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The University of Colorado has been investing big to modernize and keep the Boulder campus competitive. The 66,000-square-foot Roser ATLAS Center includes research labs, a hacker lab, virtual-reality and audio labs and the two-story, 2,700-square-foot Black Box Experimental Studio, a flexible, technologically enhanced performance space that supports 360- degree HD projection. The $31 million building opened in 2006. About $20.7 million in construction costs was covered by student fees.(Doug Conarroe, Special to The Colorado Sun)

Colorado’s flagship public university is within reach of a controversial milestone: the majority of its student body could soon come from out of state.

The University of Colorado’s Boulder campus has trended that direction for years — the result of radically changing its business model to make up for two decades of state budget cuts. Amid two recessions, the university amped up out-of state recruitment efforts and spent hundreds of millions on athletics and luxury amenities aimed at competing with public and private schools for wealthy students. It also more than doubled the cost of in-state tuition over 10 years.

Now, tuition makes up 81 percent of the school’s general budget. The state contributes just 9 percent.

Non-residents make up the largest share of the student body in the university’s history. And under a new law, state residents could eventually become the minority at Colorado’s premier public university, a Colorado Sun analysis found.

On its own, the shift is not necessarily cause for concern, said Dan Baer, the former director of the state Department of Higher Education. The reason: CU schools are required by law to admit any qualified Colorado resident who applies.

University officials insist that the purpose of increasing the number of out-of-state students is to raise the money needed to support their primary mission — educating Colorado residents. Without the money from non-residents, they argue, in-state tuition costs would be even higher.

“Despite the fact that they get less of their revenue from public coffers today than they once did, they were built with a significant amount of Colorado taxpayer dollars,” Baer told The Sun in an interview before he left the department in January during the transition to a new governor. “And they are intended to serve — as a first priority — the education and skill-building needs of Colorado.”

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Despite the assurances, there’s no legal requirement that CU use revenue from out-of-state tuition to drive down costs for Coloradans. And it’s not the only Colorado university pursuing this new business model.

Colorado State University in Fort Collins, the Colorado School of Mines in Golden and the University of Northern Colorado in Greeley all received the same legislative authorization to enroll a majority of their students from outside the state’s borders.

The situation confronts state policymakers and university officials with uncomfortable questions: What does it mean to be a public university in a state where the taxpaying public is no longer the primary funding source for higher education? And can a university that increasingly caters to wealthy out-of-state students truly fulfill its public-oriented mission?

“I do think we owe it to the taxpayers of Colorado and the local graduates to educate them at our public institutions, first and foremost,” said Rep. Jeni Arndt, a Fort Collins Democrat who sponsored the legislation allowing more out-of-state students.

But, she added, “honestly, in defense of them (the institutions), I don’t know what they’re supposed to do.”

“There’s none worse than the state of Colorado”

Colorado’s not alone in slashing public funding for higher education, nor are its universities the only in the nation in looking out-of-state to raise money.

But it is an extreme example.

“Out of all the states in our great country that have decided to disinvest in higher education, there’s none worse than the state of Colorado,” says Ozan Jaquette, an assistant professor at  UCLA, who studies funding and enrollment trends at public universities.

In 2000, the state budget contributed 68 percent of public college and university funding, with students supplying the rest through tuition and fees. But state dollars fell after two economic downturns. Colorado now ranks 47th nationally in higher education spending per student, according to the State Higher Education Executive Officers Association, and is dead last among states the department considers peers.

Meanwhile, the cost of higher education has grown faster than inflation and tuition has climbed dramatically to make up the difference. Today, the ratio between taxpayer funding and tuition has nearly flipped, with students now providing 64 percent of total statewide university funding.

State lawmakers have boosted funding in recent years, but it hasn’t been enough to make up for decades of cuts. For the 2018-19 school year, state lawmakers appropriated $906 million to schools for general education expenses and financial aid, according to state budget documents. CU received the most of any school system — $256.7 million — and CU Boulder received $81 million of that number.

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Meanwhile, students at CU Boulder bear an even greater share of the costs than the typical state school. At $234 million, in-state tuition made up 27 percent of the school’s general education budget this year. Out-of-state tuition generated even more: $474 million, or 54 percent.

And administrators there say the only way to keep in-state tuition down — without a major infusion of public dollars — is an increase in non-resident population because they pay more than in-state students. When you include room, board and fees, the sticker price for an in-state student today is $28,704 a year. Domestic out-of-state students pay $53,504 annually, and international students pay $59,312.

The university reports that CU’s student body is now split 67 percent residents to 33 percent non-resident, according to official figures. But those numbers are skewed by a formula that excludes international students and counts certain scholarship recipients under the Colorado Scholars program as two in-state students.

In reality, the ratio of in-state to out-of-state students today is about 60-40, according to a Colorado Sun analysis of enrollment figures.

And under a law passed last year, the Colorado resident share can drop to 55 percent on paper — and 45 percent in reality. If the trend continues, that means CU could eventually be educating a student body that’s as much as 55 percent out-of-state or international students. (More than 80 percent of students at CU’s other campuses, in Colorado Springs and Denver, come from Colorado.)

Jaquette, the UCLA researcher, says there’s a clear causal relationship across the country: When state funding falls, out-of-state enrollment rises.

“A public flagship university isn’t going to say, ‘let’s become a community college because a state isn’t going to give us the resources we need,’ ” Jaquette said. “They’re going to say ‘how do we generate the revenue?’ They want to be a research university of national renown.”

“We’re not bumping out the in-state students”

State policymakers don’t blame CU Boulder and other research institutions for their growing focus on non-residents. In fact, lawmakers approved the 2018 measure that allowed more out-of-state and international students, Senate Bill 206, by a vote of 96-4 in the two chambers.

Arndt, one of the bill sponsors, said that the universities’ commitment to admit all academically qualified Colorado students was crucial to her support of the measure. It was a built-in safeguard against what is happening elsewhere: in-state residents being crowded out by the influx of non-state students that generate more money for the school.

“We’re not bumping out the in-state students. It’s in the law,” Arndt said. “That made me feel better about it.”

Major construction projects at the University of Colorado have included improvements to Folsom Field and practice and training facilities on the Boulder campus. (Doug Conarroe, Special to The Colorado Sun)

Growth in out-of-state and international students on the Boulder campus has actually helped CU administrators refocus on their in-state mission, Senior Vice Chancellor and CFO Kelly Fox told The Sun.

“I think as a business model we have to change what we’re doing because the nature of the funding sources is changing,” Fox said. “But the nature of the institution, I think, is even more strongly public than it was.”

Over the last five years, CU has ramped up financial aid and merit-based scholarships by nearly $13 million. In 2018, 9,218 students received some form of financial help, a 50 percent increase from 2014. CU also implemented a tuition guarantee, which prevents year-to-year tuition hikes for students once they’ve enrolled. And the university eliminated course and program fees, saving in-state students $6 million a year.

Finances aren’t the only factor driving the out-of-state enrollment push. According to the Western Interstate Commission for Higher Education, the number of Colorado high school graduates is expected to peak in 2025, and then decline by about 10 percent over the following four years, leaving fewer in-state students for CU to recruit.

Still, despite the legislative safeguards for in-state students, Jaquette says there are reasons policymakers should be concerned by the trend. The UCLA researcher says an influx of wealthy out-of-state students can come at a cost to a university’s culture — and its public-oriented mission.

“The argument that policymakers make on reductions (is) ‘K-12 can’t make their own money, but higher ed, they can make their own money, so we don’t fund them,’ ” Jaquette said. “Yes, they can make their own money. But they do it by focusing on rich kids, and not the ones that could benefit the most from that social-mobility boost.”

His research bears that out. CU predominantly recruits from wealthier, whiter higher schools, according to his analysis of recruiting visits in 2017.

And a separate New York Times study of the class of 2013 found that CU was among the least likely of any public research institution to take a student from a poor family and help them climb the economic ladder. CU also had the second highest share of students whose families made more than $630,000; 7.7 percent of the student body came from families in the top 1 percent of household income.

Fox has a different take on the impact of the influx of out-of-state and international students: She sees it as improving the quality and global perspective of the university.

“One of the advantages of having the domestic non-residents and international students really is this ability to offer a better opportunity and higher value to Colorado residents,” she said.

“People need to pay up”

While the growth in the number of wealthy out-of-state students makes financial sense for CU Boulder and Colorado’s other major universities, it underscores the challenges the state faces in meeting its educational and workforce goals.

The state’s higher education master plan calls for increasing statewide college graduation and certification completion to 66 percent by 2025, citing a study that expects nearly 3 in 4 jobs in Colorado to require some form of post-secondary education within the next few years.

Today, 56 percent of residents have a college degree or certificate. That makes Colorado one of the most highly educated states in the country, despite its funding challenges.

But it’s still not enough. And the numbers are dramatically worse for minorities, who represent the state’s fastest-growing demographic. Just 29 percent of Hispanics and Native Americans have a post-secondary credential in Colorado, compared with 39 percent of African-Americans.

Many, but not all, out-of-state students stay after graduation. But the state can’t reach its economic goals with transplants alone — nor would policymakers want to take this approach.

To Jaquette, the solution is fairly straightforward: more state funding. “If they want access for people from Colorado, people need to pay up,” he said. “That’s what policymakers need to do.”

One area of concern: while the out-of-state business model has helped CU Boulder weather funding cuts, smaller state colleges that primarily serve underprivileged in-state students have been left behind. These schools can’t recruit or accomodate enough non-resident students to offset the drop in public dollars.

The backdrop is adding urgency to the discussions at the state Capitol about how state dollars are divvied up among the different institutions.

Coming Tuesday: A look at how the state’s higher education funding system works, and what may change.

Staff writer John Frank contributed to this story.

Brian Eason

Special to The Colorado Sun Twitter: @brianeason