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Analysis of Minnesota-Wisconsin Tuition Reciprocity Agreement

Summary

Minnesota and Wisconsin established a tuition reciprocity agreement in 1969 to allow residents from one of the states to attend institutions in the other at reduced rates. The two states reconcile resulting revenue and expenses between them through a net payment obligation based on enrollments and marginal cost calculations. In FY2022, the states sought NCHEMS’ assistance as a neutral third party to arbitrate how they should address a sudden change in the magnitude and direction of the net price obligation between them, as their agreement specified. Additionally, due to the decommissioning of the technology used to calculate the payments and to changes in Wisconsin’s postsecondary structures, the two states also asked NCHEMS to evaluate and propose updates to the methodology to be used in future years.

NCHEMS conducted an in-depth analysis, including a literature review, data evaluations, and cost methodology assessments. The final report offers a revised approach for calculating net payment obligations, ensuring transparency, accuracy, and equity between the states. Recommendations include refining cost calculations using national data sources and simplifying the methodology for transparency and ease of implementation. The proposed changes aim to maintain the agreement’s integrity while adapting to evolving higher education landscapes in both states.

Topics Challenges Approach Impacts Resources

Topics

From this project, NCHEMS explored several topics related to the reciprocity agreement including:

  • Issues arising from changes in financial obligations between states.
  • Reciprocity models in other states and the methodologies used.
  • Analysis of marginal cost calculations to evaluate different approaches to calculating the net payment obligation under the state’s agreement.

Challenges

Historically, the prior method had been run on a mainframe computer that was decommissioned. Details about the specifics of the calculation were lost in the process. Additionally, the Universities of Wisconsin System Administration was assigned the task to manage the state’s participation in the reciprocity agreement rather than the Wisconsin Higher Education Aids Board that had previously carried out the task. Decisions about the categorization of individual institutions also needed to be updated, in part because of the absorption of the UW Colleges into their respective universities as branch campuses. Finally, the two states sought to use a method that would limit volatility from year to year but also strike a balance between data from across the nation and data specific to and directly relevant for them.

Approach

NCHEMS conducted a literature review to assess other reciprocity agreements and determine best practices. NCHEMS developed guiding principles for choosing an equitable methodology, explored potential methodologies, and conducted detailed data analyses to assess different marginal cost calculation methods. We tested multiple approaches, including various regression models and variable cost analyses, to identify the most transparent and practical solution. At each step, NCHEMS consulted with both states to gather feedback and assess progress. The final recommendations prioritize accuracy, simplicity, and fairness, ensuring both states can independently verify calculations.

Impacts

NCHEMS’ recommendations aim to improve the accuracy, transparency, and fairness of the financial calculations that underpin the Minnesota-Wisconsin tuition reciprocity agreement. By adopting a revised cost methodology based on national data, the states can ensure a more stable and predictable determination of net payment obligations. The proposed approach simplifies the calculation process, making it easier for both states to independently verify results and reduce the risk of future disputes. Additionally, the recommendations account for structural changes in Wisconsin’s higher education system, ensuring the agreement remains relevant and sustainable. Overall, these updates help maintain the integrity of the agreement while adapting to shifts in enrollment and financial considerations.

Resources

  • MN-WI Reciprocity Program 1-2 Memo
  • MN-WI Reciprocity Program Items 3-4 – Final Report