service programs;
Academic Support- activities including curriculum development, technology
and media services that support the institutions primary missions of
teaching, research, and public service;
Student Services- services provided by the offices of admissions and the
registrar and activities designed to contribute to the students emotional and
physical well-being including student clubs, cultural events, intramural
athletics, counseling and career guidance.
Institutional Support- administrative activities including fiscal operations,
human resource management, procurement, etc.
Plant Operations and Maintenance- operations established to provide
services and maintenance related to grounds and facilities.
Scholarships and Fellowships- grants to students resulting from selection by
the institution or from an entitlement program.

As shown in Exhibit 4, fiscal year 2017 undergraduate in-state tuition rates for full-
time students vary by institution type and range from $1,363 per semester to $4,906
per semester.

Exhibit 4
In-State Tuition Rates for Full-Time Undergraduate Students Vary By
Institution Type, Fiscal Year 2017
Type of Institution Tuition Rates Per
Semester
Research University $3,296-$4,906
Comprehensive $2,613-$2,660
University
State University $1,630-$2,676
State College $1,363-$1,922
Source: USG data
BOR: Cost Drivers of Higher Education 5

Mandatory Student Fees

According to BOR policy, a mandatory fee is any fee or special charge that is required
to be paid by all full-time, undergraduate students at an institution or by all
undergraduate students in a specific degree program. There are many types of
mandatory student fees, including, but not limited to, fees for intercollegiate athletics,
student activities, student health services, parking, transportation, and facilities
development.

USG institutions may charge different types of mandatory student fees at rates
associated with their unique needs, with the approval of BOR. For example, all USG
institutions charge an Activity Fee (ranging from $33 to $200 per semester); whereas
only five institutions charge an International Fee3 (ranging from $5 to $19 per
semester). As shown in Exhibit 5, the total mandatory student fee rates charged by
each institution range from $427 to $1,478 per semester.

Exhibit 5
Total Mandatory Student Fees for Full-Time Undergraduate Students
Vary By Institution Type,
Fiscal Year 2017
Type of Institution Total Mandatory Fee
Rates Per Semester
Research University $915-$1,200
Comprehensive $981-$1,478
University
State University $641-$1,011
State College $427-$1,102
Source: USG data

The mandatory fee rates shown in Exhibit 5 do not include the cost of USG institution
mandated on-campus housing and the mandated purchase of meal plans. These costs
are discussed in the following section.

Auxiliary Services
According to BOR policy, an auxiliary service is an activity that exists to provide a
service directly or indirectly to students, faculty or staff. Auxiliary services are funded
on a self-supporting basis and are not subsidized by state appropriations or general
revenues. Examples include housing, food services, student activities, intercollegiate
athletics, campus bookstores, and parking. Auxiliary services such as college
bookstores are supported through sales. Other auxiliary services, such as
intercollegiate athletics, are supported by mandatory student fees as well as revenue
from other sources, such as ticket sales.

On-campus housing and dining (food services) are mandatory at some institutions.
USG institutions may require students to live on campus with prior notification to
the USG chancellor and subject to the chancellors review. Currently, 19 of the 29 USG
institutions require full-time freshman students to reside on campus. In addition, 18
of these institutions mandate that full-time freshman students purchase meal plans.
Mandatory on-campus housing and meal plans range in cost, from $6,050 per year at
Albany State University to more than $11,000 per year at Georgia Gwinnett College.

3 The International Fee may be used to offer scholarships to students who study abroad.
 BOR: Cost Drivers of Higher Education 6

Cost of Attendance
The cost of attendance is the estimated total cost of attending a higher education
For the purposes institution as a full-time student. It is published by each institution and includes
of this report, the tuition, fees, and on-campus housing and dining, and expenses for books, supplies,
cost of attendance and transportation. This report focuses on tuition, fees, housing and dining as they are
includes tuition, the largest cost components. The cost of attendance is the full cost students are
mandatory fees, charged, and does not take into account financial aid.
housing, and
dining. In fiscal year 2017, the average cost of attendance at USG institutions was $7,468 per
semester. As shown in Exhibit 6, cost of attendance ranges from $5,157 to $11,520 per
semester.

Exhibit 6
The Cost of Attendance1 at USG Institutions2 for In-State, Full-time Students
Residing On-Campus Ranges from $5,157 to $11,520 per Semester, Fiscal Year
2017

(1)
The cost of attendance is estimated based on the lowest cost housing and meal plan options available for first-
year residential students.
(2)
Only USG institutions that provide on-campus housing and meal plan options are included.

Source: Georgia Board of Regents, USG institution policies

Scholarship and Grant Aid

Students who receive scholarship and grant aid do not pay the full cost of attendance.
The amount students actually pay after taking into account scholarship and grant aid
BOR: Cost Drivers of Higher Education 7

is commonly referred to as the net cost of attendance. In fiscal year 2014, full-time, first-
year, undergraduate residential students awarded scholarship or grant aid received an
average aid award of $6,010 per year reducing their annual cost of attendance from an
average of $14,300 to an average net cost of $8,290.

Scholarship and grant aid includes federal, state, and institutional awards. Federal
grant aid is primarily composed of Pell grants, which provide up to a maximum annual
value of $5,775 and is awarded based on financial need. The HOPE scholarship is the
primary source of state grant aid in Georgia and is awarded based on academic
achievement. Other sources of grants or scholarships include merit or need-based
awards issued by USG institutions.

Student loans do not impact the net cost of attendance. Unlike scholarships and
grants, loans are required to be repaid in the future. Student loans are used by some
students to pay the net cost of attendance.

Financial Information
As shown in Exhibit 7, state appropriations, tuition and fees comprise the majority of
total funding to the USG. The majority of operating expenditures are associated with
personal services costs such as salaries and benefits.

Exhibit 7
USG Revenue and Expenditures, Fiscal Years 2014-2015
Revenue 2014 2015
State Appropriations $1,880,492,086 $1,942,664,302
Tuition & Fees 1,751,606,706 1,865,059,386
Federal Appropriation 18,770,294 21,757,958
Grants & Contracts 2,118,470,118 2,167,795,426
Sales & Services 182,725,700 209,425,200
Rents & Royalties 2,926,002 4,991,663
Auxiliary Enterprises 847,423,017 885,065,041
Capital Grants & Gifts 149,750,387, 385,621,578
Other 85,518,622 94,857,927
Total Revenue $7,037,682,932 $7,577,238,451
Operating Expenditures
Personal Services $4,416,495,701 $4,577,223,561
Travel 71,378,144 76,556,399
Scholarships 318,139,424 313,019,514
Utilities 183,570,984 191,486,623
Supplies/Other Service 1,702,974,606 1,836,338,935
Depreciation 445,565,188 459,368,084
Total Expenditures $7,138,124,047 $7,452,993,116
Source: USG Annual Financial Reports

U.S. Higher Education Data

The Integrated Postsecondary Education Data System (IPEDS) contains
comprehensive data regarding higher education in the United States. IPEDS is a
system of surveys conducted annually by the U.S. Department of Educations National
Center for Education Statistics (NCES). IPEDS surveys all higher education
institutions that participate in federal student financial aid programs. Higher
education institutions report data on enrollment, program completion, graduation
rates, faculty and staff, finances, institution costs, and student financial aid. This
BOR: Cost Drivers of Higher Education 8

includes published tuition, mandatory student fees, on-campus room and board,
average scholarship and grant aid amounts, and faculty composition.

Comparable Institutions in Other States

Higher education institutions are compared to peer institutions to benchmark
finances, enrollment, graduation rates, and other data points using IPEDS data. USG
institutions created a list of their peer institutions in 2009. Also, IPEDS lists peer
institutions. The peer institutions in IPEDS are either generated by NCES or
institutions may self-report their peer institutions as part of the IPEDS survey.
BOR: Cost Drivers of Higher Education 9

Requested Information

How has funding of USG institutions changed over time and how have these
changes impacted cost of attendance?

USG system revenue increased from $4.8 billion in fiscal year 2006 to $7.6 billion in
fiscal year 2015, a 5.9% annualized or 59% cumulative growth rate. As shown in
Exhibit 8, when adjusted for enrollment growth, USG revenue per FTE increased by
2.6% annually or 26% cumulatively, which tracks closely with the rate of inflation over
the ten-year period shown below.4

Exhibit 8
Growth in Total Revenue per FTE is Consistent with Inflation, Fiscal Years 2006-
2015
$30,000 Revenue per FTE if
growth in revenue =
inflation
$25,000
Other

$20,000 Federal Appropriations, Grants &

Contracts
Auxiliary Enterprises
$15,000

Tuition & Fees

$10,000

$5,000
State Appropriations

$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: USG Annual Financial Reports, USG Enrollment data, and U.S. Bureau of Labor Statistics

Although total USG revenue has not significantly increased in real terms, the portion
funded by students has increased from 26% in fiscal year 2006 to 36% in fiscal year
2015. This change is the result of a 15% decrease in state appropriations for instruction
and a corresponding increase in tuition and fees. In addition, USG institutions
increased and expanded mandatory student fee programs and auxiliary enterprise
programs. (These decisions are discussed in more detail on pages 11-22.)
As shown in Exhibit 9, the impact of these changes has increased students cost of
attendance by an average of 77% (from $8,361 in fiscal year 2006 to $14,791 in fiscal
year 2015) for in-state full-time students residing on-campus. The average increase in
cost of attendance ranged from 97% at USGs state colleges to 55% at USGs
comprehensive universities.

4 Inflation, as measured by the consumer price index (CPI), increased by 2.0% annually or 20.0%
cumulatively from fiscal years 2006 to 2015.
BOR: Cost Drivers of Higher Education 10

Exhibit 9
Increases in Tuition, Fees, Housing and Dining Rates1 Have Increased the
Cost of Attendance for In-State Students Residing On-Campus, Fiscal
Years 2006-2015

(1) Includes average tuition and fees rates for all USG institutions and average typical housing and dining
costs reported by USG institutions to NCES.

Source: NCES IPEDS data

What are the state-level factors driving increases to students cost of attendance
at USG institutions?

Reductions in state appropriations and HOPE scholarship benefits have increased the
cost of attendance for USG students. To offset the reduction in state funds, the BOR
increased tuition rates and instituted a system-wide mandatory student fee to fund
instruction.

Over the past ten years, state appropriations to USG have decreased by $1,288 per FTE
student from $8,312 to $7,024. To generate revenue sufficient to offset reduced state
appropriations, USG increased tuition rates by an average of $1,144 per semester from
2008 to 2017 and instituted the Special Institutional Fee, an alternative form of tuition,
which additionally increased student costs. As shown in Exhibit 10, tuition rate
increases vary by type of institution with the four Research Universities incurring the
largest average increase of 109% and state colleges incurring the smallest average
increase of 66%.
BOR: Cost Drivers of Higher Education 11

Exhibit 10
In-State Tuition Rate Increases for Full-Time Undergraduate Students
Vary By Institution Type, Fiscal Years 2008 to 2017
Type of Institution 2008 Average 2017 Average Percent
Tuition Tuition Increase
Research University $2,044 $4,280 109.4%
Comprehensive $1,357 $2,625 93.4%
University
State University $1,356 $2,420 78.4%
State College $890 $1,473 65.5%
Source: USG data

As shown in Exhibit 11, the Special Institutional Fee adds from $170 to $544 to
students cost of attendance per semester.

Exhibit 11
Special Institutional Fees for Full-Time Undergraduate Students Vary By
Institution Type, Fiscal Year 2017
Type of Institution Special Institutional Average Percent of
Fee Tuition
Research University $355-$544 9%
Comprehensive $290-$300 10%
University
State University $202-$275 9%
State College $170-$245 12%
Source: USG data

As shown in Exhibit 12, additional revenue generated by tuition rate increases and the
implementation of the special institutional fee did not completely offset the loss in
state appropriations. After adjusting for inflation, from fiscal years 2006 to 2015, state
appropriations per FTE student declined by $2,448 while tuition and fee rate
increases generated $2,069 additional revenue per FTE student, leaving a funding
deficit of $379 per FTE student. As shown in Exhibit 25 on page 28, USG institutions
have reduced spending on activities funded with tuition and appropriations revenue,
such as instruction and public service.
Exhibit 12
Considering Enrollment and Inflation, Tuition and Fee Increases Have
Not Fully Offset Losses in State Appropriations, Fiscal Years 2006-2015
Funding Deficit

$379
- $2,448

+ $2,069

Appropriations Revenue Reduction Tuition Revenue Increase

Source: USG annual financial reports and enrollment reports, Bureau of Labor Statistics
 BOR: Cost Drivers of Higher Education 12

As shown in Exhibit 13, the reduction in state appropriations, the increase in tuition,
and the addition of the Special Institutional Fee increased students share of funding
by approximately 20 percentage points since fiscal year 2006, from 30% to 49%. The
states share of funding correspondingly declined from 70% in fiscal year 2006 to 51%
in fiscal year 2015.

Exhibit 13
The Reduction in State Appropriations Has Increased the Share of Costs
Funded By Students: Fiscal Years 2006-2015

$16,000

$14,000

$12,000
30% Tuition and
$10,000 30% 49%
Fees
44%
$8,000

$6,000

70% 70%
$4,000 State
56% 51% Appropriations
$2,000

$0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: USG annual financial reports and enrollment reports

USG Funding Formula

State appropriations and tuition fund operations for USGs Teaching Program which includes
activities related to instruction, research, academic and institutional support, and plant
operations. The primary USG funding mechanism is the funding formula which calculates the
funding required for faculty, staff, and support expenditures necessary to fund workload
based on enrollment. Historically, state appropriations were set at a level sufficient to provide
75% of required funding and tuition rates were set at a level sufficient to provide the
remaining 25% of funds.

HOPE Scholarship
A variety of legislative changes to the Helping Outstanding Pupils Educationally
Net Cost of (HOPE) state scholarship program have increased the net cost of attendance for
attendance is the students that qualify for the scholarship. The HOPE Scholarship was created in 1992
price students to provide tuition assistance for Georgia residents obtaining a postsecondary
actually pay to education. It is a merit-based scholarship available to Georgia residents who have
attend an institution. graduated from high school with a minimum 3.0 grade point average (GPA). The
It is the cost of scholarship originally covered 100% of students tuition expenses, mandatory student
attendance minus fees, and book expenses. The following changes to this award increased eligibility
any grants and
requirements and decreased award amounts.
scholarships a
student receives.
House Bill 1325 2004 Legislative Session: This bill changed eligibility by
requiring that students maintain a 3.0 cumulative GPA at the end of each
spring semester to remain eligible for the HOPE scholarship. This bill also
reduced scholarship award amounts by limiting the book award to $150 per
semester and capping the mandatory student fee award amount to January
2004 levels.
BOR: Cost Drivers of Higher Education 13

House Bill 326 2012 Legislative Session: This bill reduced the scholarship
award from funding 100% of tuition to funding only a portion of tuition, which
currently ranges from 71% at the Georgia Institute of Technology to 88% at 12
state colleges. The bill also created a new scholarship program, the Zell Miller
Scholarship, which provides 100% tuition awards for Georgia residents who
graduate from high school with a minimum 3.7 GPA and have a combined
math/reading SAT score of at least 1200. These students must maintain a
minimum 3.3 GPA to remain eligible. Lastly, the bill eliminated awards for
mandatory student fees and book expenses.

The average HOPE Scholarship award decreased by 22% ($1,087 per year) and changes
in eligibility criteria reduced the number of awards made. As shown in Exhibit 14,
implementation of House Bill 326 reduced the average award amount for over 80% of
HOPE recipients. In fiscal year 2012, 89% of scholarship recipients qualified for the
HOPE scholarship versus the new Zell Miller Scholarship; however, the average
award amount declined by 26% as the program now only covers a portion of tuition
expenses. A smaller portion of students eligible to receive the Zell Miller Scholarship,
18% in fiscal year 2016, continue to receive full tuition awards. The average award for
these students has increased by 62% since fiscal year 2011. This increase is caused by
increasing tuition rates.

Exhibit 14
HOPE Program Changes Occurring in Fiscal Years 2004 and 2012
Reduced the Number of Students Receiving Awards and Reduced Award
Amounts for Over 80% of Scholarship Recipients, Fiscal Years 1994-2016
120,000
Number of Zell Miller
Scholarships
100,000

80,000

60,000 Number of HOPE Scholarships

40,000

20,000

-
$9,000
Zell Miller Average
$8,000 Award Amount
$7,000

$6,000

$5,000

$4,000

$3,000 HOPE Scholarship

HOPE award
Average Award
$2,000 reduced and
Amount
Zell Miller Award
$1,000 Created
$-
1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source: Georgia Student Finance Commission data

BOR: Cost Drivers of Higher Education 14

Another factor increasing the net cost of attendance for students receiving HOPE is
that USG implemented a system-wide general purpose mandatory student fee. While
the fee is an alternative form of tuition, USG implemented this increase as a fee rather
than increasing tuition. The fee is not covered by HOPE. We estimate that in fiscal
year 2016 students funded $61.4 million in USG costs that would have been previously
covered by the HOPE scholarship program had BOR increased tuition rather than
create the new Special Institutional Fee. This has increased net cost of attendance by
an average of $580 per year.

BORs Response: The Board of Regents implemented a 0% tuition increase for the 2016-2017
academic years and has averaged tuition increases of 2.47% over the past five years.

What are the USG institution-level factors driving student cost increases?

Institution-level decisions to increase mandatory fees and auxiliary programs have

contributed to the increase in cost of attendance. Increases in mandatory fees are due
to a multitude of factors including the construction of new student fee-funded
facilities, the addition or expansion of intercollegiate athletic programs, the expansion
of student activity programs, and insufficient revenue generated from current fee rates.
Increases in auxiliary fees are due to the addition of on-campus housing and dining
services or the construction of new housing and dining facilities. USG institutions are
authorized to determine mandatory fees and fees associated with auxiliary services,
with the approval of BOR. Because USG students are required to pay mandatory fees
and may be required to pay fees for auxiliary services, these fees are a significant
component of their cost of attendance.

Mandatory Fees
Mandatory fees charged by USG institutions in fiscal year 2017 vary from $763 per
semester at Valdosta State University to $202 at the University of North Georgia-
Gainesville campus.5 Over the past ten years, USG institutions have significantly
increased mandatory fees by an average of $218 (75%) per semester from $292 to $510.
As shown in Exhibit 15, these increases have varied at the USG institutions ranging
from $368 (119%) at Savannah State University to $42 (26%) at the University of
North Georgia-Gainesville.

The addition or increase in mandatory fees has a cumulative impact on a students

total cost of attendance. For example, if a fee is increased by $100 per semester, it could
increase the total cost of a four-year degree by as much as $800 if the student graduates
within eight semesters.

5The Special Institutional Fee is not included in this analysis because it fee is a system-wide general
purpose fee determined by the Board of Regents and used for the same purpose as tuition revenue.
BOR: Cost Drivers of Higher Education 15

Exhibit 15
Mandatory Fees for Full-Time Undergraduate Students Have Significantly Increased At
Most USG Institutions, Fiscal Years 2008-2017

Source: USG data

Facility-Related Student Fees

A significant driver in the increase in mandatory fee rates is the addition or increase in
facility-related fees. The majority of USG institutions (26 of 29) charge facility-related
fees to support capital lease payments on bond-financed facilities. The bonds for these
facilities will be repaid typically within 20 to 30 years. Facilities funded by these fees
include student centers, recreation centers, parking decks, and stadiums.
Since fiscal year 2008, 20 USG institutions have implemented a total of 23 new facility-
related mandatory student fees increasing total student costs by an average of $143 per
semester. In addition to the 23 new fees, 14 institutions have increased the rates for
existing facility-related fees by an average $56 per semester. USG institutions increase
facility-related fees typically because the initial fee rate was insufficient to generate
the funds needed for the required debt service or for the operations of the facility. In
some instances this occurred because USG institutions did not accurately estimate
operating costs or other revenue sources in the original funding projection.
Additionally, as shown in the example in Exhibit 16, enrollment growth projections
used in the funding pro-forma to calculate projected student fee revenue did not
materialize. Consequently, USG institutions with lower than projected enrollment
growth increased rates for these facility-related fees to generate needed revenue.
BOR: Cost Drivers of Higher Education 16

Exhibit 16
Albany State University Increased the Student Center Fee by $76 Per Semester to
Offset Lower Than Projected Enrollment, Fiscal Years 2011-2016

Source: USG data

Intercollegiate Athletic Fees

Athletic fees are often the highest mandatory fee at USG institutions. Currently, USG
institutions charge an average $155 athletic fee per semester. Over the past ten years,
all USG institutions, with the exception of the University of Georgia and Bainbridge
State College6, have either added a new athletic fee or have increased existing athletic
fees. These new or increased fees have increased student costs by an average of $66 per
semester. Five institutions added an athletic fee to support newly established
intercollegiate athletic programs increasing student costs from $83 at Dalton State
College to $175 at Augusta University-Health Sciences campus. The remaining 23
USG institutions increased the fee for established intercollegiate athletic programs by
$10 at Abraham Baldwin Agricultural College to $137 at the College of Coastal
Georgia.
As discussed in the following examples, some fee increases were due to significant
athletic program changes including the addition of new sports programs or the move
to different conferences, divisions, or athletics associations.
The College of Coastal Georgia increased its fee from $38 to $145 per semester
in fiscal year 2011 to fund the addition of eleven sports programs and its move
from the National Junior College Athletics Association (NJCAA) to the
National Association of Intercollegiate Athletics (NAIA). In fiscal year 2014,
the college increased the fee by another $30 to the current $175 rate. According
to the Colleges five-year plan for its athletics program, these changes were
part of a strategy to transform the institution to a destination college with a rich
array of student life including intercollegiate athletics, club sports, and
intramurals.
Savannah State University increased its fee from $173 to the current $300 per
semester rate due to increased operating expenses incurred as a result of the
Universitys move in fiscal year 2010 to the Mid-Eastern Athletic Conference
as a Division I member. Although athletic program expenditures continue to
outpace student fee and other athletic revenue sources, university officials

6
Bainbridge State College does not have an intercollegiate athletics program.
 BOR: Cost Drivers of Higher Education 17

stated that admittance into the Division 1 conference provides the

opportunity for the university to grow non-fee revenue through increased
ticket sales and game guarantee revenue.
Georgia State University increased its fee from $142 to $357 per semester in
fiscal year 2009 to fund the addition of an intercollegiate football program and
to move from NCAA Division I-AA to Division I-A. The fee has since decreased
to its current rate of $277 per semester.
Kennesaw State University increased its fee from $117 to $252 in fiscal year
2014 to fund the addition of an intercollegiate football program and to move
from NCAA Division I-AAA to Division I-AA. The fee has since decreased to
its current $221 rate.
Changing Character of USG Campuses
Over the past ten years, seven USG institutions have added on-campus housing,
shifting from commuter-only to residential campuses. Since becoming residential
campuses, these institutions have added mandatory student fees to fund programs
and services typically associated with residential campuses such as intercollegiate
athletics and student recreation. These fee increases impact all students, not just
those residing on campus. For example, East Georgia State College added on-
campus housing in fiscal year 2011 and added $195 per semester in additional
mandatory fees to fund new programs including intercollegiate athletics, student
health, and student transportation.

USG institutions use Auxiliary Enterprise Programs

auxiliary enterprises
to manage the non- Increases in elective fees for auxiliary programs such as housing and dining have
academic services also had a large impact on total student costs. Housing and dining fees comprise the
they provide such as largest cost for students who reside on-campus.
student housing and
dining, parking,
Mandatory Housing and Dining Policies
health services, and Although housing and dining are auxiliary programs and their fees are considered
intercollegiate elective, as shown in Exhibit 17, 19 USG institutions require full-time first-year
athletics. Auxiliary students to reside in on-campus housing and 18 of those institutions require these
enterprises are students to purchase a meal plan.7 These requirements significantly increase the total
primarily funded mandatory costs for first-year students by an average of $7,923 per year. Two
through both
institutions, Kennesaw State University8 and Georgia Gwinnett College, require
mandatory and
commuter students to purchase meal plans increasing these students costs by an
elective fees paid by
average of $408 per year.
students.

7 Most institutions with these mandatory policies allow exemptions for students whose permanent
address is in close proximity to the institution, who are married, or who are the custodial parent of a
dependent child.
8 Kennesaw State University will eliminate all mandatory commuter student meal plans effective Fall

2018.
BOR: Cost Drivers of Higher Education 18

Exhibit 17
Housing and Dining Requirements Increase Mandatory Costs for Full-Time
First-Year Students by an Average $7,923 per Year, Fiscal Year 2017
Research Comprehensive State Universities State Colleges
$20,000

$15,000

Dining
$10,000

Housing
$5,000
Fees

Tuition
$-
University of Georgia

Albany State University

Darton College
Dalton College

Gordon College
Georgia Institute of Technology

College of Coastal Georgia

Augusta University-Health Sciences

Georgia Southern University

Kennesaw State University

Bainbridge College
University of West Georgia

Armstrong State University

Clayton College & State University

Fort Valley State University

Georgia SW State University

Savannah State University

University of North Georgia-Gainesville

East Georgia College

Middle Georgia College

South Georgia College
Georgia Gwinnett College
Georgia State University

Valdosta State University

Columbus State University

Abraham Baldwin Agricultural College

Augusta University-Summerville Campus

University of North Georgia-Dahlonega

Atlanta Metropolitan College

Georgia College & State University

Georgia Highlands College/Floyd College

Georgia State University-Perimeter College
Source: USG data and USG institution policies

USG institutions may require students to purchase a meal plan level in excess of their
demand, increasing cost of attendance. Of the 18 USG institutions that require first-
year students to purchase a meal plan, the minimum plan that students are required
to purchase varies from 8 meals per week to 21 meals per week and costs from
approximately $1,500 to $2,000 per semester. We reviewed meal plan utilization rates
at five USG institutions with mandatory plans and found that students on average
consume less than half of the meals purchased. As shown in Exhibit 18, students
utilized only 35% to 52% of the meals purchased.
In addition to higher costs associated with larger meal plans, the cost per meal
consumed increases as utilization rates decrease. For example, students required to
purchase a 19 meal per week plan that costs $1,755 pay $5.88 per meal. If students
consume half of the meals purchased (i.e., 8 per week versus 19), the actual cost per
on-campus meal doubles. As shown in Exhibit 18, USG institutions charged students
from $4.60 to $8.30 per meal, but due to underutilization the actual cost per meal
consumed increased to as much as $15.97.
BOR: Cost Drivers of Higher Education 19

Exhibit 18
Students Typically Do Not Utilize Majority of Meals Purchased More Than
Doubling the Cost of Meals Consumed, Fiscal Year 2016

$15.97
$15.46
$14.53
$13.42 $13.08

Cost per Meal

Purchased

$8.30 Cost Per Meal

$7.06 Consumed
$6.29 $5.92
$4.60

Armstrong State College of Coastal Georgia Gwinnett South Georgia State University of North
University Georgia College College Georgia-Dahlonega

% of Meal Plan
52% 46% 41% 47% 35% Not Consumed
48% 54% 59% 53% 65%
% of Meal Plan
Consumed

Source: USG data

Increases in Typical Housing and Dining Costs

From fiscal years 2006 to 2015 typical housing and dining costs, as reported by USG
institutions to NCES, have increased at rates more than double the inflation rate.
These cost increases contribute to increased cost of attendance at USG institutions.
System-wide, typical housing costs have increased 56% from fiscal years 2006 to 2015,
more than double the inflation rate. As shown in Exhibit 19, the typical housing
expense for students living on-campus ranges from an average of $4,718 at USGs state
universities to $6,272 at USGs research universities. In addition, from fiscal years
2006 to 2015, these rates have increased by an average of from $1,066 at USGs
comprehensive universities to $2,521 at USGs state colleges.
BOR: Cost Drivers of Higher Education 20

Exhibit 19
Typical Annual Housing Costs at USG Institutions Have Significantly
Increased, Fiscal Years 2006-2015

2006 2015
$6,272
$6,048

$5,139
$4,718
$4,377
$4,073
$3,527

$2,737

Research Comprehensive State Universities State Colleges

Source: NCES IPEDS data

System-wide, typical dining costs have increased 60% from fiscal years 2006 to 2015,
more than double the inflation rate. As shown in Exhibit 20, the typical dining
expense for students living on-campus ranges from an average of $2,962 at USGs state
colleges to $3,976 at USGs comprehensive universities. In addition, from fiscal years
2006 to 2015, average dining cost increases ranged from $809 at research universities
to $1,645 at state colleges.

Exhibit 20
Typical Annual Dining Expenses at USG Institutions Have Significantly
Increased, Fiscal Years 2006-2015

$3,976 2006 2015

$3,684

$3,259
$2,962

$2,450 $2,427
$2,270

$1,317

Research Comprehensive State Universities State Colleges

Source: NCES IPEDS data

BOR: Cost Drivers of Higher Education 21

BORs response: BOR reported implementing initiatives to reduce costs including consolidating
institutions and a formal review process for approval of new academic programs and facilities. As
discussed below, BOR reported taking action or proposing action to control costs related to student
fees, housing, and dining.

Mandatory Student Fees Increases to or creation of new mandatory student fees has slowed over the
past five years with essentially a moratorium on fee requests with the exception of those required to
support buildings or with demonstrated and significant student support. BOR noted that, with the
exception of the Special Institutional Fee, the number of new and/or increased mandatory fees declined
from 65 in the 2011-2012 academic year to 14 in the 2016-2017 academic year.

Lease-Financed Facilities In 2012, BOR adopted policies to limit the debt institutions can issue for
facilities funded by student fee revenue. BOR reported that total financing for new projects during 2012
through 2016 is only 17% of the amount financed during the previous four-year period.

Intercollegiate Athletics Based on a USG analysis of intercollegiate athletics costs, BOR adopted a
policy restricting the annual growth in athletics expense to 5% and requires that institutions earn a
certain percentage of athletics revenue through sources other than student fees and institutional funds.

Housing Approval of new housing has slowed from 18,828 new beds during fiscal years 2007 to 2011
to 4,772 new beds during the last four-year period (2012-2016). BOR stated that the cost of housing is
largely driven by the construction cost of the facility, the room type and mix, and associated financing
costs. BOR stated that it will take action to require System approval of housing fees to further control
housing costs charged to students.

Dining In an effort to reduce dining costs, the system facilitated a pooled food services contract for
five USG institutions. The system will assess contract performance after its first year of operations,
fiscal year 2017, to determine if this results in savings and should be extended to other institutions.
BOR stated that it will take action to eliminate mandatory meal plans other than for those living in
on-campus housing and will require System approval of dining fees to further control dining costs
charged to students.

How does the cost of attendance for students at USG institutions compare to peer
institutions in other states?

Generally, the cost of attendance for in-state, full-time, first-year residential students
at USG institutions is equal to or less than the average cost of attendance at peer
institutions9 in other states. The cost of attendance for 23 of 26 USG residential
institutions is lower in comparison to their peer institutions. The primary reason USG
institutions cost of attendance is lower is because tuition and fees average 25% less
while room and board is 5% higher than peers.

9The peer institutions for each USG institution include those listed in the IPEDS data feedback reports
published by NCES. Our analysis excluded private institutions and other USG institutions from each
comparison peer group.
 BOR: Cost Drivers of Higher Education 22

Exhibit 21 shows the percentage difference in the cost of attendance between USG
Cost of attendance institutions and their peer institutions. Darton State and Abraham Baldwin
for residential Agricultural College have a higher cost of attendance due to higher room and board
students is charges. Georgia College is higher due to higher tuition/fees and room and board
composed of charges.
published tuition,
mandatory fees, and Exhibit 21
on-campus housing 23 of 26 USG Institutions Have a Lower Cost of Attendance for In-State,
and dining. This is Full-Time, First-Year Residential Students than Peer Institutions in Other
the full price States, Fiscal Year 2014
students are
charged, and does
not take into account
financial aid.

Net Cost of
attendance is the
price students
actually pay to
attend an institution.
It is the cost of
attendance minus
any grants and
scholarships a
student receives.

Source: NCES IPEDS data, USG and DOAA analysis

The net cost of attendance for in-state, full-time, first year residential students at 18 of
26 USG residential institutions is lower in comparison to their peer institutions.
Exhibit 22 shows the percentage difference in the net cost of attendance between
USG institutions and their peers. The composition of a USG institutions student
body significantly impacts the net cost of attendance because grants and scholarships
factor into net cost. Federal Pell grants, which are based on financial need, and the
states HOPE scholarship, which is based on academic performance, are the two
largest factors in the difference between USG institutions cost of attendance and net
cost of attendance.
BOR: Cost Drivers of Higher Education 23

Exhibit 22
18 of 26 USG Institutions Have a Lower Net Cost of Attendance for In-State, Full-Time,
First-Year Residential Students than Peer Institutions in Other States,
Fiscal Year 2014

Source: NCES IPEDS data, USG and DOAA analysis

 BOR: Cost Drivers of Higher Education 24

What additional factors impact the cost of attending a USG institution?

The average length of time taken by USG students to obtain their degree increases the
Standard time to total cost of the degree. It takes USG students on average almost three semesters
obtain a longer to obtain a bachelors degree and more than four semesters longer to obtain an
bachelors degree associates degree than is standard. Because students are required to pay tuition and
is four years or fees for these additional semesters, the total cost of their degrees increases
eight semesters. correspondingly. It should be noted that the additional time taken by USG students
Standard time to to obtain a degree is consistent with national trends. In addition, students who have
obtain an enrolled in USG institutions but have failed to obtain a degree incur education-related
associates
costs they are less able to afford. Students who fail to graduate are less likely to earn a
degree is two
higher salary from their higher education investment and less able to repay student
years or four
loan debt.
semesters.

Time to Degree
As shown in Exhibit 23, depending on the type of USG institution, students take an
average of two to five semesters longer than is standard to obtain a bachelors degree
and four to five terms longer than is standard to obtain an associates degree. The total
cost of a degree increases with each additional term enrolled, as students incur costs
associated with tuition, mandatory fees, and living expenses.

One factor increasing the time to degree, which is related to student choice, is the
number of credit hours per semester students enroll. To obtain a bachelors degree
within eight semesters, students would be required to enroll in at least 15 credit hours
each semester, for a total of 120 credit hours. As shown in Exhibit 23, students who
obtained a bachelors degree in fiscal year 2015 enrolled in an average of 11.8 to 12.9
credit hours each semester.

In addition to enrolling in less than a full course load, students may take longer to
obtain their degree due to changing their major, failing a required course, enrolling in
unnecessary courses, enrolling in one or more summer semesters, or failing to enroll in
a required course within the recommended time. While these factors are also due to
student actions or decisions, academic advising and counseling could help reverse
these trends. For example, Georgia State University has increased its academic
advising activities by analyzing student data and hiring additional advisors to contact
students when such problems arise. These actions have reportedly reduced the time
to degree by one-half of a semester.
BOR: Cost Drivers of Higher Education 25

Exhibit 23
USG Students Seeking Bachelors Degrees Enroll in Less Than a Full Course
Load and Take Additional Semesters to Graduate1, Increasing the Cost of a
Degree, Fiscal Year 2016
Research Comprehensive State Colleges
State Universities
Universities Universities

Semester
13
Semester
12
Semester Semester Semester
11 11 11
Semester Semester Semester Semester
10 10 10 10
Semester Semester Semester Semester
Average Time to Degree in Terms

9 9 9 9
Semester Semester Semester Semester Semester Semester Semester Semester
8 8 8 8 8 8 8 8
Semester Semester Semester Semester Semester Semester Semester Semester
7 7 7 7 7 7 7 7
Semester Semester Semester Semester Semester Semester Semester Semester
6 6 6 6 6 6 6 6
Semester Semester Semester Semester Semester Semester Semester Semester
5 5 5 5 5 5 5 5
Semester Semester Semester Semester Semester Semester Semester Semester
4 4 4 4 4 4 4 4
Semester Semester Semester Semester Semester Semester Semester Semester
3 3 3 3 3 3 3 3
Semester Semester Semester Semester Semester Semester Semester Semester
2 2 2 2 2 2 2 2
Semester Semester Semester Semester Semester Semester Semester Semester
1 1 1 1 1 1 1 1

Actual Standard Actual Standard Actual Standard Actual Standard

16 Credit Hours Required Per Term to

Graduate in Four Years
15
14
12.9
12.5 12.5
Average Credit Hours Attempted Per Term

11.8
12

10

0
Research Universities Comprehensive Universities State Universities State Colleges

(1)
Based on full-time and part-time students who graduated during fiscal year 2016. The number of semesters to graduate can
include summer semesters which may increase the number of semesters but not the number of years to graduation.

Source: USG analysis

Student Loan Debt Accumulated by Students Who Did Not Graduate

USG students who fail to graduate often accrue significant student loans during their
time of attendance. Bachelor degree-seeking students who failed to obtain a degree or
BOR: Cost Drivers of Higher Education 26

re-enroll10 accumulated $11,322 in loan debt, on average. As shown in Exhibit 24,

average student loan debt accumulated by these students varies among USG
institutions.

Exhibit 24
Attendees of USG Institutions who Fail to Graduate1 Leave with
Substantial Student Loan Debt2
Bachelor Seeking, Fall 2009 Number Drop Outs Average Loan Debt
Cohort Accrued
Research Universities 1,101 $11,884
Comprehensive Universities 2,405 $10,588

State Universities 2,397 $12,185

State Colleges 296 $8,211

System Total 6,199 $11,322

(1)
Includes students who enrolled as first-year students in FY 2009 but did not graduate within six-years
and were no longer enrolled in USG institutions.
(2)
Includes total debt acquired at all USG institutions attended by each student.
Source: USG analysis

What are the academic versus non-academic expenditure trends at USG

institutions?

While average spending among individual USG institutions has risen at a rate slightly
higher than inflation and enrollment from fiscal years 2006 to 2015, spending patterns
have not significantly changed. Spending by function such as instruction versus plant
operations has remained fairly consistent with only small shifts in spending
categories. As shown in Exhibit 26, from fiscal years 2006 and 2015, average spending
among individual USG institutions, adjusted for inflation, increased by approximately
$890 per FTE student (6%), from approximately $15,040 to $15,930. The largest driver
of increased spending was auxiliary enterprises such as housing, dining, and
intercollegiate athletics followed by financial aid. Conversely, spending on academic
activities related to public service and instruction declined. As shown in Exhibit 25,
these spending changes have only slightly impacted the portion of overall spending by
function. For example, although instruction spending declined by an average of $135
per FTE, this remains the largest single category of spending.

Spending patterns by type of expenditure, such as for salaries, benefits, or supplies

which may be expended in any of the functional areas included in Exhibits 25 and 26
have also not significantly changed from fiscal years 2006 to 2015. As shown in
Exhibits 27 and 28, personal services expenditures including faculty and staff salaries
and benefits expenses continue to comprise the majority of expenditures even though
salaries have declined. The largest drivers for spending increases were supplies,
depreciation, and financial aid.

10These students are defined as those who initially enrolled in fiscal year 2010, but did not graduate or
to re-enroll six-years later fiscal year 2016.
BOR: Cost Drivers of Higher Education 27

Exhibit 25
Academic Expenditures Remain the Largest Expense, Fiscal Years 2006-20151
2006 2015

Plant Plant
Operations Operations

s
s

9 % sh i p
11%

6% ship
12%
Institutional

r
Institutional

ola
r
ola
Support Support

h
h

Sc
Auxiliary

Sc
14% 12%
Enterprises Auxiliary
Student 10% Enterprises
Services 6% Student
14%
Unallocated 2% Services 7%

Academic Activities Academic Activities

50% 46%

Instruction
35% 31%

4% Research 4%
3% Public Service 2%
9% 9%
Academic Support

(1) The change in expenditures is the average change reported by USG institutions. Percentages may
not add to 100% due to rounding.

Source: USG annual financial reports and enrollment reports

Exhibit 26
Net Expenditures per FTE Have Increased While Academic Activities
Expenditures Have Declined, Fiscal Years 2006-20151
$1,800 Increases In Expenditures Decreases in Expenditures Net
2006 to 2015 2006 to 2015 Expenditures
Student Services 2006 to 2015
+$128
$1,600 Public Service
Research -$318
+$187
$1,400
Academic Support Unallocated Expenses
+$198 -$302
$1,200 Operation &
Maintenance of Plant
+$275 Instruction
$1,000 -$135 Total
Scholarships & +$887
Fellowships
$800 +$281 Institutional
Support
-$7
$600

$400 $68 Net Decrease in

Auxiliary Enterprises
Academic Activities
+$580

$200

$0

(1) The change in expenditures is the average change reported by USG institutions. Fiscal year 2015 expenditures have been adjusted for
inflation.

Source: USG annual financial reports and enrollment reports, Bureau of Labor Statistics
BOR: Cost Drivers of Higher Education 28

Exhibit 27
Personal Services Expenditures Remain the Largest Spending Category1, Fiscal
Years 2006-2015
2006 2015

Supplies and

Uti
Supplies and
Uti
Other

litie
Other
litie Services 22%

s4
Sc Services 22% Sc
s4 h
ion ola n

%
hola tio
r
% iat 1 0 r sh i p ci a
8 % sh i p p re c % s p re
Trav s De 5% De 7%
e l 1% Trav
e l 1%

Personal Services
Personal Services
61%
56%

22% Faculty Salaries 20%

26% Staff Salaries 24%

13% Benefits 13%

(1) The change in expenditures is the average change reported by USG institutions. Reported
percentages may not add to 100% due to rounding.

Source: USG annual financial reports and enrollment reports

Exhibit 28
Net Expenditures per FTE Have Increased While Personal Services
Expenditures Have Declined1, Fiscal Years 2006-2015
$1,400
Increases in Expenditures Decreases in Expenditures Net Expenditures
2006 to 2015 2006 to 2015 2006 to 2015
Travel
+ $12 Staff
$1,200 Other Personal Services - $133
+ $39
Benefits Faculty
+ $93 - $101
$1,000 Uitlities
- $27 Total
+$887
Scholarships &
$800 Fellowships
+ $261

$600
Depreciation
+ $358
$400
$102 Net Decrease in
Personal Services

$200 Supplies and Other

Services
+ $384

$-
(1) The change in expenditures is the average change reported by USG institutions. Fiscal Year 2015 expenditures have been adjusted for
inflation. Reported percentages may not add to 100% due to rounding.

Source: USG annual financial reports and enrollment reports, Bureau of Labor Statistics
 BOR: Cost Drivers of Higher Education 29

What expenditures are covered by fees and to what extent do the fees offset
program costs?

Surplus revenue from some fee-funded programs may be used to fund deficits in other
auxiliary or mandatory student fee programs. BOR policies state that auxiliary
enterprises should be operated on a self-supporting basis, where the combination of
An auxiliary fees and other revenues is sufficient to meet cost of service. However, BOR does allow
enterprise, or institutions to have a deficit in an auxiliary enterprise if the deficit is covered by a
auxiliary service, is
surplus in another auxiliary enterprise. In fiscal year 2015, 19 of 29 USG institutions
defined as an
had a negative fund balance in at least one auxiliary enterprise.
activity that exists
to provide a service
Auxiliary enterprises are primarily funded through both mandatory and elective fees
directly or indirectly
to students, faculty
paid by students. Common auxiliary enterprises operated by USG institutions include
or staff, and for
housing, food services, health services, stores and shops, and transportation and
which a fee is parking. Exhibit 29 shows which auxiliary enterprises are typically funded with
charged that is mandatory student fees. For example, most USG institutions charge a mandatory
related to, but not athletic fee which is then used as the main revenue source for the intercollegiate
necessarily equal athletic auxiliary enterprise.
to, the cost of the
service. Exhibit 29
Auxiliary Enterprises May Be Funded With Mandatory Student Fee
Revenue

Auxiliary Enterprises Mandatory Student Fees

Food Services Mandatory Meal Plans
Health Services
Health Services
Health Facility
Housing
Athletic
Intercollegiate Athletics
Stadium Fee
Stores and Shops
Transportation
Transportation and Parking
Parking Facility
Student Center
Access Card
Other
Recreation Activities
Recreation Facility
Source: USG data

Although USG institutions should establish fee rates consistent with program costs,
fees may generate excess revenue. USG institutions are allowed to retain unexpended
revenues from year to year creating fund balances. In fiscal year 2015, 28 of 29 USG
institutions had surplus auxiliary fund balances ranging from $203,267 at Atlanta
Metropolitan College to $94,194,230 at the University of Georgia11. BOR does not have
a policy limiting growth in fund balances. In addition, BOR does not require USG
institutions to provide specific plans for the use of these fund balances.

Current year surplus revenue or accumulated fund balances in specific auxiliary

programs may be used to fund deficits in other auxiliary programs such as athletics.
For example, at the end of fiscal year 2015, the athletics programs at 12 USG

11The University of Georgias reported $94 million fund balance does not include funds available in the
Intercollegiate Athletics auxiliary program. All revenue for this auxiliary program is transferred to the
universitys athletic foundation.
BOR: Cost Drivers of Higher Education 30

institutions had cumulative deficits ranging from ($2,859) at Abraham Baldwin

Agricultural College to ($6,787,637) at Savannah State University. These deficits were
offset by surplus revenue generated in other auxiliary enterprises such as housing or
food services.

The following examples describe how institutions may accumulate surplus revenue
and how surplus revenue is used.

University of North Georgia-Dahlonega Food Services Auxiliary: All first-

and second-year students are required to purchase meal plans at an average
semester rate of approximately $2,051. The university pays on average of 55%
of this fee ($1,128) to its dining services contractor, 20% of the fee ($410) for
dining hall debt service payments, and 15% of the fee ($308) for dining
auxiliary operating costs. The remaining 10% of the fee ($205) is added to the
dining auxiliary fund balance which can grow from year to year. At the end of
fiscal year 2015, the dining auxiliary fund balance was almost $4.3 million.
Savannah State University Student Center and Stadium Fee: Students are
required to pay a $170 fee per semester to fund the debt service and operations
cost for the student center and the stadium. In fiscal year 2016, fee revenue
collections fell $205,811 short of covering the debt service and operating costs
of the facilities. The deficit was funded with $108,265 in prior year reserves
and $97,546 in surplus revenue from housing and dining hall auxiliary
operations.
Georgia State University Turner Field Acquisition: The university is
planning to acquire and redevelop Turner Field at a total cost of
approximately $52.8 million. The majority of funding for this project ($40.7
million) is from fund balances in the universitys various auxiliary enterprise
programs. These fund balances, totaling approximately $53.3 million in fiscal
year 2015, have accumulated from years of surplus revenue generated by
elective fees paid by students for such services as housing and parking,
bookstore sales, the sale of housing facilities to the Georgia Institute of
Technology, and real estate rental income.
Armstrong State University Intercollegiate Athletics: Students are
required to pay a $190 fee per semester to fund the operations of the
universitys intercollegiate athletics program. For the past several years, this
fee has not generated sufficient revenue to cover expenses. In fact, the
universitys five-year plan for this auxiliary shows anticipated yearly deficits
of more than $500,000 to continue through fiscal year 2020. The university
projects these annual deficits will accumulate to approximately $8.3 million
in fiscal year 2020. The annual deficits will continue to be funded from surplus
revenue generated in other auxiliary programs such as housing and food
services.
BOR: Cost Drivers of Higher Education 31

Appendix A: Objectives, Scope, and Methodology

Objectives
This review of factors increasing the cost higher education was conducted at the
request of the Senate Appropriations Committee. The Committee asked that we
review the cost drivers of public higher education and the extent to which fees cover
associated expenditures at University System of Georgia (USG) institutions. Based on
this request we addressed the following questions:

1. How has funding of USG institutions changed over time and how have these
changes impacted the cost of attendance?
2. What are the state-level factors driving increases to the cost of attendance at
USG institutions?
3. What are the institution-level factors driving increases to the cost of
attendance at USG institutions?
4. How does the cost of attendance at USG institutions compare to peer
institutions in other states?
5. What additional factors impact the cost of attending a USG institution?
6. What are the academic versus non-academic expenditure trends at USG
institutions?
7. What expenditures are covered by fees and to what degree do fees offset
these costs?
Scope
This special examination generally covered activity related to the cost drivers of higher
education within the University System of Georgia that occurred from fiscal year 2000
to fiscal year 2017, with consideration of earlier or later periods when relevant.
Information used in this report was obtained by reviewing relevant laws, rules, and
regulations; interviewing agency officials and staff from the University System of
Georgia; analyzing data provided by USG; analyzing data from the U.S. Department
of Education, National Center for Education Statistics (NCES) Integrated
Postsecondary Education Data System (IPEDS); and prior audit work.

We obtained higher education data from the NCES IPEDS through the IPEDS website
for fiscal years 2000 to 2015. NCES gathers information from every college, university,
and technical and vocational institution that participates in the federal student
financial aid programs, through an interrelated system of surveys conducted annually.
This includes data on enrollments, program completions, graduation rates, faculty and
staff, finances, institution prices, and student financial aid. We assessed the data used
for this examination and determined that the data used were sufficiently reliable for
our analyses.

Methodology
To identify how funding of USG institutions has changed over time and how
these changes have impacted the cost of attendance, we compiled and analyzed
revenue data from the USGs system-wide Annual Financial Report. In addition, we
obtained and analyzed tuition and fee rate information for each USG institution for
fiscal years 2006 through 2015. Revenue data were adjusted for inflation using the
Consumer Price Index for all urban items in the south urban area. The data were also
adjusted for enrollment growth using USGs fall semester enrollment reports for full-
BOR: Cost Drivers of Higher Education 32

time equivalent students at each USG institution. Although we did not independently
verify revenue data, we determined the data to be reliable for our purposes as it was
obtained from audited annual financial reports. We did not independently verify
enrollment data.

To identify the state-level factors driving increases to the cost of attendance at

USG institutions, we reviewed relevant state laws and BOR policies and procedures,
we compiled and analyzed revenue and expenditure data from USG annual financial
reports for fiscal years 2008-2017, we compiled and analyzed tuition and fee rates
charged from fiscal years 2008-2017, and we analyzed fiscal years 1992-2016 HOPE
program scholarship award data obtained from the Georgia Student Finance
Commission. Although we did not independently verify revenue and expenditure
data, we determined the data to be reliable for our purposes as they were obtained
from audited annual financial reports. We did not independently verify HOPE
program scholarship award data but have determined it to be sufficiently reliable for
our analyses.

To identify the institution-level factors driving increases to the cost of attendance

at USG institutions, we reviewed relevant BOR policies and procedures, we reviewed
housing and dining policies for each USG institution, we compiled mandatory student
fees charged by each USG institution from fiscal years 2008-2017, we compiled and
reviewed housing and dining rates charged by each USG institution, and we obtained
meal plan usage data from a sample of five USG institutions for fiscal year 2016. We
did not independently verify the accuracy of the reported meal plan usage but have
determined it to be sufficiently reliable for our analyses.

To determine how the cost of attendance for students at USG institutions

compares to peer institutions in other states, we used interviews with USG staff
and NCES data to identify comparable institutions in other states. We used data
Feedback Reports created by IPEDS to identify peer institutions for all USG
institutions. These peer institutions in IPEDS are either generated by NCES based on
enrollment, geographic location, and Carnegie Classification, or the peer group was
self-reported by the USG institution as part of the IPEDS survey. We used data
obtained from IPEDS to determine the cost of attendance and at USG institutions and
their peers, and the net cost of attendance at USG institutions and their peers. This
was conducted only for USG institutions that had on-campus housing and dining. We
did not independently verify NCES IPEDS data but have determined it to be
sufficiently reliable for our analyses.

To identify additional factors that impact the cost of attending a USG institution,
we used IPEDS data to determine the graduation rates for full-time students seeking
a bachelors degree within four, five and six years of enrollment, and for full-time
students seeking an associates degree within three years of enrollment, for USG
institutions, and their peers in others states, determined as described in the previous
objective. We interviewed USG staff and obtained student loan data from USG staff
to determine the average loan amount accrued by students who failed to graduate,
both for the USG-system as a whole, and for each USG institution.

To identify the academic and non-academic expenditure trends at USG

institutions, we obtained and analyzed expenditure data for each USG institution
from annual financial reports for fiscal years 2006-2015. Expenditures by functional
classification and by natural classification were compiled for each institution. The
BOR: Cost Drivers of Higher Education 33

data were adjusted for inflation using the Consumer Price Index for all urban items in
the south urban area. The data were also adjusted for enrollment growth using USGs
fall semester enrollment reports for full-time equivalent students at each USG
institution. Although we did not independently verify expenditure data, we
determined the data to be reliable for our purposes as it was obtained from audited
annual financial reports. We did not independently verify enrollment data.

To identify expenditures that are covered by fees and to determine the degree to
which the fees offset these costs, we obtained from BOR staff fiscal year 2015 fund
balances for auxiliary enterprises at each USG institution, we reviewed BORs cash
flow analyses for student fee-funded facilities, we obtained and analyzed five-year
plans for various USG institutions auxiliary programs, and we requested and
reviewed information from BOR regarding the use of auxiliary and student fee fund
balances. Although we did not independently verify the fund balance data, we have
determined it to be sufficiently reliable for our analyses.

This special examination was not conducted in accordance with generally accepted
government auditing standards (GAGAS) given the timeframe in which the report
was needed. However, it was conducted in accordance with Performance Audit
Division policies and procedures for non-GAGAS engagements. These policies and
procedures require that we plan and perform the engagement to obtain sufficient,
appropriate evidence to provide a reasonable basis for the information reported and
that data limitations be identified for the reader.
 The Performance Audit Division was established in 1971 to conduct in-depth reviews of state-funded programs.
Our reviews determine if programs are meeting goals and objectives; measure program results and effectiveness;
identify alternate methods to meet goals; evaluate efficiency of resource allocation; assess compliance with laws
and regulations; and provide credible management information to decision makers. For more information, contact
us at (404)656-2180 or visit our website at www.audits.ga.gov.