Market Rate Tuition

1. Market Rate Tuition A Determination and Analysis for Florida State University Cohen Hardin Pan & Tschirhart AER July 24, 2012 Applied Economic Research Group

2. President Barron’s Requested Analysis • Compute the market rate tuition • Undergraduate, in-state • Florida State University • 2011-2012 academic year • Compute the net cost of tuition and fees • Before and after tuition change • Bright Futures, Prepaid

3. Determination & Analysis

4. Background • Drastic cuts • Lost revenue • FSU $65 million • No raises for 5 years • Capped growth rate • Current tuition • $5,826

5. What is a market rate? Price S2 S1 P2 P1 P1 D1 Quantity Q2d Q1d

6. House Bill 7129 • Preeminence Bill • High quality research universities • Removes tuition cap • Improve value of degree and quality of education

7. Determination & Analysis

8. How do we estimate tuition? • Select relevant market

9. General SelectionProcess Aggregated Research Activity Index Very High Research (N=108) High Research (N=98) Research University (N=88) FAMU FSU UCF USF UF UM UWF FAU Per-capita Research Activity Index FIU Source: Carnegie Foundation

10. General Market General SelectionProcess Public (N=73) Solutions Preeminence Bill Carnegie Classification

11. How do we estimate tuition? Public • Select relevant market • Select standards for comparison Preeminence Bill Carnegie Classification

12. Preeminence Bill Carnegie Classification

13. Preeminence Selection Preeminence Bill Carnegie Classification

14. Preeminence Bill Carnegie Classification

15. How do we estimate tuition? Public 11 or more • Select relevant market • Select standards for comparison • Average the tuition Preeminence Bill Carnegie Classification

16. Preeminence Bill Estimates Preeminence Bill Carnegie Classification

17. Carnegie Foundation • Classifies higher education institutions • Characteristics • Public, Private • Undergraduate population • Used to control for institutional differences Preeminence Bill Carnegie Classification

18. How do we estimate tuition? Public • Select relevant market • Select standards for comparison Preeminence Bill Carnegie Classification

19. Carnegie Selection Preeminence Bill Carnegie Classification

20. How do we estimate tuition? Public High Undergrad Balanced Arts & Sciences Full-Time, Selective • Select relevant market • Select standards for comparison • Average the tuition Preeminence Bill Carnegie Classification

21. Carnegie Estimates Preeminence Bill Carnegie Classification

22. Concerns with Averages • Susceptible to outliers • Characteristics differ • Small sample sizes Preeminence Bill Carnegie Classification

23. Solutions Preeminence Bill Hedonic Regression Carnegie Selection

24. Hedonic Regression • Vector of attributes for a good • Contributions to price • Typically used to price housing • Bedrooms • Square footage • Lot Size Carnegie Classification Preeminence Bill Hedonic Regression

25. How do we estimate tuition? • Select relevant market Carnegie Classification Preeminence Bill Hedonic Regression

26. Regression Selection Very High Research Public Private Carnegie Classification Preeminence Bill Hedonic Regression

27. How do we estimate tuition? Very High Research Public Private • Select relevant market • Select variables for regression Carnegie Classification Preeminence Bill Hedonic Regression

28. Close Teacher-Student Relationship Price S2 S1 P2 P1 D2 D1 Q1d Q2d Quantity Carnegie Classification Preeminence Bill Hedonic Regression

29. Academic Reputation Price S2 S1 P2 P1 D2 D1 Q1d Q2d Quantity Carnegie Classification Preeminence Bill Hedonic Regression

30. What Affects Tuition? Carnegie Classification Preeminence Bill Hedonic Regression

31. Available Proxies for Attributes Carnegie Classification Preeminence Bill Hedonic Regression

32. How do we estimate tuition? Very High Research Student Faculty Ratio Room and Board External Funding Rank Student Services Degree Offerings Public Private • Select relevant market • Select variables for regression • Run the regression Carnegie Classification Preeminence Bill Hedonic Regression

33. Regression Selection Very High Research Public Private Carnegie Classification Preeminence Bill Hedonic Regression

34. Regression Model • External • Sum of all external revenues • Rank • 1-29, 30-59, 60-89, etc. • Undergraduate degrees • Balanced arts & sciences • Balanced professional + arts & sciences

35. Public

36. Student-Faculty Drives Tuition Negative Positive Carnegie Classification Preeminence Bill Hedonic Regression

37. Regression Selection Very High Research Public Private Carnegie Classification Preeminence Bill Hedonic Regression

38. Public and Private

39. Public and Student-Faculty Drive Tuition Negative Positive Carnegie Classification Preeminence Bill Hedonic Regression

40. Estimated Tuition Carnegie Classification Preeminence Bill Hedonic Regression

41. Determination & Analysis

42. Declining Tuition Coverage

43. Bright Futures & Prepaid Interaction Prepaid Bright Futures FAS 4 Year College 2 Year 2+2 10% 4 Year Univ. FMS GSV

44. Students with Bright Futures & Prepaid

45. Bright Futures Breakdown

46. Costs Remain Zero for 34%

47. Costs Increase by Less Than $2,000

48. Determination & Analysis

49. Prepaid Plan Prices Double

50. Forecasted Recommendations