Statement Submitted for the Record

Harris Pastides, President, University of South Carolina
August 15, 2017
Senate Education Committee, Tuition and Scholarship Subcommittee


Mr. Chairman (Peeler), Senators (Hembree, Jackson, Sheheen and Young) we appreciate the opportunity to be with you this afternoon.

There is no doubt that USC’s enrollment strategy is important. It’s important because it forms the basis of our ability to maximize opportunity for South Carolinians while meeting the economic demands of the state. In other words, to make the Palmetto State more educated and more prosperous.

Higher education is the key to achieving that goal and as the largest provider of higher education in South Carolina, USC is leading the way.

So, it is my hope that today we can deliver to you the information you seek in order to put the topics of abatements and non-resident enrollment behind us, cease these distractions and allow us to get back to focusing on education, research and public service — the prescribed mission of the University of South Carolina.

To begin, I want to be absolutely clear about 4 points:

First, abatements are not cash payments. No money is moving out the door. These are discounts — much like you would find in the hotel or airline businesses. Different rates for different customers. We are not losing money and it would be foolish for us to do so. In fact, each year we increase our net revenue from non-resident students.

Second, non-resident students DO NOT DISPLACE South Carolina residents. We prioritize South Carolinians and accept every qualified applicant from South Carolina into one of our programs. In fact, of the South Carolina residents who completed an application to USC, 90% were offered the opportunity to attend one of our programs: the #1 Honors College in the nation, Capstone Scholars, regular admit or Gamecock Gateway.

Third, South Carolina residents pay less because non-residents pay more. Call it a subsidy or call it revenue to help achieve a balanced budget — the bottom line is we increased non-resident enrollment and non-resident tuition revenue to save South Carolinians money. Why?

That brings me to point #4, because the decline in state funding has forced us to. South Carolina has suffered from the 4th largest cut to higher education funding in the country. Beginning in 2008, my first year as president, our funding was cut nearly in half — a $120 million hit to our budget. How do you make up for that lost revenue? You either jack up tuition or find alternative sources. We chose the latter.

A Moore School study points to a shortage of 70,000 four-year degree holders to meet the needs of business and industry in South Carolina in 2030, less than 15 years from now. We cannot meet that demand with South Carolina high school graduates. We need the nation’s best and brightest. We need to educate them here and we need to keep them here.


Before I speak in a little more detail on each of these points, I think it is worth noting that abatements are an accepted business practice across higher education and have been used for more than a quarter of a century.

Clemson, College of Charleston, Coastal, Winthrop, every public university I know of, uses them, but yet, they are not here today. I’m the only public university president asked to speak to this topic. It is true we offer more than any other university in our state, but we are also the largest.

Business leaders would avow that recruiting the best and brightest students to South Carolina is a boon to our state’s economy. It contributes to diversity, enhances our educated workforce, positions South Carolina closer to the global economy and enriches our local businesses.

Ted Pitts, CEO of the State Chamber of Commerce, was recently quoted in Columbia Business Monthly:

We’re going to have a shortage of 4-year degrees, a shortage of engineers and health care-related people. We need to make sure we don’t lose focus there.

Of course, he’s not the only one saying it. A Moore School study points to a shortage of 70,000 four-year degree holders to meet the needs of business and industry in South Carolina in 2030, less than 15 years from now. WE CAN NOT MEET THAT DEMAND WITH SOUTH CAROLINA HIGH SCHOOL GRADUATES. We need the nation’s best and brightest. We need to educate them here and we need to keep them here.

You’ve asked us to act more like businesses and we are. More government regulation is not the answer to better business practices. We compete in a free market for students. Market forces drive our enrollment strategy while we keep prices lower for South Carolinians.

Let me quickly paint a picture of the consequences of limiting non-resident enrollment.

First, such a move would actually hurt South Carolina resident students

  • It would result in fewer opportunities for South Carolinians and disproportionately affect lower income students
  • Resident tuition would increase, perhaps dramatically
  • There would be reduced money for scholarships

Second, the local economy in the Midlands would be negatively impacted immediately

  • Non-resident students and their families are 6- or 7-year tourists, beginning in high school and continuing through graduation
  • Visitors to our campus have a $41 million annual economic impact on the Midlands
  • It could put as many as 16 privately owned student housing complexes in danger of foreclosure

Third, our long-term statewide economy would be threatened

  • We need non-residents to help meet the jobs needs of South Carolina
  • We are emphasizing areas of study and career paths that map with the needs of South Carolina: health sciences, aerospace, engineering, computer science, business and entrepreneurship, teaching and global leadership
  • 60% of our graduates remain in South Carolina and many more return as boomerangers

Disrupting our ability to educate will disrupt South Carolina’s economy. You cannot have a prosperous state without a strong higher education sector and a highly educated workforce.

In the months ahead, let me propose that we move our conversations beyond enrollment strategy and begin new conversations in five areas that will strengthen higher education and help us keep it affordable for South Carolinians:

  • Resume investment in state assets and infrastructure through regular capital bond bills for higher education.
  • Enact enterprise act legislation to provide regulatory reform for auxiliary operations and the ability to establish auxiliary authorities.
  • Establish baseline funding for the regional, comprehensive and research sectors based on per SC full-time equivalent (FTE).
  • Develop a fair funding formula for investing in SC that prioritizes retention and graduation in high demand career fields and provides opportunity for new recurring funding year after year.
  • Creating a state funded need-based aid program. Research shows that need-based aid would help boost enrollment of minority students, including African American. Ultimately, it would help increase access to higher education for all South Carolinians.

I cannot emphasize this point enough. Our mission is to maximize opportunity for South Carolinians and I take that charge very seriously.


Now, back to the four points at hand.

One, abatements are discounts, not cash payments.

There are four non-resident rates. I know, most people are only familiar with one. But our board approves four every year as part of our budget. Each rate is associated with a scholarship level. Non-residents qualify for a price point based on academic, artistic or athletic achievement in high school.

61% of non-residents pay a rate higher than that of in-state students.

Two, non-resident students DO NOT DISPLACE South Carolina residents.

I cannot emphasize this point enough. Our mission is to maximize opportunity for South Carolinians and I take that charge very seriously. As I noted before, we accept all qualified South Carolina applicants. Of the South Carolina residents who completed an application to USC, 90% were offered the opportunity to attend one of our programs: the #1 Honors College in the nation, Capstone Scholars, regular admit or Gamecock Gateway.

There will be at least 400 more South Carolinians in the fall 2017 class than there were last year. And we still have two more orientation sessions to go, so that may climb even higher.

While I recognize that the emphasis of this meeting is on USC Columbia, I must also remind the committee that there are seven other institutions in our system that enroll primarily South Carolinians and between them offer a pathway for all South Carolinians into the research institution or a four-year degree at one of our comprehensive campuses.

This is the system that was intentionally created and that we are especially proud of. We can accommodate any student and give them a pathway to success.

We have fielded a number of questions from committee staff about minority enrollment at USC Columbia. Given that, I’d like to focus on the topic just a bit.

First, let me acknowledge that we too are cognizant of the importance of making improvements in minority enrollment and we are going to extensive lengths to do so.

We actively recruit minority students in every corner of South Carolina and have created new programs specifically designed to do so, including but certainly not limited to a new scholarship program in low socio-economic high schools that rewards achievements throughout a student’s high school career; a revitalized pipeline program called Think Carolina that aims to have every middle school student in the state visit our campus; STEM bootcamps to help the transition into college; and, most importantly, our Gamecock Guarantee which covers tuition and fees for first generation, low income students whose families on average make less than $17,000 per year.

And USC is unparalleled in our success with outcomes. We enroll more African American than any other institution in South Carolina. We graduate more African American than 97% of all institutions in the country.


I must also state publicly that the African-American enrollment numbers often cited by public officials do not accurately reflect African-American enrollment at USC. Why?

In 2010, federal reporting requirements changed. Students who once reported as African American, now report in one of three categories: African American, two or more races or Hispanic. By simply citing the African-American enrollment number as tracked by CHE you are missing students of mixed races who may choose to report in another category. The decline in African-American enrollment parallels the rise in those at USC reporting as two or more races.

Using that understanding of African-American enrollment, since I began my presidency in 2008 the presence of African-American undergraduates on our campus has increased from 2,295 in fall 2008 to 2,626 in the fall of 2016. A similar pattern holds true among graduate students, meaning total African-American enrollment has moved from 3,208 to 3,879 this past year. Total non-white enrollment across all student levels has increased by more than 2,000 students. I’m proud of that progress and pledge to you that it will continue.

I am pleased to report that minority enrollment in the fall 2017 freshman class is up significantly over the fall 2016 class. Right now, we’re on track to have 50 more African-American students, 50 more Asian students and 75 more Hispanic students. But at USC, we don’t only focus on recruiting freshman minority students, we want to focus on graduating minority students.

Often, the discussion around minority recruitment focuses on percentages. I understand that because it makes a strong point. But we choose to focus more on outcomes than percentages. That makes a strong societal impact.

And USC is unparalleled in our success with outcomes. We enroll more African American than any other institution in South Carolina. We graduate more African American than 97% of all institutions in the country. The Education Trust has cited USC as among the nation’s best at improving graduation rates for minority students and in the top five flagship universities for closing the graduation gap between minority and white students over the past decade.

In the SEC, USC Columbia ranks 2nd in the graduation rate of African-American students and we are the only institution at which the graduation rate for African American actually exceeds that of the total cohort.

Just last month, the Brookings Institution named USC as #23 in the country at helping students achieve social mobility. That is what being a public research university is all about.

As I mentioned earlier. We want to work with you to increase access for South Carolinians. A need-based aid program would go a long way toward that.

Point 3, South Carolina residents pay less because non-residents pay more.

Let me repeat, 61% of non-resident students pay a higher rate than resident students — again, you can see the exact breakdown among the four non-resident rates in your packet. Nearly 3,200 non-resident students pay the full non-resident rate. That provides a significant source of revenue that offsets the cuts in state funding and allows us to function as one of the nation’s leading research universities.

In fact, non-resident tuition and fees are our #1 source of revenue. Grants are #2. Resident tuition and fees are #3. Auxiliary enterprises are #4. And state appropriations are way down at #5.

Let me put that in real numbers for you. In Fall 2016, SC residents paid, on average, $5,429 for that semester. Non-residents paid, on average, $9,445 for that same semester. Clearly, SC residents pay less because non-residents pay more.

How about some more good news? Those numbers I just cited are sticker price. Actually, out-of-pocket costs for South Carolina residents are significantly less because of the lottery scholarships and other aid. In fact, on average, South Carolina undergraduate students at USC Columbia pay less than $6,000 per year in out-of-pocket costs for tuition and fees. That fact, combined with our diligent efforts at financial education, are why nearly half of USC students graduate with zero student loan debt.

There are other ways that non-resident students reduce costs for South Carolina residents. Non-residents pay more per semester toward bond payments — about $9 million per year. In the 20-year absence of a capital bond bill, this is what enables us to build modern facilities.

Also, non-residents provide $5.7 million per year in scholarships to SC residents through the 4% fee waiver. In large part, that pays for our Gamecock Guarantee program, allowing us to admit up to 150 first-generation students from low-income families and cover 100% of their tuition. These bright, driven students come from families whose household income is less than $17,000 per year. This program is a perfect example of how non-resident students positively impact our state.

Before I move on, let me address a specific question we received from your staff — what is the exact cost to educate a student?

Much was made of this point at a recent CHE meeting.

The honest answer is that there is no exact cost. The cost to educate an engineering major is significantly higher than the cost to educate a political science major. The cost to educate a student who needs extra support and tutoring is significantly higher than the cost to educate a high achieving student. In fact, of the 25,500 undergraduates enrolled at Columbia in Fall 2016, there were 25,500 individual costs to educate.

Given that fact, it’s hard, if not impossible, to even calculate an average cost to educate.

We can, however, use a couple formulas to look at the question.

One data point you might look at is expenditures per student. This is the number you see calculated federally by IPEDS and used on the CHE dashboard. At USC Columbia, it’s a little more than $24,000. However, this number includes research, public service and graduate program expenditures (like the two medical schools), along with other costs that are funded by sources other than undergraduate tuition. So, you cannot simply plug this number into a formula using tuition only.

In order to answer your questions and report back to CHE, we turned to a commonly accepted formula generated by the Delta Cost Project. If you wish, our CFO can go into detail but at USC Columbia, for FY 2016, using their formula, the approximated cost to educate an undergraduate is $14,500.

As an epidemiologist, I would caution against using even this number out of context in a formula not intended for its use because it is not an average but an estimation that makes certain assumptions.

However, we have taken the liberty of doing Commissioner Kirkland’s “whiteboard math” and provided it to you. You will see clearly that non-resident tuition is subsiding South Carolina residents and enabling us to run the research, public service and graduate programs that make USC Columbia and top-tier research institution.

For years, we’ve said this funding model is unsustainable and I hope that we are finally at a point where we can have serious conversations about the funding of higher education and a new partnership between state government and higher education.


Now, Point 4, all of this is necessary because of the drastic cuts to public higher education in South Carolina — the fourth largest cut in the nation. Our state has shifted the burden of paying for college away from the state and onto the backs of students and their families.

In fact, one researcher has suggested that based on current trends, state funding for higher education in South Carolina will reach $0 in 2031. Ironically, the same time frame that the Moore School study says we’ll need an additional 70,000 4-year degree holders.

For years, we’ve said this funding model is unsustainable and I hope that we are finally at a point where we can have serious conversations about the funding of higher education and a new partnership between state government and higher education.

Let me also say that I believe this committee understands the tenuous situation we are in and I appreciate your work to help change the trend. We have a long way to go and we want to work with you.

In closing, let me propose that we do just that. Let’s schedule discussions on the five areas I mentioned before:

  • Resume investment in state assets and infrastructure through regular capital bond bills for higher education.
  • Enact enterprise act legislation to provide regulatory reform for auxiliary operations and the ability to establish auxiliary authorities.
  • Establish baseline funding for the regional, comprehensive and research sectors based on per SC full-time equivalent (FTE).
  • Develop a fair funding formula for investing in SC that prioritizes retention and graduation in high demand career fields and provides opportunity for new recurring funding year after year.
  • Creating a state funded need-based aid program. Research shows that need-based aid would help boost enrollment of minority students, including African American. Ultimately, it would help increase access to higher education for all South Carolinians.

Thank you again for your time this today. We’d be happy to answer any questions.