Extending In-State Tuition to Undocumented Immigrants

Extending In-State Tuition to Undocumented Immigrants:

Policy Analysis of North Carolina House Bill 1183

by

Robert Brown Stromberg

Policy Analysis Project

School of Public and International Affairs

North Carolina State University

December 2006

Advisor: Dr. Ryan C. Bosworth, Department of Public Administration

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Table of Contents

Executive Summary ……………………………………..... iv

Background ……………………………………………….. 1

Standing and Outcomes ……………………………...…… 1

Data Difficulty ……………………………………...…….. 2

North Carolina Hispanic Population Growth ……..……... 3

Eligible Population ………………………………...……... 4

Program Participation ……………………………...……... 7

Experience in Other States …………………….……… 8

University vs. Community College ………………..…. 10

Marginal vs. Average Cost ……………………………. 11

Program Costs ……………………………………...……. 11

Program Benefits …………………………………........… 12

Primary Benefits: Willingness-to-Pay ………….……. 13

Secondary Benefits: Income and Taxes ……….…….… 14

Sensitivity Analysis ……………………………………… 16

Recommendation………………………………..….….… 17

References………….…………………………………...… 18

About the Author……………………………………...…. 21

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List of Tables

1. Projected US and NC Population Growth 2000-2030

2. NC High School Graduates and UNC System Undergraduate Enrollment

1998-2003

3. Projected NC High School Graduates and UNC System Undergraduate

Enrollment 2007-2011

4. Undocumented Population 2006 and Other State Program Participation

2001-2005

5. Projected NC Program Participation 2007-2011

6. Projected UNC System vs. NC Community College Program Participation

2007-2011

7. Projected One and Five-Year Program Implementation Costs 2007-2011

8. Average UNC System and NC Community College Tuition and WTP

2005-06

9. Projected One and Five-Year Direct Program Benefits 2007-2011

10. Projected One and Five-Year Program Implementation Costs 2007-2011:

Upper and Lower Bound Included

11. Projected One and Five-Year Program Benefits 2007-2011: Upper and

Lower Bound and Net Social Benefits Included

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Executive Summary

Over the past five years, ten states have implemented legislation extending

in-state tuition rates to undocumented immigrants. While the policies have

experienced low participation rates and been subject to legal challenge, they

remain a valid alternative in the void created by lack of federal action regarding

this growing segment of the United States population. Introduced in April 2005,

North Carolina House Bill 1183 (HB1183) proposed offering in-state tuition

rates within the UNC and North Carolina Community College systems to those

undocumented immigrants meeting specified good-faith eligibility requirements.

This analysis projects the initial program participation to be 432 students (0.4

percent of the total university and community college population) and

recommends implementation based on projected net social benefits of $118,208

in the first program year. Projected net social benefits for a five-year analysis

period (2007-2011) are $800,167. In addition, substantial secondary benefits of

personal income ($2.8 billion) and state tax revenue ($197 million) would be

realized should HB1183 or similar legislation be passed and signed into law.

Extending In-State Tuition to Undocumented Immigrants

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Background

Introduced in April 2005 in the North Carolina General Assembly was

House Bill 1183 (HB1183). This legislation would have extended in-state tuition

benefits to undocumented immigrants in the State of North Carolina. The benefit

would have applied to universities in the University of North Carolina (UNC)

system as well as to the North Carolina (NC) Community College system. In

order to qualify under HB1183 (hereafter referred to as the “program”), students

were required to meet the following criteria: 1) receive a NC high school diploma,

2) attend school in NC four consecutive years, and 3) file an affidavit with the

respective university or community college affirming the student has applied for

legal immigrant status (General Assembly, 2005). Program participants would

have remained ineligible for state as well as federal financial aid.

Similar legislation has been implemented in ten other states. Beginning with

Texas in 2001, California and Utah followed in 2002. The next year, programs

began in Illinois, New York, Oklahoma and Washington. Kansas and New

Mexico followed in 2004 and 2005 and Nebraska became the tenth state to

extend the benefit upon implementing legislation in 2006. The alternatives for

this analysis are “go” and “not go.” Undocumented immigrants are currently

required to pay out-of-state tuition rates in NC and are barred from admission at

some institutions. The eligibility criteria set out above has been tested and set by

precedent in other states. It is unlikely to be altered in any NC legislation.

Standing and Outcomes

For this analysis, standing is only granted to those directly impacted by the

proposed program: participating students and the State of North Carolina. While

all NC residents, the business community and student families would be indirectly

affected by the program, they do not inform the selection of measurable costs and

benefits. Likewise, the analysis considers only two direct outcomes: one cost and

one benefit. The cost of the program is determined utilizing the average cost to

the State of North Carolina of educating one student. While marginal cost would


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have been preferable, data was not available. However, for mature systems the size

of those in NC, marginal cost is likely significantly lower than average cost. In

that case, program costs would actually be much lower than those projected in this

analysis. The program benefit is derived from individual gain realized by

participating students defined as the difference between Willingness-to-Pay

(WTP) and the in-state tuition rate they are able to take advantage of as a result

of the program.

Data Difficulty

The difficulty in acquiring adequate data from which to project costs and

benefits is without doubt the primary obstacle to reliably analyzing the program.

However, there have been multiple studies on the United States (US)

undocumented immigrant population in recent years, most notably those by the

Pew Hispanic Center and the Urban Institute. In addition, the Frank Hawkins

Kenan Institute of Private Enterprise at the University of North Carolina’s

(UNC) Kenan-Flagler Business School published an exhaustive report on the

economic impact of the NC Hispanic population. These and other studies

provided adequate information for program analysis.

The primary data necessary to project program costs and benefits are: 1) NC

tuition rates, 2) NC per student expenditures, 3) WTP of the student population,

and 4) size of the participating student population. Tuition rates are documented

and accessible. Data on NC spending per university student is available, but

requires translation based on overall spending ratios to arrive at differentiated

estimates for university and community college students. WTP of the student

population is ideally obtained from survey data which is currently unavailable.

Therefore, this analysis utilizes a crude estimate based on in- and out-of-state

tuition rates. The size of the participating student population is impossible to

perfectly project. However, current research on the total size of the NC

undocumented population in addition to the experience of other states having

previously implemented similar programs provide sufficient data to confidently


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project program participation. The following sections detail the methodology

used to quantify program costs and benefits.

North Carolina Hispanic Population Growth

The Hispanic population is projected by the US Census Bureau to grow 37.4

million or 105 percent between 2000 and 2030 (1.2 million or 2.4 percent

annually) in the US as a whole (see Table 1). North Carolina total population

growth is projected to be 4.2 million or 51.9 percent (140,000 or 1.4 percent

annually) over the same period while projected total US population growth is 82.2

million or 29.2 percent (2.74 million or 0.858 percent annually). Given these

projections, the North Carolina population—and therefore its Hispanic

population—can be expected to grow at an annual rate 1.63 times that of the

national average (1.4 ÷ 0.858 = 1.63). (US Census Bureau, 2004, 2005)

Table 1: Projected US and NC Population Growth 2000-2030

2000 2005 2010 2020 2030

US Total 281,421,906 295,507,134 308,935,581 335,804,546 363,584, 435

US Hispanic 35,622,000 - 47,756,000 59,756,000 73,055,000

NC Total 8,049,313 8,702,410 9,345,823 10,709,289 12,227,739

NC Hispanic 383,465 542,653 615,236 884,776 1,211,749

NC Hispanic -

Undocumented 172,559 244,193 276,856 398,149 545,287

Note: From US Census Bureau 2004, 2005. Italicized numbers are estimates derived from combining US

Census Bureau projections and the methodology described in the narrative above and below. NC Hispanic –

Undocumented number is 45 percent of NC Hispanic number for each year as per Kasarda and Johnson,

2006. According to Pew Hispanic Center, 2006, the North Carolina undocumented Hispanic population is

between 300,000 and 400,000.

Subsequently, this analysis projects growth of the Hispanic population in

North Carolina at an annual rate of 1.63 times the national rate. Therefore,

growth for the period between 2000 and 2030 is projected to be 828,284 or 316

percent (27,609 or 3.9 percent annually) arriving at a total Hispanic population of


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1,211,749 or 9.9 percent of the total North Carolina population in 2030

(compared with 4.8 percent in 2000). Projections for 2010 and 2020 are

determined utilizing the same methodology. 2005 projections are based on the

known population in 2004 and the documented 7.2 percent annual increase from

2000 to 2004.

It is important to note that Hispanic population growth is projected to slow

over time. While growth was at an annual rate of 17 percent between 1994 and

2000 in North Carolina, it slowed to 7.2 percent between 2000 and 2004

(Kasarda and Johnson, 2006). The US Census Bureau estimates national annual

Hispanic population growth at 3 percent between 2000 and 2010 (2.3 and 2

percent for the following two decades respectively). This represents a significantly

reduced growth rate over time. It is therefore expected that the NC Hispanic

population growth rate will continue to decline for the remainder of the current

decade.

It should also be noted that projections beyond 2010 are of little consequence

for this analysis as federal legislation will likely intervene regarding the

undocumented immigrant population by that time. However, it is important to

recognize the increasing size and significance of the undocumented Hispanic

population in NC although this analysis will focus on benefits and costs and

within only one and five-year timeframes.

Eligible Population

In order to determine the cost of such legislation, the size of the benefiting

population must be identified. Quantifying the number of undocumented

students who would take advantage of the in-state tuition benefit is a difficult

exercise. However, with the help of U.S. Census Bureau data, historical data on

the number Hispanic graduates of NC high schools, the experience of other states

implementing similar legislation and other studies on undocumented Hispanic

immigration provide the possibility of arriving at reliable estimates.


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While the Hispanic population makes up 27.5 percent of total NC

population growth from 1990-2004, Hispanic enrollment accounts for 57 percent

of NC public school (primary and secondary) enrollment growth between 2000

and 2004. This is due in large part to a significant number of children only now

coming of age as well as a higher birth rate among NC’s Hispanic population.

From the Kasarda and Johnson 45 percent estimation, the undocumented

Hispanic population makes up 12.4 percent of NC population growth and 25.7

percent of enrollment growth in the periods referenced above. (Kasarda and

Johnson, 2006)

The size of the Hispanic high school student population has been well

documented by UNC General Administration (see Table 2). Just as NC

population growth has exceeded that of the nation as a whole, so has the number

of high school graduates. However, while the number of graduates has increased

in recent years by a relatively high annual rate of 3.3 percent, the increase in

Hispanic high school graduates exceeds it more than fivefold. The number of

Hispanic graduates has increased by an annual rate of 16.5 percent over the same

period. Again utilizing Kasarda and Johnson’s 45 percent estimation, it is also

possible to show the approximate number of undocumented Hispanic high school

graduates each year (Kasarda and Johnson, 2006). UNC system-wide

undergraduate enrollment is shown to indicate the relative size of the

undocumented population. This percentage is important when contemplating

extending in-state tuition benefits to that population. In 2002, undocumented

Hispanic high school graduates represented a mere 0.6 percent of the total UNC

system undergraduate population. (University of North Carolina, 2003)

Utilizing relevant percent increases for each student category from 1998 to

2003 (see Table 2), this analysis makes projections for the following five years (see

Table 3). Both Hispanic and undocumented Hispanic students will make up an

increasing percentage of total NC high school graduates. While making up only

1.5 and 0.7 percent respectively in 1998, this analysis projects that Hispanic and

undocumented Hispanic students will account for 7.1 and 3.2 percent by 2011.


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Having quantified the eligible population for the five year period of analysis,

examination of in-state tuition program participation in other states already

implementing legislation will enable us to estimate the number of students who

would likely take advantage of the NC tuition benefit.

Table 2: NC High School (HS) Graduates and UNC System Undergraduate Enrollment 1998-2003

1998 1999 2000 2001 2002 2003 Annual Increase

HS Graduates 64,148 66,403 67,521 70,494 73,054 - 2,227 or

3.3%

Hispanic

HS Graduates 956 1,083 1,290 1,580 1,763 -

202 or

16.5%

Undocumented HS

Graduates 430 487 581 711 793 -

91 or

16.5%

Total UNC

Undergraduate

Enrollment

127,940 129,375 130,671 135,567 140,331 145,153 3,443 or

2.6%

Note: From University of North Carolina, 2003. Italicized Undocumented High School Graduates based on

45 percent estimation from Kasarda and Johnson, 2006.

Table 3: Projected NC Hispanic HS Graduates and UNC System Undergraduate Enrollment 2007-2011

2007 2008 2009 2010 2011 Annual Increase

HS Graduates 85,930 88,766 91,695 94,721 97,847 2,979 or

3.3%

Hispanic

HS Graduates 3,783 4,407 5,135 5,982 6,969

797 or

16.5%

Undocumented HS

Graduates 1,702 1,983 2,311 2,692 3,136

359 or

16.5%

Total UNC

Undergraduate

Enrollment

159,548 163,696 167,952 172,319 176,799 4,313 or

2.6%

Note: Projections based on sustained annual increase per category as documented for 1998-2003 in University

of North Carolina, 2003. Italicized Undocumented High School Graduates based on 45 percent estimation

from Kasarda and Johnson, 2006.


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Program Participation

While ten states have implemented legislation extending in-state tuition to

undocumented immigrants, only Texas has maintained complete accounting of

those taking advantage of the program. This analysis relies heavily on the Texas

data while utilizing reporting from other states to arrive at an estimated

percentage of eligible students likely to take advantage of an in-state tuition

benefit in NC.

It is clear from examining states already implementing legislation that initial

program participation is low. For example, upon implementing legislation in

Kansas in 2004, anticipated participation was 370. However, only 30

undocumented immigrant students took advantage of the program in its first year

(Fischer, 2004). Similarly low initial participation numbers are seen in all states

with legislation currently on the books (see Table 4).

Table 4: Undocumented Population 2006 and Other State Program Participation 2001-2005

State Undocumented

Population 2001 2002 2003 2004 2005

Participation

Percentage

TX 1,500,000 393 - - 3,704 - 0.036

WA 225,000 - - 27 0.012

UT 87,500 - - - 22 0.025

NM 62,500 41 0.066

KA 55,000 30 221 0.055

Note: Total undocumented population numbers are averages of estimated ranges for 2006 from Pew Hispanic

Center, 2006. Those taking advantage of in-state tuition are from Lewis, 2005. The 393 and 3,704 students

indicated for TX are from Jaschik, 2005 and McGee, 2005. The 30 students indicated for KA is from

Fischer, 2004. No data was obtained for CA (enacted in 2002), IL (2003), NY (2003), OK (2003), or NE

(2006).

Low initial participation is caused by three factors. First, there is a significant

lack of information about programs as not all states actively advertise them to

potential beneficiaries. Second, inherent in participating in a program aimed


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specifically at undocumented immigrants is immigration status disclosure. While in

most cases unfounded, there is a fear of deportation which inhibits widespread

participation. In states where immigration status data is obtained, it is held by the

individual institution or state education organization and is not accessible by US

Immigration and Naturalization Services or Homeland Security. The third and

perhaps most important obstacle is the lack of access to financial aid faced by

undocumented students.

While in-state tuition is a significant benefit for program participants, most are

still unable to afford higher education due to their ineligibility for financial assistance.

They do not qualify for federal financial aid and only qualify for state aid in three of

the ten states offering in-state tuition: Texas, Oklahoma and Utah (albeit for only

one aid program in Utah) (Fischer, 2004). At Central Washington University, for

example, “tuition is only 25 percent to 33 percent of the cost, with housing, food,

books, fees and transportation accounting for most of the rest” (Iwasaki, 2003).

Additionally, the cost of foregone wages prevents most from attending full-time.

Experience in Other States

This analysis projects initial program participation in NC based on the

participation percentage of five states already implementing legislation: Texas,

Washington, Utah, New Mexico and Kansas. Participation percentage is defined as

the number of students participating as a percentage of the total estimated

undocumented population for each state (see Table 4 above). Average participation

percentage for the five states analyzed is 0.039 percent. Applied to an estimated

undocumented population of 350,000 (Pew Hispanic Center, 2006) in NC, the

anticipated program participation in 2006 is 137. Based on the same sample, lower

and upper bounds are 42 and 231 respectively.

These projections are realistic within the context of the estimated

undocumented Hispanic high school graduation population (see Tables 3 and 4

above), but are lower than projections made by advocates of pending legislation in

Massachusetts. The Massachusetts Immigrant and Refugee Advocacy Coalition


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projects initial program participation of 400 (Massachusetts Immigrant, 2006) or 0.2

percent of the state’s estimated undocumented population of 200,000 (Pew Hispanic

Center, 2006). This projection is undeniably conservative and high—most likely to

avoid underestimating state costs in implementing legislation—but is a meaningful

projection and informs estimates for NC program participation.

The participation percentage in NC would likely be higher than the average of

the five states analyzed above due to several factors. First, pending legislation has

been widely reported and debated (In-State Tuition, 2005; In-State Tuition Bill,

2005; Tuition Bill, 2005; Cardenas, 2006). Also, as immigration became increasingly

nationalized in the 2006 election year, the in-state tuition issue played a role in NC

General Assembly races (Devore, 2006; Willsie, 2006). As a result, the

undocumented population is likely more aware of the program in Massachusetts and

NC in 2007 than in Kansas in 2004, for example. Second, improved advocacy and

Spanish language information networks increase the likelihood that eligible students

will participate. A third factor determining participation is the amount of energy and

resources the state invests in advertising the program. Texas, for example, increased

its participation percentage to 0.25 percent in 2004 (from 0.036 in 2001) in large part

due to full support and active state promotion of the program (Lewis, 2005).

Therefore, this analysis will utilize the Massachusetts 0.2 participation

percentage cited above to arrive at an adjusted upper bound projection of 700

program participants to be utilized in sensitivity analysis. The lower bound remains

42. Subsequently, the average participation for 2006 is adjusted from 137 to 371

(average of 700 and 42). Utilizing a 16.5 annual percentage increase (see Table 2

above), this analysis projects program participation for the 2007 to 2011 period of

analysis (see Table 5). It is important to note the annual increase of projected

program participants relative to the annual increase in overall UNC System

enrollment. System-wide undergraduate enrollment is projected to increase annually

by 4,313 (see Table 3 above). At an average projected annual increase of 85, program

participation would make up less than two percent of annual enrollment growth.


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Table 5: Projected NC Program Participation 2007-2011

2006 2007 2008 2009 2010 2011 Annual Increase

Lower Bound 42 49 57 66 77 90 10

Average 371 432 504 587 683 796 85

Upper Bound 700 816 950 1,107 1,289 1,502 160

Note: Based on sustained 16.5 annual percentage increase as documented in Table 2 above. Italicized 2006

numbers are included only as a baseline from which to project 2007-2011 participation. See Table 10 below

for sensitivity analysis including Lower and Upper Bound participation projections.

University vs. Community College

In addition to anticipating overall program participation, benefits and costs

of pending legislation are heavily dependent on the number of students enrolling

in university as opposed to community college. The experiences of Kansas and

Texas give good indication of the percentage of students participating in each type

of higher education. In 2004, of the 30 participants in Kansas, 22 were enrolled in

two-year—or community college—programs (27 percent university). Likewise, 25

percent of Texas participants enrolled in universities (Fischer, 2004). Therefore,

based on Table 5 above, this analysis utilizes the average—26 percent—in

projecting NC university versus community college enrollment (see Table 6).

Table 6: Projected UNC System vs. NC Community College Program Participation 2007-2011

2007 2008 2009 2010 2011 Annual Increase

UNC System

Lower Bound

Average

Upper Bound

13

112

212

15

131

247

17

153

288

20

178

335

23

207

391

3

24

45

Community College

Lower Bound

Average

Upper Bound

36

320

604

42

373

703

49

434

819

57

505

954

67

589

1,111

8

67

127

Note: Based on Table 5 and subsequently broken down utilizing a 26:74 university to community college

enrollment ratio. See Table 10 below for sensitivity analysis including Lower and Upper Bound participation

projections.


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Marginal vs. Average Cost

The cost of educating an undocumented immigrant is no different than that

of educating a fully documented NC resident. Therefore, data on the average cost

of educating a student is not difficult to understand or acquire. For this analysis

however, it is not the average cost which is ideally suited for analysis. Rather, the

marginal cost, or the cost of educating one additional student, is the appropriate

measure. This marginal cost is much more difficult to quantify. Neither UNC

General Administration nor North Carolina State University’s Planning and

Analysis department were able to provide marginal cost data.

This has not been the case in Massachusetts, where legislation is also

pending. In a January 2006 press release, the Massachusetts Taxpayers

Foundation stated that “Massachusetts education officials confirm that their

schools can accommodate these small numbers of additional students without

incurring new costs.” While it is perhaps an exaggeration to say there are no new

costs, it is not difficult to imagine that adding 400 students (0.04 percent of the

total) to a combined university and community college student population of

approximately 980,000 would cost significantly less than the per student average.

Alas, without marginal cost data, this analysis is forced to utilize average cost in

estimating program costs. The marginal cost of higher education is in need of

additional research.

Program Costs

Average cost, on the other hand, is easily identified. It is a simple function of

state government higher education expenditures and the number of students

enrolled. According to State Higher Education Executive Officers, the 2005

average cost of educating one university student in NC was $6,995 (American

Association, 2006). Adjusted by NC’s 2000 to 2005 annual higher education

expenditure increase of 4.1 percent (Center for the Study, 2006b), state funding

per university student in 2007 is projected to be $7,580.


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This projection must be adjusted for community college as state funding per

student is significantly lower for those students. State community college

expenditures represented 26.9 percent of the higher education total in 2005

(Center for the Study, 2006a). Therefore, this analysis projects state funding per

community college student in 2007 to be $2,039 (26.9 percent of $7,580).

Utilizing program participation projections in Table 6 above, an annual per

student expenditure increase of 4.1 percent, and a discount rate of 4.8 percent

(Office of Management, 2006), this analysis projects the present value of one and

five-year program implementation costs at $1,501,440 and $10,289,492

respectively (see Table 7). See Table 10 below for sensitivity analysis including

lower and upper bound participation projections.

Table 7: Projected One and Five-Year Program Implementation Costs 2007-2011

2007 2008 2009 2010 2011 Total

Per Student

UNC System

7,580

848,960

7,891

1,033,721

8,214

1,256,742

8,551

1,522,078

8,902

1,842,714 6,504,215

Per Student

Community College

2,039

652,480

2,123

791,879

2,210

959,140

2,300

1,161,500

2,395

1,410,655 4,975,654

Total 1,501,440 1,825,600 2,215,882 2,683,578 3,253,369 11,479,869

Total – Present Value 1,501,440 1,741,985 2,017,549 2,331,473 2,697,045 10,289,492

Note: Numbers in dollars. Italicized annual increase per student cost projected utilizing 4.1 percent increase

(Center for the Study, 2006b). University per student baseline from 2005 per student cost (American

Association, 2006). Community College per student baseline based on 26.9 percent of university per student

cost. Student numbers from Table 6. Total – Present Value based on 4.8 percent five-year discount rate

(Office of Management, 2006). See Table 10 below for sensitivity analysis including Lower and Upper

Bound participation projections.

Program Benefits

The benefit of reduced tuition for state residents is undisputed. It is so widely

accepted that all fifty states offer in-state tuition rates. Residents are more likely than

nonresidents to remain in-state after graduation to work, therefore contributing

positively to the economy. It is a good investment to encourage them to acquire their

higher education at home rather than elsewhere. While all college degree-holders


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typically have higher incomes than those without, the difference among the

immigrant population is even more pronounced. In Massachusetts, for example,

immigrant college graduates “earn twice as much as their counterparts with just high

school diplomas” (Massachusetts Taxpayers, 2006).

As secondary support, this analysis will examine the potential individual and

state benefits of increased income and associated externalities. However, the primary

benefit utilized for analysis will be the direct benefit to the students projected to

participate in the program. That benefit is derived from the tuition reduction and the

financial gain realized by participants and their families as a result of that reduction.

Primary Benefits: Willingness-to-Pay

While it may seem that the benefit realized by program participants is simply

the difference between out-of-state and in-state tuition rates, it is not. Were all

program participants currently paying out-of-state rates, the benefit of the program

would indeed be that difference. However, most if not all potential participants are

not paying any rate. The actual benefit for students participating is determined by the

difference between their willingness-to-pay (WTP) for education and the in-state

tuition rate. Without extensive survey data, it is difficult to quantify the WTP of

potential program participants. Some will be willing to pay the in-state rate and

nothing more while others may be willing to pay an amount just below the out-of-

state rate. Therefore, this analysis will utilize the average of the two rates as the

average WTP of program participants in 2005: $8,540 for program participants

entering the UNC system and $4,210 for those attending community college (see

Table 8).

Table 8: Average UNC System and NC Community College Tuition and WTP 2005-06 (in dollars)

In-State Out-of-State Difference WTP

UNC System 3,424 13,656 10,232 8,540

NC Community College 1,330 7,090 5,760 4,210

Note: Averages from University of North Carolina, 2006. WTP derived from the average of both tuition rates.


©2006 RBS 14

Program benefits are determined by the difference between a student’s WTP

and the in-state rate: $5,116 per student entering the UNC system and $2,880 for

community college in 2005. Total annual benefits are subsequently derived in the

same manner as program costs in Table 7 above, by multiplying the per student

benefit by the number of participants. Utilizing program participation projections

in Table 6 above, an annual increase of 4.1 percent, and a discount rate of 4.8

percent (Office of Management, 2006), this analysis projects the present value of

one and five-year program benefits to be $1,619,648 and $11,089,659 respectively

(see Table 9). Utilizing the average participation level, direct program benefits

exceed program costs. The net social benefit (NSB) of the program is $118,208

and $800,167 for one and five-year periods respectively. See Table 11 below for

sensitivity analysis including lower and upper bound participation projections.

Table 9: Projected One and Five-Year Direct Program Benefits 2007-2011

2007 2008 2009 2010 2011 Total

Per Student

UNC System

5,544

620,928

5,771

756,041

6,008

919,213

6,254

1,113,257

6,511

1,347,710 4,757,149

Per Student

Community College

3,121

998,720

3,249

1,211,863

3,382

1,467,862

3,521

1,778,024

3,665

2,158,779 7,615,267

Total 1,619,648 1,967,904 2,387,075 2,891,281 3,506,509 12,372,416

Total – Present Value 1,619,648 1,877,771 2,173,419 2,511,923 2,906,898 11,089,659

Note: Numbers in dollars. Italicized annual increase per student cost projected utilizing 4.1 percent increase

(Center for the Study, 2006b). Per student benefit derived from difference between WTP and in-state tuition

rate (North Carolina, 2006). Student numbers from Table 6. Total – Present Value based on 4.8 percent

five-year discount rate (Office of Management, 2006). See Table 11 below for sensitivity analysis including

Lower and Upper Bound participation projections.

Secondary Benefits: Income and Taxes

As mentioned above, there are many societal benefits to be gained from

increasing the number of college graduates among the state population. First and

foremost, increased earnings yield increased state tax revenues. In addition, it has

been shown that college graduates are less likely to utilize expensive social services


©2006 RBS 15

and more likely to participate in the community and the economy (Massachusetts

Imigrant, 2006). The latter two benefits are very difficult to quantify. However,

increased income as a result of a college education has been widely studied and

documented and its benefits can be easily quantified.

According to a 2005 Arizona State University study, lifetime earnings for a

college graduate are $1,268,698 greater than those of a high school graduate (Hill,

Hoffman and Rex). Utilizing a 65 to 100 ratio from the same study, those

attending community college will realize increased lifetime earnings of $824,829.

Based on participation projections in Table 6 above, extending the in-state tuition

benefit to undocumented immigrants for only one year would produce more than

$406 million in additional earnings over the lifetime of participants. Based on a 7

percent individual income tax rate (NCDOR, 2006), the State of NC would

therefore gain more than $28 million in additional tax revenue.

Table 10: Projected One and Five-Year Program Implementation Costs 2007-2011:

Upper and Lower Bound Included

2007 2008 2009 2010 2011 Total

UNC System

Per Student

Lower Bound

Average

Upper Bound

7,580

98,540

848,960

1,606,960

7,891

118,365

1,033,721

1,949,077

8,214

139,638

1,256,742

2,365,632

8,551

171,020

1,522,078

2,864,585

8,902

204,746

1,842,714

3,480,682

732,309

6,504,215

12,266,936

Community College

Per Student

Lower Bound

Average

Upper Bound

2,039

73,404

652,480

1,231,556

2,123

89,166

791,879

1,492,469

2,210

108,290

959,140

1,809,990

2,300

131,100

1,161,500

2,194,200

2,395

160,465

1,410,655

2,660,845

562,425

4,975,654

9,389,060

Total

Lower Bound

Average

Upper Bound

171,944

1,501,440

2,838,516

207,531

1,825,600

3,441,546

247,928

2,215,882

4,175,622

302,120

2,683,578

5,058,785

365,211

3,253,369

6,141,527

1,294,734

11,479,869

21,655,996

Total – Present Value

Lower Bound

Average

Upper Bound

171,944

1,501,440

2,838,516

198,025

1,741,985

3,283,918

225,737

2,017,549

3,801,918

262,480

2,331,473

4,395,035

302,760

2,697,045

5,091,330

1,160,946

10,289,492

19,410,717

Note: Numbers in dollars. Italicized annual increase per student cost projected utilizing 4.1 percent increase (Center

for the Study, 2006b). University per student baseline from 2005 per student cost (American Association, 2006).

Community College per student baseline based on 26.9 percent of university per student cost. Student numbers

from Table 6. Total – Present Value based on 4.8 percent five-year discount rate (Office of Management, 2006).


©2006 RBS 16

Sensitivity Analysis

Based on student participation upper and lower bounds identified in Table 6

above, this analysis performs sensitivity analysis in order to determine outcomes

for a range of participation projections. For a detailed explanation of how these

values were chosen, see the Program Participation section above. Lower bound

program costs for one and five-year periods are projected to be $171,944 and

$1,160,946 respectively. Upper bound costs are $2,838,516 and $19,410,717 (see

Table 10 above). Lower bound program benefits for one and five-year periods are

$184,428 and $1,251,869. Upper bound benefits are $3,060,413 and $20,922,048.

Program benefits exceed costs across the range of projected program participation

and net social benefits are greatly increased by higher participation projections

(see last row of Table 11 below).

Table 11: Projected One and Five-Year Direct Program Benefits 2007-2011:

Upper and Lower Bound and Net Social Benefits Included

2007 2008 2009 2010 2011 Total

UNC System

Per Student

Lower Bound

Average

Upper Bound

5,544

72,072

620,928

1,175,328

5,771

86,570

756,041

1,425,512

6,008

102,135

919,213

1,730,283

6,254

125,085

1,113,257

2,095,175

6,511

149,746

1,347,710

2,545,675

535,607

4,757,149

8,971,972

Community College

Per Student

Lower Bound

Average

Upper Bound

3,121

112,356

998,720

1,885,085

3,249

136,456

1,211,863

2,284,021

3,382

165,726

1,467,862

2,769,997

3,521

200,688

1,778,024

3,358,880

3,665

245,568

2,158,779

4,072,030

860,795

7,615,267

14,370,012

Total

Lower Bound

Average

Upper Bound

184,428

1,619,648

3,060,413

223,026

1,967,904

3,709,533

267,861

2,387,075

4,500,280

325,773

2,891,281

5,454,055

395,314

3,506,509

6,617,704

1,396,401

12,372,416

23,341,985

Total – Present Value

Lower Bound

Average

Upper Bound

184,428

1,619,648

3,060,413

212,811

1,877,771

3,539,630

243,886

2,173,419

4,097,481

283,029

2,511,923

4,738,443

327,715

2,906,898

5,486,081

1,251,869

11,089,659

20,922,048

Net Social Benefits

Lower Bound

Average

Upper Bound

12,484

118,208

221,897

90,923

800,167

1,511,331

Note: Numbers in dollars. Italicized annual increase per student cost projected utilizing 4.1 percent increase (Center

for the Study, 2006b). Student numbers from Table 6. Total – Present Value based on 4.8 percent five-year

discount rate (Office of Management, 2006). Net Social Benefits are derived from Total – Present Value of benefits

minus Total – Present Value Costs (see Table 10 above).


©2006 RBS 17

Recommendation

As shown in Table 11, net social benefits are positive for both one and five-

year analysis periods for the entire range of projected program participation. In

other words, costs incurred by the State of NC to provide in-state tuition to

undocumented immigrant students are less than the benefits received by those

students. This finding is not surprising. As indicated above, the rationale behind

providing a reduced tuition rate is the same for this growing population as it is for

NC residents generally.

This finding is also supported strongly by secondary program impacts. The

State of NC stands to gain $28 million in additional tax revenue as a result of just

one year of program implementation. Over the entire five-year analysis period, the

State would gain more than $197 million in tax revenue over the lifetime of

participating students. Total lifetime benefits to program participants would be

more than $406 million and $2.8 billion respectively for one and five-year periods.

While these gains would be mitigated to some degree by remittances to the

country-of-origin, the secondary benefits portend potential gains for NC on a

scale far greater than that of program costs and benefits. It is estimated that

buying power in the undocumented population is reduced by 20 percent due to

remittances (Kasarda and Johnson, 2006), yet incomes would be taxable in full.

While not quantified in this analysis, the additional gains realized from increased

buying power, economic and civic participation as well as a decreased need for

social services would only increase the societal benefit of the program. Therefore,

in order to achieve maximum societal benefit, undocumented immigrants should

be encouraged to seek higher education and be provided the benefit of in-state

tuition (if meeting the eligibility requirements of HB1183) to NC universities and

community colleges.


©2006 RBS 18

References

American Association of State Colleges and Universities. (2006). State Budget

and Tuition: North Carolina. Retrieved November 18, 2006 from

http://www.aascu.org/state_budget/nc.htm

Cardenas, Jose. (2006, October 16). Grass roots groups challenge illegals: Since

immigration reform has stalled in Congress, the focus has become local. St.

Petersburg Times. St. Petersburg, FL. Retrieved October 30, 2006 from

http://www.sptimes.com/2006/

10/16/Tampabay/Grass_roots_groups_ch.shtml

Center for the Study of Education Policy. (2006). Appropriations of state tax

funds for operating expenses of higher education, fiscal years 2004-05 and

2005-06 in North Carolina. Illinois State University, Grapevine. Retrieved

November 16, 2006 from http://www.grapevine.ilstu.edu/North_Carolina_

06.htm

Center for the Study of Education Policy. (2006). Table 4: Tax appropriations for

higher education, by state, FY96, FY01, FY02, FY03, FY04, FY05, and FY 06,

and average annual percent changes in state tax appropriations for higher

education, by state, FY01 through FY06. Illinois State University, Grapevine.

Retrieved November 16, 2006 from http://www.grapevine.ilstu.edu/

table4_06.htm

Devore, Linda. (2006, November 29). Did Glazier have an epiphany? The

Fayetteville Observer. Retrieved November 29, 2006 from

http://www.fayobserver.com/blog/comments?bid=32&eid=2901

Fischer, Karen. (2004, December 10). Illegal Immigrants Rarely Use Hard-Won

Tuition Break. The Chronicle for Higher Education, 19.

General Assembly of North Carolina. (2005, April 12). House Bill 1183: Access

to Higher Education and a Better Economic Future. First Edition. Retrieved

October 15, 2006 from http://www.ncga.state.nc.us


©2006 RBS 19

Hill, Kent, Hoffman, Dennis and Rex, Tom R. (2005, October). The Value of

Higher Education: Individual and Societal Benefits. L. William Seidman

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from http://www.wpcarey.asu.edu/seid/

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detail.html

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www.miracoalition.org/issues/state/higher-education

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Colleges Would Gain Millions of Dollars from Undocumented Immigrants.

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bulletins/MTF%20News%20Release%20Undocumented%20Immigrants.PDF

McGee, Patrick. (2005, July 24). More illegal immigrants in colleges; Enrollment

has increased ninefold since the state allowed them to pay lower tuition. The

Houston Chronicle, B6.


©2006 RBS 20

NCDOR: North Carolina Department of Revenue. (2006). Tax Rate Schedule.

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rates.html

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©2006 RBS 21

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About the Author

Robert Brown Stromberg received his BA from Duke University in 1998, going

on to work for many years in the non-profit arts community in North Carolina.

In 2000, he founded the Durham Association for Downtown Arts (DADA) and

presented local artists for several years in Durham. Most recently having studied

immigration and global policy in the School of Public and International Affairs at

North Carolina State University, Robert will graduate in December 2007 with a

Master of International Studies.

Contact: (919) 449-4092, [email protected]

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