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


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.

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Extending In-State Tuition to Undocumented Immigrants

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

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

2,227 or
HS Graduates 64,148 66,403 67,521 70,494 73,054 -
3.3%

Hispanic 202 or
956 1,083 1,290 1,580 1,763 -
HS Graduates 16.5%

Undocumented HS 91 or
430 487 581 711 793 -
Graduates 16.5%

Total UNC
3,443 or
Undergraduate 127,940 129,375 130,671 135,567 140,331 145,153
2.6%
Enrollment

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

2,979 or
HS Graduates 85,930 88,766 91,695 94,721 97,847
3.3%

Hispanic 797 or
3,783 4,407 5,135 5,982 6,969
HS Graduates 16.5%

Undocumented HS 359 or
1,702 1,983 2,311 2,692 3,136
Graduates 16.5%

Total UNC
4,313 or
Undergraduate 159,548 163,696 167,952 172,319 176,799
2.6%
Enrollment

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

Undocumented Participation
State 2001 2002 2003 2004 2005
Population 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 13 15 17 20 23 3
Average 112 131 153 178 207 24
Upper Bound 212 247 288 335 391 45

Community College
Lower Bound 36 42 49 57 67 8
Average 320 373 434 505 589 67
Upper Bound 604 703 819 954 1,111 127

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 7,580 7,891 8,214 8,551 8,902
UNC System 848,960 1,033,721 1,256,742 1,522,078 1,842,714 6,504,215

Per Student 2,039 2,123 2,210 2,300 2,395
Community College 652,480 791,879 959,140 1,161,500 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.

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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 5,544 5,771 6,008 6,254 6,511
UNC System 620,928 756,041 919,213 1,113,257 1,347,710 4,757,149

Per Student 3,121 3,249 3,382 3,521 3,665
Community College 998,720 1,211,863 1,467,862 1,778,024 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

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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 7,580 7,891 8,214 8,551 8,902
Lower Bound 98,540 118,365 139,638 171,020 204,746 732,309
Average 848,960 1,033,721 1,256,742 1,522,078 1,842,714 6,504,215
Upper Bound 1,606,960 1,949,077 2,365,632 2,864,585 3,480,682 12,266,936
Community College
Per Student 2,039 2,123 2,210 2,300 2,395
Lower Bound 73,404 89,166 108,290 131,100 160,465 562,425
Average 652,480 791,879 959,140 1,161,500 1,410,655 4,975,654
Upper Bound 1,231,556 1,492,469 1,809,990 2,194,200 2,660,845 9,389,060
Total
Lower Bound 171,944 207,531 247,928 302,120 365,211 1,294,734
Average 1,501,440 1,825,600 2,215,882 2,683,578 3,253,369 11,479,869
Upper Bound 2,838,516 3,441,546 4,175,622 5,058,785 6,141,527 21,655,996
Total – Present Value
Lower Bound 171,944 198,025 225,737 262,480 302,760 1,160,946
Average 1,501,440 1,741,985 2,017,549 2,331,473 2,697,045 10,289,492
Upper Bound 2,838,516 3,283,918 3,801,918 4,395,035 5,091,330 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 15


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 5,544 5,771 6,008 6,254 6,511
Lower Bound 72,072 86,570 102,135 125,085 149,746 535,607
Average 620,928 756,041 919,213 1,113,257 1,347,710 4,757,149
Upper Bound 1,175,328 1,425,512 1,730,283 2,095,175 2,545,675 8,971,972
Community College
Per Student 3,121 3,249 3,382 3,521 3,665
Lower Bound 112,356 136,456 165,726 200,688 245,568 860,795
Average 998,720 1,211,863 1,467,862 1,778,024 2,158,779 7,615,267
Upper Bound 1,885,085 2,284,021 2,769,997 3,358,880 4,072,030 14,370,012
Total
Lower Bound 184,428 223,026 267,861 325,773 395,314 1,396,401
Average 1,619,648 1,967,904 2,387,075 2,891,281 3,506,509 12,372,416
Upper Bound 3,060,413 3,709,533 4,500,280 5,454,055 6,617,704 23,341,985
Total – Present Value
Lower Bound 184,428 212,811 243,886 283,029 327,715 1,251,869
Average 1,619,648 1,877,771 2,173,419 2,511,923 2,906,898 11,089,659
Upper Bound 3,060,413 3,539,630 4,097,481 4,738,443 5,486,081 20,922,048
Net Social Benefits
Lower Bound 12,484 90,923
Average 118,208 800,167
Upper Bound 221,897 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 16


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 17


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
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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
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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 18


Hill, Kent, Hoffman, Dennis and Rex, Tom R. (2005, October). The Value of
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Houston Chronicle, B6.

©2006 RBS 19


NCDOR: North Carolina Department of Revenue. (2006). Tax Rate Schedule.
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202004.xls
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content.php/assessment/reports/abstract-current.htm

©2006 RBS 20


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Template=/GlobalTemplates/Details.cfm&StoryID=30579&Section=Local

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, rstromberg@alumni.duke.edu

©2006 RBS 21

Extending In-State Tuition to Undocumented Immigrants

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