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Has the State Become an Albatross?
Some of Virginia's public universities are seeking greater freedom to set tuition

By Pamela Burdman
Williamsburg, Virginia

The year was 1906, and the second-oldest college in America was in a shaky state. The College of William and Mary had been badly ravaged during the Civil War-physically by the military units that had occupied the campus' main building and financially by the Board of Visitors' decision to invest part of the endowment in Confederate bonds.

The school's president managed to keep the campus open for some 12 years only by reaching into his own pocket, but in 1881, the campus was shuttered. It re-opened in 1888 when the commonwealth of Virginia stepped in to fund a teacher education program at the school. But by 1906, increasingly dependent on the state's subsidy, the board agreed to transfer the school to state control.

"They were after a more stable funding source," said William and Mary economics professor Robert Archibald.

On the eve of its 100th anniversary of state control, the university may loosen that bond in favor of greater independence, and the irony is that the state has gone from savior to albatross: "The state has become an unreliable funding source," said Archibald, who has been analyzing higher education financing since serving as dean of faculty seven years ago.

Virginia's public colleges and universities would benefit from a $1 billion tax increase proposed by Governor Mark Warner, a Democrat.
(Photo by Dennis Brack, Black Star, for CrossTalk)

Fifteen years ago, higher education received 18 percent of Virginia's total budget, a proportion that has dropped to 12 percent, according to the State Council of Higher Education for Virginia. At the same time, Virginia's public colleges and universities enrolled an additional 62,000 students, an increase of 23 percent, but education-related appropriations increased by only 17 percent in real dollars. State leaders overrode governing boards and imposed tuition freezes in the late 1990s and a 20 percent tuition rollback in 2000, but tuitions have climbed dramatically in the three years since the state was hit by a budget crisis.

Intent on minimizing its dependence on state resources and enhancing its ability to plan for the future, William and Mary would join the University of Virginia and Virginia Polytechnic and State University as early as 2005 in becoming the state's first "commonwealth charter institutions" under a proposal currently circulating in the General Assembly.

"For some people, there's a feeling that this is an acknowledgment of the inability of the state to fund its premiere institutions of higher education," said Leonard Sandridge, UVA's executive vice president and chief operating officer. "A much more appropriate reaction would be to recognize the realities of higher education and build on the strengths of those institutions in a position to help themselves."

The precedent is familiar to UVA. Two of the university's professional schools have been decreasing their reliance on university funding, and one-the Darden Graduate School of Business Administration-no longer receives a single dollar from the central campus.

Though not willing to eschew state support completely, Sandridge said UVA is increasingly relying on private giving. On the heels of a $1.4 billion campaign, and after state general fund support dropped from $167 million in 2000 to $116 million this year, the university reached a dubious milestone: The portion of the budget coming from private giving (8.3 percent) exceeded the state's contribution of 8.1 percent, putting UVA at the very bottom of the nation's public universities in share of state support. A campaign opening later this year could go as high as $3 billion. Sandridge calculates that faculty salaries are hovering at the 27th percentile of peer institutions, despite a statewide goal to hit the 60th percentile.

At William and Mary, similarly stark statistics drove the decision to pursue charter status, said Stewart Gamage, vice president for public affairs, who came to the college after positions with President Jimmy Carter and former Virginia Governor Chuck Robb. The school lost about $27.9 million in state support in the last three years, and the state's share of the operating budget fell from 32.8 percent in 1990 to just 18.7 percent this year.

Gamage says that state funds and tuition dollars bring in only $97.9 million, far short of the $107.7 million state officials have set as an "adequate" budget-or the $119.3 million the campus insists it needs to maintain top-quality faculty and high rankings. Program cuts and deferred maintenance are major concerns-Gamage points to at least one teetering building-as is a 34 percent tuition hike (to $6,430) over the last two years.

Virginia state Senator John Chichester has led the fight for more state spending on education.
(Photo by Dennis Brack, Black Star, for CrossTalk)

But the top concern is salaries. Faculty are beginning to feel as though they are reaching into their own pockets: William and Mary has fallen far below the state's goal, with faculty salaries dropping to the 16th percentile of peer institutions, primarily private schools. A recent survey revealed that almost one third of professors have applied for jobs elsewhere.

"We've tried everything known to man," said Gamage. "We've tried organizing the business community. We've tried organizing students and parents and families. We've tried getting alumni involved. We've tried one-on-ones with members of the General Assembly, organizing the college presidents, putting out reports. We're not going to come up with a reasonable, sustainable financial plan for running this university, and we fail to recognize that at our peril. We have to change our relationship with Richmond."

A similar conversation is playing out around the country as public institutions search for ways to reconcile growing enrollment with shrinking state support. Though the terminology varies, the aim is greater freedom for institutions to conduct their affairs, and in particular, to set tuition.

"Tuition autonomy is what everyone's after," said David Breneman, dean of UVA's Curry School of Education. "That's the real game."

With many policymakers drawing the line on high tuition, the real question is how far Virginia and other states will be willing to go to grant such autonomy. Last year, Texas lawmakers vested tuition control with universities' boards, and the University of Texas' regents proceeded to hike law and business school tuition by more than 20 percent.

But elsewhere, concerns both political and practical about high tuition were largely responsible for keeping autonomy plans off the fast track:

In Washington state, legislators put the brakes on Governor Gary Locke's proposals for higher education performance contracts, instead requesting a prototype of such a contract. "They were killed…because of the fear on the part of legislators that tuition would get out of control," noted Stephen Jordan, president of Eastern Washington University, who had joined the state's five other four-year presidents in backing the concept.

Florida lawmakers rejected a plan from the state's two top research institutions to become "state-related" institutions that negotiate service contracts with the state.

In Colorado, the state Senate threw its support behind a new and improved version of a higher education voucher bill that had stalled last year. Presidents, such as the University of Colorado's Elizabeth Hoffman, were lobbying hard for the plan, which would route appropriations directly to students, thereby reducing general fund support enough to qualify the campuses as "state enterprises." That, in turn would free the campuses from some spending and tuition limits.

The University of Wisconsin's Board of Regents are also discussing a "deregulation" plan, said Linda Weimer, vice president of university relations. "We are very keenly watching what's going on in these other states," she said.

Weimer and others stress that their institutions do not have privatization in mind. And, indeed, the one gesture that sounded the most like privatization has had no takers: South Carolina Governor Mark Sanford's promise to hand over all property to any institution willing to phase out state funding.

Virginia Secretary of Education Belle Wheelan is skeptical of plans to semi-privatize three of the state's public campuses.
(Photo by Dennis Brack, Black Star, for CrossTalk)

But in Virginia, the plan worries even some who support it, like UVA political scientist Michael J. Smith. "A public university used to pride itself on having a mission to serve the broader purposes of society. We're going to wake up some day and find we have no institutions that are securely and robustly insulated from the pressures of the market. I'm not so worried about UVA, I'm worried about public institutions in general," said Smith.

The three Virginia universities made their plans public in early January. Three Republican members of the House of Delegates introduced a bill to free the institutions to manage their own affairs under the terms of annual contracts with the state. Other institutions could also attain charter status if they met the requirements, and their boards approved.

Though the separate negotiations would determine the specific outlines of the arrangement, the schools are seeking tuition flexibility as well as management of tuition and fee revenues, which now go through the state treasury. Campus officials seek latitude to run their own health insurance and retirement systems, and oversee their own procurement, personnel, and construction decisions.

"A lot of the structures and rules go back to the '70s and earlier," said Ralph Byers, a lobbyist for Virginia Tech. "To build a building we hire our own engineers and architects, and yet we still have to get all our plans approved centrally. Essentially, we do the same things twice."

And many state agencies have begun to charge for services such as reviewing plans, even though state appropriations didn't anticipate those fees, said Sam Jones, vice president for finance at William and Mary. Under the proposed plan, the institutions would still have to comply with state codes, but approvals would be made internally.

Many legislators said they were open to the idea, but by mid-April, a month after their deadline to finalize the state budget, and weeks after Governor Mark Warner ordered them back to Richmond, the legislature's two houses had yet to break their bitter deadlock.

Warner, a Democrat, had proposed $1 billion in new revenue for the 2004-06 biennium. Senate Republicans then upped the ante to $3.9 billion, in a move spearheaded by Senator John H. Chichester. House Republicans initially were only willing to raise $500 million in corporate tax breaks. But after House leaders agreed to small sales tax increases that would bring revenues up by $700,000, and senators dropped their goal to about $1.6 billion, legislators were struggling to strike a compromise in the range of the governor's original proposal.

Bob Templin, president of Northern Virginia Community College, lacks the money needed to open a new medical education campus.
(Photo by Dennis Brack, Black Star, for CrossTalk)

The charter question, meanwhile, had been relegated to a study commission with a report due by November. The good news for universities was that each of the budget scenarios was generous to higher education. "There's a belief on the part of the General Assembly that education is a priority," said Leonard Sandridge. "It's quite reassuring."

Part of the impetus for the increases appears to have been a joint subcommittee on higher education finding that established a common yardstick for analyzing higher education funding. Using the yardstick, the subcommittee, co-chaired by Chichester, found that the state's 15 four-year universities and 23 two-year colleges are now receiving $400 million less than adequate funding. At the same time, the state is expecting an additional 60,000 students to hit higher education this decade.

"Where are those 60,000 students going to be educated?" asked Bob Templin, president of Northern Virginia Community College. "That's the equivalent of three universities, and there are no plans in Virginia to build."

"We knew the baby boom echo was going to be very great in Virginia," said Alan Merten, president of George Mason University. "You can count the number of kindergarteners. But it was politically incorrect to speak of it. If the state had admitted it, we would have started investing more in higher education in 2000, but then we couldn't have had tax cuts and other politically favorable things."

Chichester was aiming to restore that base funding over a four-year period, and didn't want the charter debate to interfere.

"The universities see that Virginia's not stepping up to the plate to meet their underlying need," he said. "They are skeptical about whether our partnership is going to remain intact. I am very much in favor of more autonomy for these institutions. The details will need enormous scrutiny."

According to insiders, the fortunes of the charter idea were riding on the results of the budget skirmish.

"The outcome of this battle determines the path the institutions have to take for the foreseeable future," said Don Finley, executive director of the Virginia Business Higher Education Council. "If the House position prevails, the game is over in terms of additional funding for colleges and universities for quite some time. You've got to do it a new way."

On the other hand, he said, the Senate's $3.9 billion proposal would have taken "a lot of steam…out of the charter proposal."

As a former community college president, Education Secretary Belle Wheelan is familiar with higher education's predicament, but she has concerns about the charter campaign by the three universities.

"The reality is the Commonwealth probably needs them more than they need the Commonwealth. It will hurt if we lose some of their leverage," said Wheelan.

Wheelan said the state needs to examine how the loss of the three universities-and more, if other universities sign on-will affect the state's bargaining power, how the elimination of tuition dollars will affect the state's bond rating, and what liability the state would have if, for example, a campus building were to collapse.

"I didn't know they were thinking of going this far," she said. "It's almost like seceding from a union."

In principle, charter universities could spell good news for other institutions of higher education-to the extent that the three institutions would be leaving money on the table. "We expect to give up something," said Sandridge of UVA. "We would not expect proportionately to get the same increase in state funds in the future that non-chartered institutions would expect to get."

In other words, the schools would forego some percentage of annual increases in state support. But in practice, those hypothetical sums would be hard to measure and harder to route to other colleges and universities.

"There's no guarantee that other institutions would get it," said Wheelan. "The General Assembly could put it elsewhere."

Other Virginia institutions are faring even worse, notes Peter Blake, Deputy Secretary of Education. Though the charter hopefuls were having trouble competing in national markets, they were receiving about 90 percent of Virginia's "base adequacy" level, whereas Virginia Commonwealth University was at 81 percent, Longwood University was at 74 percent, and the community college system was down to 80 percent.

"I don't know of any organization that can operate and grow when the funding doesn't grow," said Templin of Northern Virginia Community College. "We would have 10,000 more students today if we had the same portion of the population as in 1990." Instead, the college enrolls 64,000 students and receives a full $1,000 less per student than ten years ago.

The most visible example of the problems Templin faces is the gleaming new medical education campus that was due to open last fall after about ten years of planning. But, instead of the $12 to $14 million needed to run the new campus, the state granted $617,000-just enough to pay utilities and secure the building.

Rather than a full campus with expanded programs, the building instead is running at 25 percent of capacity, with existing programs transferred to make more room at the main campus. At the same time, students face a one- to three-year wait for programs like nursing and dental hygiene.

George Mason University, a 32-year-old institution that was originally part of UVA, has been doing somewhat better, at 90 percent of base adequacy. To get there, the school raised tuition about 30 percent from 2001 to 2004, in defiance of legislators' wishes, and jettisoned ambitions to enroll 35,000 students by 2007, growing only from 23,000 to 28,000.

"We felt we could grow, but everyone assumed there would be support associated with growth," said President Alan Merten. "We can feel the additional 5,000 students. The only part that was funded was their tuition. Our board has said enough is enough."

So have boards at UVA, William and Mary, and Virginia Tech.

But most of Virginia's other schools do not consider enrollment caps an option for managing a budget downturn. Nor do they enroll anywhere near one third of their students from out of state, as do UVA and William and Mary.

"We've kept our doors open by policy and by practice," said Glenn DuBois, chancellor of Virginia's community colleges. "We didn't cancel anyone. We are the onramp to higher education for Virginia residents."

DuBois' biggest concern about the charter proposal is the same as for many of the state's policymakers-the prospect of higher tuition. The hikes of the last few years have already dug a $240 million hole in the state's 529 prepaid tuition plan, which has officially been suspended. But more generally, DuBois and others worry about affordability.

Already the number of low-income students at Virginia's top colleges and universities is low. Among state flagship campuses, UVA ranks 50th in enrolling low-income students, with only 8.6 percent of students receiving federal Pell Grants, according to higher education policy analyst Tom Mortenson. At UC Berkeley, UVA's peer institution, one-third of undergraduates receive Pell Grants.

University of Virginia Provost Gene Block suspects low-income students simply aren't applying. "That's worried me," he said. "I've always wondered where the students who need financial aid are going. I think we may be viewed as a little inaccessible." The high proportion of out-of-state students also contributes.

"There's a certain aura about it," said Admissions Director Jack Blackburn, referring back to the school's founder. "Thomas Jefferson wanted it to be the best place in the country."

The charter hopefuls aim to address affordability by devoting enough of any increased tuition revenues to ensure that they meet 100 percent of student need. At William and Mary, that would require spending about 20 percent of new tuition dollars on need-based aid. Because of budget problems, the campus currently meets only 88 percent of need.

William and Mary, the second-oldest college in the U.S., is one of three Virginia public campuses seeking "charter" status.
(Photo by Dennis Brack, Black Star, for CrossTalk)

UVA has gone a step further. After reaching the goal of meeting 100 percent of need three years ago, the university has moved to limit student debt. In a program that will cost UVA about $16 million annually, students at 150 percent of the poverty level or lower will no longer be required to borrow. And for any student on financial aid, loans will be capped at 25 percent of the in-state cost of education, according to Yvonne Hubbard, director of student financial services.

"We actually do hope to affect the demographics of the university," she said.

At the same time, the institutions say the tuition increases they envision are mindful of the market. "Nobody's talking about doing anything outlandish. We're talking about increases in the nine percent range," said Ralph Byers, the Virginia Tech lobbyist. At his school, tuition and fees have gone from $3,664 to $5,095 in the last two years.

But if the idea of high tuition is unpopular with legislators, it is more welcome to students, at least at UVA, where students track UVA's top marks in U.S. News & World Report rankings. "The Student Council has been very vocal in favor of increasing tuition so as to maintain financial stability," said senior Carey Mignery, a student leader.

And at William and Mary, students assessed themselves an additional $5 a year to support a "Save a Professor" fund that would provide $10,000 raises for three professors.

While tuition remains controversial, the least contentious aspect of the charter proposal is the idea of eliminating state bureaucracy. And, indeed, the state has already begun to loosen regulations that once forced state university staff to drive to Richmond on payday to pick up employees' checks. Now, the three major universities have the freedom to sign leases, purchase vehicles, and exceed hiring caps. But the requirements are still onerous, officials say.

"We estimate that during a 12-month period, we send 200 reports to somebody in Richmond," said Merten. "Many of the things in the proposal should be dealt with even if we never have a charter university. Boards should be able to run institutions. We don't just need less of that for the charter schools. We need it for all of them," he said.

But any pie-in-the-sky notions about what charter status would do for universities in Virginia or elsewhere must be tempered by the experience of St. Mary's College of Maryland, which became the nation's first charter college in 1993 by agreeing to base funding with an annual inflator.

"It worked beautifully for us," said Laurie Stickelmaier, vice president for business and finance. "We were able to completely focus on building quality. By 1996-97, our graduation rates were the highest in the states. All of a sudden, in 2003, the legislation didn't mean anything anymore. We were cut like everyone else."

That's why UVA's Breneman says contracts are a bad analogy for public universities. "UVA can't walk away and say we reject your contract. This is a monopsony," said Breneman.

And that's also the reason that, with the state's budget in contention, the new proposal isn't budging.

Pamela Burdman is a freelance writer in Berkeley, California, and a former higher education reporter for the San Francisco Chronicle.

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National CrossTalk Spring 2004



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