As enrollment dips, UNC opens door to more out-of-state students at five campuses

The University of North Carolina Board of Governors has raised the out-of-state freshman enrollment cap at five universities, from 18% to 25%.

East Carolina University, the University of North Carolina at Asheville, the University of North Carolina at Greensboro, the University of North Carolina at Pembroke and Western Carolina University all received permission to admit more students from outside North Carolina.

Enrollment caps were initially set at 18% in 1986 board policy as a way to promote in-state enrollment. When universities exceed caps for two consecutive years, they must pay a fine based on the total excess out-of-state freshmen enrolled.

In recent months, the board has loosened some limits on out-of-state students, signaling a focus on abating university enrollment decreases and associated funding shortfalls.

For the first time in nine years, the UNC system has experienced a decrease in overall student enrollment, according to the 2022 UNC Fall Enrollment Report.

A fall 2022 decline in enrollment among students from North Carolina, was offset by the increase in new out-of-state freshmen enrollment, according to the report. The UNC system also saw enrollment demand in excess of capacity from out-of-state first-time freshmen for fall 2022.

In April, the board raised North Carolina Agricultural and Technical State University and North Carolina Central University’s caps to 35% while Elizabeth City State University’s cap was raised to 50%.

Previously, the board raised the cap to 25% at all five of the system’s HBCUs, including Fayetteville State University, Winston-Salem State University and the three referenced above.

No leeway for busting limits

Despite the focus on abetting losses, universities do not get leeway when it comes to paying the penalties if they violate out-of-state student caps.

A statue of the four students who staged a civil rights sit-in at a Greensboro lunch counter in 1960 stands on the campus at N.C. A&T University in Greensboro NC on Jan. 23, 2014. From left: David Richmond, Franklin McCain, Ezell Blair, Jr., and Joseph McNeil. For story on the state of historically black universities in North Carolina, of which A&T is one.

This November, the board approved a $1.97 million penalty for NC A&T in Greensboro. During the 2022-23 fiscal year, the historically Black research university exceeded its 35% cap by 171 students.

This was the heftiest fine any system university has had to pay in the past 20 years, according to data provided by The UNC System.

During the November meeting where NC A&T was fined, BOG board member Joel Ford voted against the penalty.

“Fundamentally speaking, we have campuses and in time, environments that are struggling with enrollment, and here we have one of our HMSI’s (historically minority-serving institution) that is experiencing historical seasonal growth,” he said.

“I cannot support a policy that’s going to take $2 million away from a university when in reality they can use every dime they can get to continue that mission,“ said Ford.

Out-of-state students can often pay double or even five times more than in-state students, making them an alluring financial prospect for universities.

In fiscal year 2021-2022, NC A&T had revenue of over $43 million, with 52% of its funds coming from state appropriations, over 28% from nonresident tuition and under 17% from resident tuition, according to data shared by the UNC System.

Between fiscal year 2017-2018 to 2021-2022, NC A&T’s out-of-state funds grew by 47% and in-state funds by 5%. Appropriations grew by 24%. By comparison, the UNC System saw appropriations grow by 17%, in-state-tuition funds by 3% and out-of-state tuition funds by 8%.

State fiscal years run from July 1 of one calendar year through June of the next year, meaning the 2023 fiscal year goes through June.

Following Ford’s comments, Jim Holmes, who is chairman of the Committee on Budget and Finance, said that this topic “requires conversation and deliberate thinking versus just a change at the board level,” he said.

He added that he had discussed the fine with A&T Chancellor Harold Martin and that he did not “know that he likes the penalty. But he certainly accepted the penalty,” Holmes said.

Performance matters

The board is fine-tuning details on the switch to a performance-weighted funding model, which would significantly affect the way universities are funded.

Under this model, approved in April, state funds will be allocated based on a university’s performance, student outcomes and system goals rather than total enrollment. Goals include “elements of increasing undergraduate success, affordability, and overall productivity,” according to October and November board meeting materials.

“Recognizing that each institution would start these goals at varying baselines and face their own unique challenges and have varying resources, the performance goals for the new funding model will be data-driven,” according to board meeting materials.

Board of Governors Member Lee Roberts, said in an October board meeting that based on the enrollment in 2022 under the old funding model system universities would lose a total of $62 million in state funding but under the new model, they would lose $36 million.

East Carolina University in Greenville.

The $26 million in savings show that performance based model “is doing what it was intended to do, which was minimize the whipsaw created by the old enrollment-driven model,” Roberts said. He added that 13 schools do better under the new performance model but two schools do slightly worse. He did not specify which universities might be affected negatively.

The N&O requested documents, including any analysis and reports, that detail how the different universities will be impacted funding wise under the performance-based model.

The UNC System replied that “a responsive public record does not yet exist” and that a report will likely be discussed and made public at the Board of Governors’ February meeting.

Other penalties paid by campuses exceeding out-of-state caps:

For the 2004-05 fiscal year: UNC Asheville was assessed a penalty of $97,570 for exceeding the 18% cap by 13 students. In fall 2004, at UNCA there were 140 out-of-state freshmen enrolled and 567 in-state freshmen enrolled.

For the 2009-10 fiscal year: ECU was assessed a penalty of $260,220 for exceeding the cap by 26 students . In fall 2009, in ECU there were 738 out-of-state freshmen enrolled and 3,218 in-state freshmen enrolled.

For the 2010-11 fiscal year: UNC Chapel Hill was assessed a penalty of $158,225 for exceeding the cap by 13 students. In fall 2010, in UNC Chapel Hill there were 726 out-of-state freshmen enrolled and 3,234 in-state freshmen enrolled.

For the 2015-16 fiscal year: UNC Chapel Hill was assessed a penalty of $1,041,017 for exceeding the cap by 76 students. In fall 2015, in UNC Chapel Hill there were 796 out-of-state freshmen enrolled and 3,280 in-state freshmen enrolled.