Cleveland introduces bill to overturn scholarship provision

RALEIGH – A state legislator is calling for a controversial budget provision seen by many as a gift to athletic booster organizations to be overturned before the costs get out of hand.

Rep. George Cleveland, R-Onslow, said that a budget provision in last year’s budget that allowed UNC institutions to consider out-of-state residents as in-state residents for purposes of awarding scholarships was bad fiscal policy for taxpayers. Cleveland has since introduced legislation to overturn the provision. The bill is House Bill 2423.

Taxpayers, Cleveland said, should not front the costs of a program that helps out-of-state students.

“I don’t see why taxpayers should worry about it,” Cleveland said about scholarship funding. “That is a school problem, not a taxpayer problem.”

When the session opened, Cleveland asked the Legislative Fiscal Research Division to analyze the program’s cost. According to an analysis performed by Richard Bostic, with the Fiscal Research Division, the program’s cost is approximately $5.2 million. The biggest chunk of that money is associated with UNC-Chapel Hill. The tuition loss to the state is $1.4 million there. Typically, out-of-state students are charged a rate of $17,003, but the in-state rate is $3,205, a considerable savings to scholarship donors.

Bostic said students do not receive any of the savings from the program. Instead, booster clubs and scholarship donors receive the benefit.

Cleveland believes the program will continue to grow and will cost taxpayers more each year.

“If we don’t nip this this year, I can see us spending $50 million on this program,” Cleveland said when he first brought up the issue. “It’s not a good program.”

In all, 456 out-of-state students were considered in-state students after the provision was adopted. Of those students, 311 are attending UNC institutions on athletic scholarships. Many who complained about the provision when it was included in the budget last year said it would be a reward for people who sponsor athletic scholarships.

Of the 311 athletic scholarships that were switched to in-state status, the majority was from some of the state’s biggest athletic departments. North Carolina State University reclassified 52 scholarships from out-of-state to in-state, while East Carolina University transferred 50. North Carolina Central was next with 40, followed by UNC-Chapel Hill at 39. Western Carolina and (31) and UNC-Greensboro (30) were the only other schools that transferred more than 30 athletic scholarships into in-state tuition offers.

Five schools – Elizabeth City State University, Fayetteville State University, North Carolina A&T, North Carolina School of the Arts, and Winston-Salem State University – did not transfer any out-of-state athletic scholarship to in-state scholarships. The North Carolina School of the Arts does not have an athletics program.

When academics are entered into the equation, UNC-Chapel Hill converted the most scholarships at 100. North Carolina State converted 80, while East Carolina transferred 60. Every school in the system converted at least one scholarship from out-of-state to in-state.

According to Fiscal Research, UNC-Chapel Hill added 10 Morehead scholarships, nine of which were given to out-of-state students. Twenty-four of the 100 scholarships at UNC-Chapel Hill converted from out-of-state to in-state were Morehead scholars. North Carolina State added five Parks Scholars, all of which were given to out-of-state students.

Cleveland said this program has nothing to do with education.

“I have no problem with education at all or I wouldn’t be sitting here,” Cleveland said. “I do have a problem with taxpayers supporting things they should not be supporting. I strongly feel this is one of them. We should address it and change it.”

Cleveland said he has support for his legislation, but not all members of the joint subcommittee were willing to consider the change. Sen. John Garwood, a Republican who lost in his primary bid for re-election in May, said he had concerns because the scholarships go to needy students.

“I hope this won’t be considered,” Garwood said. “It would take money from a lot of needy students. I want us to be very careful with how we treat this.”

Cleveland countered by saying that students would not be affected one way or the other.

“These students had their tuition covered prior to this year,” Cleveland said. “There was no problem getting their tuition covered. We’re circumventing the 18-percent cap.”

Cleveland is referring to an 18-percent cap on out-of-state freshmen residents attending UNC institutions. Bostic said this program would allow schools such as UNC-Chapel Hill to exceed the 18-percent cap.

“I recommend out-of-state students pay out-of-state tuition and in-state students pay in-state tuition,” Cleveland said. “I think it is a way to get around that cap. It is a legislative problem I believe.”