Colleges estimate new overtime rule could raise tuition $1K per student
Speaking during a Senate Health, Education, Labor and Pension Committee hearing on March 17, Chairman Lamar Alexander (R-Tennessee) grilled Department of Labor secretary Thomas Perez about the rule, which would mandate overtime pay for workers making less than roughly $50,000. Alexander read from a letter he received in late February from the Tennessee Independent Colleges and Universities Association (TICUA).
“If the president is going to go around and I'm going to go around and all of us are going to go around saying we want to keep college costs down, how can you justify an overtime rule that might raise the cost of college by $1,000 per student?” Alexander said.
The rule is expected to be in place in the next 45 to 90 days, Perez said at the hearing. Released as a draft last September, the rule doubles the minimum salary needed to classify an employee as exempt from overtime wages, from $23,660 per year to more than $50,000 per year. Affected employees would either need to have their salaries raised to the new minimum, or be re-classified as hourly and be paid an overtime wage for work beyond 40 hours.
Though the claimed tuition increase currently only covers Tennessee’s non-profit colleges, National Association of Independent Colleges and Universities director of tax policy Karin Johns said the early results from about a dozen of its member colleges nationally are “looking pretty similar to Tennessee.” She said she expects that same impact for public universities.
“We do have some colleges that are very, very afraid of not being able to comply, and not having the money to stay open,” Johns told AMI Newswire “This is just really a threat to a lot of our colleges’ ability to stay healthy, cash-wise, and not have an impact on student tuition.”
Dr. Claude Pressnell, president of TICUA, told AMI Newswire that the tuition increase wasn’t the only solution identified. He said colleges in Tennessee were looking at reclassifying employees and planning to pay a certain amount of overtime. An analysis of that option by Sewanee (the University of the South), however, showed that it too would cost a similar amount, even when estimating what Pressnell called a “very low” five to 10 additional hours of overtime per reclassified employee. He said additional options included cutting benefits to raise salaries, or laying off staff to redistribute the money saved among employees whose salaries required a mandatory raise.
“These are all very bad choices,” Pressnell said.
Both Pressnell and Johns said their organization were not opposed to increases in the salary minimums for exempt employees. They expressed, however, that a graduated system of small increases over time would better suit the budget cycles of their member schools.
Pressnell also said the $1,000-per-student increase was consistent across all schools, regardless of size. He added that it was a one-time increase, but that the schools "would never go back." One of the schools cited in his letter to Sen. Alexander was Maryville College, which estimated the rule would add $1.3 million in salary costs to its budget for a school with a student enrollment of just 1,200, according to 2014 number from the National Council for Education Statistics. With just over 1,400 students, Cumberland University estimated a $3.2 million increase to bring 133 employees in compliance, according to Pressnell.
From her early surveys, Johns said other colleges are estimating approximately $1 million to comply with the new rule.
“If you’re looking at an average-size liberal arts college with, say 1,000 kids, and you add thousand dollars tuition, that gets you to one million,” Johns said. “If somebody is estimating $1.2 million, they probably have about 1200 students.”
The rules were forwarded to the President’s Office of Budget and Management earlier this week. The office typically takes approximately two months before it publishes the rule, and congress could have the opportunity to nullify it with a vote of disapproval within 60 days.
The findings in the letter from Pressnell to Alexander were based on the findings of a white paper Tennessee Independent Colleges and Universities Association published in late January on the impact of the new rule. Pressnell said the impetus for the study came from the post-secondary presidents themselves.