We're going to ask you at the end of this article if Virginia Tech should change (increase or decrease) student athletic fees. But don't jump ahead to the poll, because it's not as simple a question as you think. You have to do some reading first.
For starters, please read last Thursday's article (Part 1) first, if you haven't already.
Next, digest the following.
A new law caps and limits student athletic fees in Virginia
The Commonwealth of Virginia recently signed into law House Bill 1897, which caps and controls how much Virginia's colleges can charge for athletic fees.
The bill takes effect for the 2016-17 Academic Year, which means it kicks in on July 1, 2016, a little over a year from now.
There are two major provisions in the bill: (1) a provision that limits athletic fee revenue as a percentage of overall athletic department revenue; and (2) a provision that limits how much a college can increase the athletic fee in a given year.
Student athletic fees as a percentage of athletic revenue
The percentage of athletic revenue that is now allowed to come from student athletic fees is dependent upon one of four institutional athletic classifications.
1.) Power 5 schools (Virginia Tech and UVa): Under the new law, up to 20% of athletic revenue can come from student fees.
In the 2013-14 academic year, VT's and Virginia's percentages were:
- VT: 10.7%
- UVa: 15.8%
2.) Non-Power 5 schools with FBS football (ODU): Under the new law, up to 55% of athletic revenue can come from student fees.
In the 2013-14 academic year, ODU's percentage was:
- ODU: 65.1%
3.) FCS football schools (JMU, William & Mary): Under the new law, up to 70% of athletic revenue can come from student fees.
In the 2013-14 academic year, JMU and W&M's percentages were:
- JMU: 76.8%
- W&M: 49.6%
4.) Division 1 schools with no football (VCU, George Mason, Radford): Under the new law, up to 78% of athletic revenue can come from student fees.
In the 2013-14 academic year, VCU, GMU, and Radford's percentages were:
- VCU: 65.9%
- George Mason: 68.3%
- Radford: 85.8%
Displayed with an infographic, here's where the listed schools were in 2013-14, and where the new law requires them to be in 2016-17 (that said, they have five years to become compliant):
Virginia Tech is easily compliant with the first provision - the 20% limit - and will remain so for the foreseeable future.
But there's another provision of the bill that caps how much schools can increase their athletic fees in any given year. This second provision may cause difficulty (or ‘heartburn’) for the Board of Visitors and/or VT Administration someday in the future.
The cap on increasing student fees
Here's a provision from the bill that is both important and problematic:
D. Effective with the fiscal year beginning July 1, 2016, any percentage increase in the subsidy at an institution that complies with subsection C [the 20% limit] shall be matched by a like percentage increase in generated revenue, except that each such institution shall utilize a rolling average of the change in generated revenue and student fees over the immediately preceding five years for the purposes of such calculation.
Yeah … that doesn't make any sense to me, either.
But here's how it was explained to me by a friend who has studied this stuff closely: take a five-year average of the percentage increase or decrease in a school's generated athletic revenue (coming from sources other than student fees), and in any given year, you can't increase your student athletic fee by any more than that five-year percentage.
Let's take an example. Let's say a school's generated athletic revenue has increased, on average, 3% a year for the last five years. Under the new law, that school can't increase their student athletic fee by more than 3% for the next year.
If their athletic fee was $500, then the most they can increase it by is $15, for a new fee of $515.
Do you see what this means? Once the bill kicks in for the 2016-17 academic year, colleges in the state of Virginia will have a cap on how much they can increase their student athletic fees. That cap has never existed or been imposed on colleges and universities, until now.
Virginia Tech's disadvantage
Let's review VT's 2013-14 student fees versus other state colleges. Remember, this data is a year old, but the proportion of the fees for 2014-15 is similar.
Because Virginia Tech has the lowest fees, they'll always have the lowest fees in perpetuity. Barring some miraculous explosion in Virginia Tech athletics revenue, Tech will always be limited to small annual increases. But perhaps more important, Virginia Tech will never be able to increase the sheer dollar amount of student athletic fees by as much as other schools.
If, for example, every school has a five-year average athletic revenue increase of 3%, they'll all be able to raise their fees by up to 3%. For each school in the infographic above, that would be increases of:
- VT: $8
- UVa: $20
- ODU: $41
- W&M: $47
- JMU: $37
- VCU: $21
- GMU: $16
- Radford: $35
Once this bill kicks in, Virginia Tech's student athletic fees will be forever capped at a much lower dollar value than other state institutions. The competitive disadvantage with UVa will only widen; 3% of $657 is annually almost 2 ½ times that of $273.
But the bill doesn't kick in until 2016-17, which gives the Hokies a one-year window (2015-16) to increase what will become their base student athletic fee once the new bill takes effect.
In other words, Virginia Tech has an opportunity in the coming academic year to set the student athletic fee to whatever they want, before the new law caps the student athletic fee increases forever.
Which leads to the question…
Should Virginia Tech increase student athletic fees in 2015-16?
The problem with asking this question is that Virginia Tech's Board of Visitors has already set tuition and fees for 2015-16, at their late March meeting. Online research doesn't reveal what the athletic fee, which was $282 this year (2014-15), will be next year. (Update: This link reveals that the athletic fee has been set to $288, a $6 per year increase.)
Whatever the fee is, a vote now to increase athletic fees before the next Academic Year starts (August) would be a political hot potato, given the climate in Virginia towards athletic fees at colleges and universities. (They did, after all, just sign a bill into law to limit athletic fees.)
Nonetheless, we'll ask you, the TSL readership, this question: Should Virginia Tech increase athletic fees for 2015-16, before the new state law that limits annual fee increases takes effect for 2016-17?
This would be a one-time only increase, and it's worth noting that every $25 increase would add approximately $700,000 to Virginia Tech's annual student athletic fee revenue (which was $7.8 million in 2013-14 on a fee of $273 per student).
- +$25/year = +$700k additional revenue
- +$50 = +$1.4 million
- +$75 = +$2.1 million
- +$100 = +$2.8 million
Remember, this is at a time when the new Cost of Attendance provision, for example, is adding about $950,000 to Virginia Tech's annual athletic budget, starting next year.
Time to vote.