Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
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Glenn Hegar
Texas Comptroller of Public Accounts
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A Review of the Texas Economy


The Hazlewood Act: College for VeteransUnique Program With a Spiraling Price Tag

by Joyce Jauer, Tara Blagg and Jackie Benton Published August 2016

Texans pride themselves on keeping their word. But what if you find that a promise made in good faith could hurt others?

Texas has a long and unique history with its veterans. It’s the only U.S. state that offers extensive educational benefits to veterans and their children. Through the state’s Hazlewood Act, originally approved in 1943, Texas promises its veterans or their survivors 150 free credit hours at any of the state’s public universities or community colleges, once their federal benefits have been exhausted. And vets may transfer hours they don't use to their children.

This benefit, commonly called the Hazlewood exemption, isn’t a grant or a scholarship, and its recipients never actually see any money. Instead, colleges and universities absorb the costs of the credit hours provided by the act.

But some say Hazlewood puts an undue strain on our institutions as well as many of their students. The number of recipients, particularly those receiving benefits transferred from a living parent, is growing exponentially, and educational institutions are passing along the cost of the exemption to other students through higher tuition bills. Skyrocketing tuition costs are forcing an uncomfortable question: how long can Texas and its colleges sustain the exemption?

Hazlewood History

Texas’ tradition of offering veterans educational benefits dates back to 1923, when legislators required public universities to exempt World War I veterans from tuitions and fees.

In 1943, the Legislature modified the law to accommodate World War II veterans as well as the children of deceased veterans. Legislators named this the Hazlewood Act after the bill’s strongest proponent, Senator Grady Hazlewood of Amarillo.

Since then, the Legislature has amended the act several times, most notably in 2007, to allow Hazlewood beneficiaries to qualify for state and federal veteran educational benefits simultaneously; and in 2009, to allow living veterans to pass up to 150 unused credit hours to a child under 26 and to extend the posthumous benefit to spouses. The ability to transfer credit hours to children has become known as the “Legacy Program.”

An Important But Costly Benefit

The Hazlewood exemption, obviously, is a huge asset to Texas military families, offering vets a pathway to a new career or helping them provide an education for their children.

Hannah Arnold, a member of the Texas A&M University class of 2018, is studying biomedical sciences using Hazlewood benefits her father earned through 25 years of service in the Air Force Reserve.

“The financial support I receive from the Hazlewood Act is 100 percent essential — I don't know if I’d be able to be here without it,” she says. “My parents didn't have a college fund saved for me, so I did a lot of research on how to pay for college. Hazlewood was one of the opportunities I found.”

The exemption’s popularity, however, has pushed its costs sharply upward. Between fiscal 2009 and 2015, the value of tuition lost due to Hazlewood rose by 621 percent, from about $25 million to $178 million (Exhibit 1). By 2017, the Legislative Budget Board expects this figure to leap to more than $286 million, a 61 percent increase in just two years.

Exhibit 1: Rise in Value of Hazlewood Exemption, Fiscal 2009-2015

Roll over the chart for specific values.

Source: Texas Veterans Commission

YearValue of Exemption

An Underfunded Mandate

The surge in Hazlewood costs is particularly significant because colleges and universities receive relatively little in state appropriations to cover them.

Texas A&M leads the pack in the dollar value of Hazlewood exemptions, forgoing more than $18 million in tuition in fiscal 2015 (Exhibit 2). Texas State University ranks highest in its number of exemptions awarded (Exhibit 3), with 2,091 Hazlewood recipients in fiscal 2015 — up from just 656 in fiscal 2010, the first full year of the Legacy Program.

Exhibit 2: Top 15 Educational Institutions by Value of Hazlewood Exemptions Granted, Fiscal 2015

Institution Value of Exemptions
Texas A&M University $18,068,913
Texas State University $14,671,408
Texas Tech University $11,817,542
University of Texas at Austin $10,968,712
University of North Texas $10,868,798
University of Texas at San Antonio $10,663,492
University of Houston $7,799,749
University of Texas at Arlington $7,653,640
Sam Houston State University $6,095,143
University of Texas at El Paso $4,089,224
University of Texas at Dallas $3,943,098
Stephen F. Austin State University $3,940,143
Texas A&M University - Corpus Christi $3,613,624
Tarleton State University $3,257,787
Prairie View A&M University $3,232,199

Source: Texas Veterans Commission

Exhibit 3: Top 15 Educational Institutions by Number of Hazlewood Exemptions Granted, Fiscal 2015

Institution Number of Awards
Texas State University 2,091
Texas A&M University 2,030
University of Texas at San Antonio 1,620
Texas Tech University 1,446
University of North Texas 1,443
University of Texas at Arlington 1,307
University of Texas at Austin 1,133
Austin Community College 1,068
University of Houston 990
Sam Houston State University 919
University of Texas at El Paso 919
Tarrant County College District 827
Alamo Community College District -
San Antonio College
Dallas County Community College District 753
University of Texas-Pan American 695

Source: Texas Veterans Commission

And again, some schools say they are recouping the cost of the exemption through higher overall tuition rates.

“Hazlewood is effectively funded primarily by other paying students,” says Dr. Eugene Bourgeois, provost and vice president for Academic Affairs at Texas State University. “We estimate at least $500 of the annual tuition paid by full-time, non-Hazlewood students goes to replace the revenue lost as a result of the act.”

In February 2013 legislative testimony, Bourgeois called for the program to be fully funded by the state, noting that the cost of the Hazlewood exemption had required the university to defer faculty hires, delay the implementation of several academic programs and leave other critical campus needs unmet.

Of course, Hazlewood isn't the only reason for rising tuition costs. But it’s a significant and rapidly increasing factor. At Texas State University, for instance, tuition rose by an average of about 5 percent annually between the 2009 and 2015 school years — but the exemption’s cost to the university rose more than twice as fast, at an annual average of 11 percent.

Cost Drivers

The sharp increase in the cost of the Hazlewood exemption is largely due to the 2009 introduction of the Legacy Program, offering free tuition to the children of Texas veterans. In 2015, Legacy participants made up more than 56 percent of all recipients of Hazlewood benefits and received nearly 70 percent of the total value of the exemption (Exhibits 4 and 5).

Exhibit 4: Types of Hazlewood Beneficiaries, Fiscal 2009-2015

Year Veterans Legacy Surviving Dependents Surviving Spouses Total
2009 9,861 0 21 0 9,882
2010 13,017 530 277 13 13,837
2011 17,869 2,440 2,245 31 22,585
2012 20,818 7,102 3,265 52 31,237
2013 24,062 12,129 1,610 144 37,945
2014 16,925 19,549 1,498 421 38,393
2015 14,304 21,781 2,187 550 38,822

Source: Texas Veterans Commission

Exhibit 5: Value of Hazlewood Exemption by Type of Recipient, Fiscal 2009-2015

Year Veterans Legacy Surviving Dependents Surviving Spouses Total Value
2009 $24,611,106 $0 $45,672 $0 $24,656,778
2010 $31,424,748 $1,860,887 $945,756 $32,437 $34,263,829
2011 $46,319,359 $12,491,785 $12,925,094 $113,972 $71,850,210
2012 $54,047,406 $43,444,679 $13,210,544 $140,311 $110,842,939
2013 $65,222,321 $76,120,691 $7,933,786 $566,118 $149,842,917
2014 $51,502,887 $112,143,312 $6,442,878 $1,440,913 $171,529,990
2015 $43,080,621 $123,840,566 $9,139,980 $1,707,740 $177,768,908

Source: Texas Veterans Commission

According to a study by Rice University’s Hobby Center for the Study of Texas, an age-specific surge is contributing to rising costs, though it’s likely to ease toward the end of the current decade.

“There’s a large cohort of veterans who served during the Cold War and/or the first Gulf War,” says Dr. Michael Cline, associate director of the Hobby Center. “They're now in their 40s and 50s, and their children are in or about to enter college, thus contributing to the growth in Legacy exemptions.”

“Despite the recent wars in Iraq and Afghanistan, however, the U.S. military has a much smaller footprint than it did in Gulf War I or in the Cold War, and thus our veteran population — and the number of their children — will be smaller in the years to come, which should help slow the growth in this program,” he says.

Another factor driving usage of the exemption could be related to public awareness of military benefits in general. According to Rufus Coburn, director of the Veterans Education Program at the Texas Veterans Commission, the rapid increase in usage of the exemption since 2009 is partly attributable to “bleed-over” from the federal Post-9/11 GI Bill, which went into effect in the same year. The bill “has had a positive influence of attracting more veterans to school and to Hazlewood,” Coburn says.

The Post-9/11 GI Bill provides veterans full credit for up to four years of school, as well as stipends for the cost of living and textbooks. Before this law, most veterans could rely on the federal government only for a monthly stipend that rarely covered the full costs of college. Thus the Post-9/11 GI Bill offered veterans an opportunity to go to school with a housing allowance as well as a stipend for books and supplies. Many then turned to Hazlewood to cover leftover or postgraduate expenses.

Harris v. Cantu

According to state law, Hazlewood benefits are available to veterans who currently reside in Texas and who lived in Texas or had Texas as their home of record at the time of enlistment, or who simply enlisted in Texas.

A recent federal court decision, however, challenged this basic residency requirement, and could have had an enormous fiscal impact on the exemption had it not been overturned upon appeal.

In January 2015, a U.S. district court in Houston granted Keith Harris, a University of Houston law student, the right to Hazlewood benefits despite the fact that he was a Georgia resident at enlistment. The court ruled in Harris v. Cantu that “Texas may not discriminate against its more recent residents in favor of more established residents simply to control costs.”

The Texas Veterans Commission estimated the district court ruling could extend Hazlewood benefits to as many as 700,000 additional veterans currently residing in Texas. It could also have had broader implications; if the residency requirement were deemed unconstitutional, it could have paved the way for challenges to other residency-based benefits, such as in-state tuition.

The Texas Attorney General appealed the case to the Fifth Circuit Court of Appeals. Shortly before this issue went to press, the court overturned the lower court’s ruling and upheld the state’s residency requirement.

Easing the Burden

The 2013 Legislature established the Permanent Fund Supporting Military and Veterans Exemptions (MVE) to offset Hazlewood costs. This fund is capitalized by state appropriations and gifts or grants and distributed to institutions in proportion to their respective share of the total costs of Legacy exemptions. In September 2013, the Texas Guaranteed Student Loan Corporation gave $248 million to the MVE. From this amount, the 2015 Legislature appropriated $11.4 million and $11.7 million in reimbursements to colleges and universities for fiscal 2016 and 2017, respectively. The institutions also received $15 million for fiscal 2016 and $15 million for fiscal 2017 in state general revenue through the Texas Veterans Commission.

The revenue is welcome, but hardly enough to cover the exemption’s full cost.

A December 2014 Legislative Budget Board report offered proposals to cope with the program’s rapidly growing cost. These centered on three main strategies: implementing socioeconomic criteria for the exemption; reducing the number of credit hours eligible for transfer to Legacy recipients; and increasing the duty time required to transfer hours to dependents.

The idea of attaching socioeconomic criteria (“means testing”) to a veteran benefit has met with resistance, however.

“From a veteran standpoint, basing it on need is untenable,” says Coburn. “When soldiers are in a foxhole together, one person’s service isn't better than another’s. Veteran benefits aren't charity, they're an earned benefit.”

Tying the number of free semester hours to years of military service, or capping them for Legacy recipients, may be more palatable options. Such strategies might be modeled after the Post-9/11 GI Bill, which provides benefits according to length of service.

The Hobby Center has examined several cost-savings strategies, including increasing Hazlewood-eligible service time to six years or more and implementing a six- to eight-year Texas residency requirement.

According to the center, requiring six years of service for Hazlewood benefits could reduce veteran awards by 70 percent and Legacy awards by 31 percent. A six- to eight-year residency requirement would decrease veteran awards by almost 30 percent, but would have little or no impact on Legacy awards.

Still another proposed solution is limiting the time in which the benefit can be used to 15 years after discharge.

“Adding an expiration date on the use of the Hazlewood exemption would help slow the growth in exemptions, while at the same time maintaining the program’s original intention,” says Cline. “This limitation probably would not affect the use of veteran exemptions significantly, because most attend college soon after discharge; but for a dependent to use a Legacy exemption, [he or she] would need to be at least four years old when their parent is discharged.”

2015 Legislation

In the 2015 session, state Sen. Brian Birdwell authored S.B. 1735, a bill combining several of these strategies. The bill that passed out of the Senate chamber would have introduced a continuous eight-year Texas residency requirement for veterans to access any part of the benefit, and a six-year active-duty requirement before veterans could pass hours to a Legacy recipient.

It also would have established a 15-year post-discharge expiration date on Legacy benefits, and restricted Legacy recipients to 60 credit hours on an undergraduate degree only, while requiring them to maintain a 2.5 GPA and a 24 credit-hour annual course load, and to complete a Free Application for Federal Student Aid form to ensure all available federal benefits are exhausted before Legacy hours are used.

The bill, however, caused a good deal of contention in the House, whose members expressed distaste at voting on it the day before a Memorial Day weekend. The House approved the bill only after removing a majority of its restrictions; it died in conference committee after legislators failed to reach an agreement.

Similar efforts to amend Hazlewood undoubtedly will resurface during the 2017 session.

Costs and Benefits

Texas needs to improve its college completion rates — currently well below the national average — to maintain its economic competitiveness, and few doubt the positive impact of providing veterans with an opportunity for higher education.

Hazlewood proponents further argue that veteran and Legacy benefits encourage many Texas veterans to return to the state after completing their service. Enticing these veterans back to Texas could help maintain the flow of billions of dollars in federal disability compensation and education funding into the state each year.

Yet the Legislature must decide how to weigh these benefits against their inflationary effects on tuition.

“More students coming out of high school are [from] economically underprivileged households. We have to be mindful of the price point of attendance,” says Bourgeois — and strive to keep it affordable for all. FN

For more information on the Hazlewood Act, visit the Texas Veterans Commission.