Board holds USC deal hostage over out-of-state tuition discounts

The board that oversees S.C. colleges Thursday unexpectedly put on hold the University of South Carolina’s bid to buy 14 acres in downtown Columbia for $9.4 million.

The S.C. Commission on Higher Education voted 3-2 to delay the project after grilling USC leaders about $515 million in tuition discounts the university has given to out-of-state students over the past decade.

“The continued increase of those (discounts) must be addressed in some capacity,” said commissioner Kenneth Kirkland, who proposed delaying approval of the land purchase until the state agency is comfortable with USC’s tuition-discounting strategy. “This is lost revenue to USC.”

For more than an hour Thursday, USC leaders defended the tuition discounts and the out-of-state students that the discounts attract.

USC officials also said the tuition discounts are unrelated to buying the SCANA owned-land, across Assembly Street from Capital City Stadium. “The $10 million is not going to put the university in a more difficult position,” USC’s Rick Kelly told the board.

However, several commissioners argued the tuition discounts and land deal both relate to USC’s overall finances. They said repeatedly they were looking out for S.C. students and taxpayers, echoing concerns about rising USC’s tuition costs.

Thursday’s wrangling comes a day after S.C. lawmakers agreed to a proposed state budget that would strip the commission of its power to review plans for non-academic projects, including buying property like the SCANA site, new athletic stadiums, garages or dorms.

If the state budget is approved by legislators next week, USC could take its land deal to other state boards instead.

“The action by CHE today is a perfect example of why they should be relieved of their overly burdensome and duplicative bureaucratic role in approving auxiliary and other projects, perhaps arguably any projects,” USC spokesman Wes Hickman said. “Several commission members demonstrated a complete lack of knowledge about a basic tool used in the free market of higher education” – tuition discounts.

However, commission executive director Jeff Schilz said the discounts show why families and taxpayers need a statewide body overseeing S.C. public colleges.

“It is perfectly logical that the commission asked some questions about how USC intends to provide a sustainable model that attracts quality in-state and out-of-state students in the future,” Schilz said. “During the meeting today, it was stated that this model works for USC. The commission’s desire is a model that works for the people of South Carolina.”

USC plans to move its facilities, housing and technology maintenance departments to the SCANA site – a move that would save about $104,000 a year in operating expenses, the school said – and build a soccer field for students.

Commission staff deemed the purchase – to be made without borrowing – to be “low-risk” in agency documents.

But the commission’s move to delay voting on the purchase could jeopardize the deal. USC has the land under contract until year’s end. However, it needs several more state approvals before the purchase can be finalized.

Commission leaders and some state legislators have balked at the roughly $84.1 million in tuition discounts that USC offered out-of-state students last year. More than a third of those students paid the lower in-state tuition rate.

School leaders say the tuition breaks help USC bring in more money that subsidizes the cost of educating in-state students. Without the discounts, out-of-state students, most of whom pay higher tuition than in-state students, would not attend USC, they say.

Even after the discounts, nearly 10,800 out-of-state students accounted for $102 million in revenue for the school last fall, USC chief financial office Leslie Brunelli said. Nearly 15,000 S.C. students accounted for less — roughly $78.8 million.

Roughly 49 percent of USC’s freshman class this year is from outside South Carolina, Brunelli told the board, adding the overall student body’s ratio is closer to 60-40.

Kelly said USC has worked toward buying the SCANA property for 15 years. To avoid a delay in that purchase, USC officials want immediately to begin discussions with commission leaders about the school’s tuition-discount strategy.

This story was originally published June 1, 2017 at 2:16 PM with the headline "Board holds USC deal hostage over out-of-state tuition discounts."