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National CrossTalk Summer 2002
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Virginia's Latest Budget Squeeze
Years of tax cuts lead to higher tuition, fewer student services

By Carl Irving
Richmond, Virginia

Virginia's 15 public degree-granting colleges and universities and 23 community colleges have been hammered by the recession, following a dozen years of state policy decisions that sharply reduced financial support for the University of Virginia, the state's flagship campus.

This last budget squeeze will have dire long-term consequences, officials and educators here in the state capital and at several campuses predict. They blame a political fixation on lowering taxes, freezing and then sharply lowering tuition, and failure to accumulate a surplus during good economic times.

"There's a feeling of apathy, skepticism and talk of promises not kept," said Phyllis Palmiero, director of Virginia's State Council of Higher Education.

"We're going to be suffering for a long time, because of what's happened in the last dozen years," said Larry Sabato, a nationally known political analyst and a faculty member at the University of Virginia in Charlottesville for 32 years. "Virginia schools generally will be moving down in the ranks," he predicted.

The latest hits this fall, after word of a state budget deficit that approaches $6 billion, will mean widespread faculty and staff dismissals, canceled programs, larger classes and enrollment caps-all of this in the face of forecasts that the number of qualified state high school graduates will increase enrollment at the four-year campuses by 12 percent over the next decade.

Current setbacks relate to past years, "when, despite constant cost increases, additional operating dollars were almost nonexistent," said Charles W. Steger, president of Virginia Tech in Blacksburg, the state's largest campus.

Virginia "squandered recovery from the last recession in the most foolish way, using the general fund to offset tax increases," said Gordon Davies, director of the Virginia Council of Higher Education from 1977 until 1997.

"What we are suffering here is partly caused by the recession, but the most grievous wounds on the system are being inflicted as a consequence of public policies putting tax reductions first," said Timothy J. Sullivan, president of the College of William and Mary, in Williamsburg. "If the state hadn't reduced taxes by $1.5 billion in the last half dozen years, or, as an alternative, had invested in higher education the amount saved on tax reductions, we would be in much better shape," Sullivan said. "In the best scenario, I'm afraid we won't recover for five or six years."

The emphasis in Virginia on no new taxes reflects "insane ideological, odd thinking," said David W. Breneman, dean of the Curry School of Education at the University of Virginia. "They've been drum beating that into people's heads for 20 years...I don't think this money is coming back in my time, not in the next four or five years." He predicted that his school "will have a smaller faculty three years from now. I think that's in the cards."

State income tax rates haven't changed since 1972. Motor vehicle taxes were practically eliminated in the 1990s. Cigarette taxes, 2.5 cents a pack, are the lowest in the nation. Virginia's senate finance committee last year ranked the state 46th in state and local taxes as a percent of personal income.

Virginia's affluence contrasts with its support for higher education: It is 12th in per capita personal income, but drops to 28th for each $1,000 in personal income spent on higher education, according to research by John Knapp, an economist at the University of Virginia.

The future looks especially bleak to leaders at campuses with shorter histories and far fewer financial resources than at UVA and William and Mary. One of them is northern Virginia's George Mason University, the state's fastest growing campus. "Another two years of this, and it could take 20 years to recover," said GMU economist James T. Bennett, president of the academic senate.

Belle Wheelan, state secretary of education, said e-mails from the campuses have poured into her office "complaining that we're cutting into bone marrow. All the campuses are considering another tuition increase in January, some are moving money out of foundations and auxiliary accounts. There's frustration." Wheelan said she saw no near-term solution "because the General Assembly (the state legislature) won't have tax increases. National rankings will drop...It's getting ugly."

One important common cause at the campuses is the hope for passage this fall of a $900 million state bond issue for campus construction. In the past, voters have approved such measures, because they don't require higher taxes. But last-minute hopes for more operating funds evaporated in September, when Governor Mark R. Warner, a Democrat who took office last January, said that it was "inconceivable" that he would back away from his campaign pledge last year not to propose a tax increase.

Warner followed through in October, announcing that he had ordered a second round of spending reductions for higher education that averaged 11 percent (with differences ranging from 9 to 13 percent, depending on private support available at individual campuses), and would require about 4,500 job "layoffs." The governor said each campus would have to decide how to make up the difference, and that students probably will face higher tuition, larger and fewer classes, and will have fewer student services.

The governor imposed the largest cuts on the University of Virginia (31.8 percent), followed by William and Mary (27.7 percent) and Virginia Tech (28.1 percent). Reductions were smaller-15.4 percent-in the community college system.

Restrictions in state spending began in 1990, when Democratic Governor Douglas Wilder, who took office during the last large recession, reduced the state budget by about 21 percent. The campuses briefly increased tuitions. As the economy recovered, his successor, Republican George Allen, added some funding for higher education, and froze tuition levels. At the same time, state and local taxes shrank or remained flat.

Allen's successor, Republican James S. Gilmore III, cut tuition 20 percent after he took office in 1998 during the height of the economic boom. State funding was increased, but was outpaced by enrollment growth. Today, in 1996 dollars, tuition levels are nearly 25 percent below six years ago.

Private resources available to the two well-endowed "public ivies"-William and Mary, founded in 1693 by King William III and Queen Mary, and the University of Virginia, founded by Thomas Jefferson in 1819-contrast with the far more meager non-state funding for the state's other campuses. William and Mary has a $360 million endowment to help it educate a mostly undergraduate enrollment of 7,500 students, and UVA has $1.7 billion, with a moderate enrollment (19,000) for a leading research university.

Another important source of private funding comes from out-of-state students-about one third of the enrollment at UVA and Willam and Mary-who must pay more than four times more tuition than Virginia residents. The two campuses are popular-9,000 applicants for 1,300 freshman openings at William and Mary this fall, and 15,000 for 3,000 spaces at UVA.

No state law regulates the percentage of out-of-state students, but last year's budget bill warned that campuses "not increase the current proportion of non-resident undergraduate students if the institutions' non-resident undergraduate enrollment exceeds 25 percent." UVA, William and Mary, Virginia Tech and James Madison University all exceed that percentage. However, the bill made no mention of possible sanctions if the proviso were ignored.

While such moves to increase non-state support may help (UVA has had to deal with a $90 million reduction in state support over about 30 months through 2004, and William and Mary has lost about $27.5 million), there is talk on both campuses about more independence from Richmond, to help assure a more secure future. A faculty proposal at William and Mary would have students receive state funding, instead of the campuses, and would allow them to decide where to spend it. But campus officials doubt that would receive enough political support for approval by the legislature and governor. A major obstacle is the fact that almost all the campus buildings are owned by the state.

A more moderate option, which might receive state support, and possibly "a longer run answer for a place like this," President Sullivan (of William and Mary) said, "is a significant increase in private support and a rearrangement of what I call our 'governance structure.'" He suggested a governing board with half its members appointed by William and Mary's private fund raising unit. At present all appointments to each of the campus governing boards are made by the governor, subject to endorsement by the legislature.

This academic year, tax dollar support probably will sink below 20 percent of the campus budget, Sullivan said. More independence (which would require legislation) "would give us a whole lot more flexibility...We could make local decisions on purchasing, management of major capital projects. It could save significant amounts of money...It would be more of a federal relationship between the universities and the state."

Asked whether he favored more independence for the University of Virginia, Vice President Leonard Sandridge responded firmly that "this is a public university, and there is no intention of changing that." Yet two of the professional units, the Darden Graduate School of Business Administration and the law school, have become virtually private and totally self-sufficient in recent years. Sandridge called that a "win-win" development.

A critique titled "Mr. Jefferson's University Breaks Up," written by Berkeley professor David L. Kirp and a UVA graduate student, Patrick S. Roberts, and published in last summer's issue of Public Interest, has been widely read on campus. The article focused on Darden, a well-appointed, smaller reproduction of the main campus a short distance away, broadly hinting that it benefited from the university name, but gave little back. The article suggested that the school may embody the future: "What works for business schools can be adapted to other potentially profitable units of the university, especially the professional schools."

Michael J. Smith, political scientist and president of UVA's academic senate, approves of the remote ties with Darden and the law school, but opposes any large-scale move toward privacy. "I think one of the reasons a lot of people give to Virginia, or Berkeley, or Michigan, is the fact that we are public," Smith said. "We are a public-private partnership. Ironically, there's a sense that we faculty are being told to play according to new rules of the private market, while for the past 12 years our tuition levels have not been permitted to move with our 'market.' There is deep dismay about the state of public support for higher education."

Historian Edward L. Ayers, dean of the largest campus unit, the 10,000-student College of Arts and Sciences, said he had to hire 70 temporary faculty this fall to fill vacancies. "We're not replenishing ourselves, we're not getting Ph.D.s, our programs are not getting fed, and there's a tremendous sense that in five years we may run into real trouble," Ayers said.

To shore up arts and sciences, Ayers made 22 fundraising trips in the past year, and raised $3.2 million. In another move to retain quality despite smaller faculty, Ayers raised additional funds to begin a series of unusually large classes (350 students each) taught by top faculty members, supported by teaching assistants. The first, in which Smith will be one of the two faculty members, will deal with war in the 21st century.

For the first time in a decade, arts and sciences faculty members recently convened in a special assembly to urge a tuition increase of nearly $3,000, to match that charged at the University of Michigan, where tuition and mandatory fees total $7,485 for in-state students and $23,365 for those from out of state. The proposal was promptly endorsed by the student paper. But informed sources in Richmond predicted that the legislature would never allow increases on that scale.

As in most other states, faculties in Virginia have little clout with the legislature. "It's a fact of life that the vast majority of faculty are liberal Democrats," said UVA's Larry Sabato. Moreover, he added, "we have Republicans in control of the legislature and, usually, the office of governor. It's quite natural that a university faculty does not become a priority."

"There's a continuing theme that the faculty is fat scum, underworked and overpaid," said John T. "Til" Hazel, a northern Virginia attorney and developer, and president of the Virginia Business Higher Education Council, which lobbies for more higher education spending. The GOP, which Hazel said he'd formerly supported, had made political gain, "by becoming populist, by cutting taxes."

Student leaders at the University of Virginia and William and Mary minimized the current impact, but expressed concern about the future.

"So far, the administration has done a good job, and classes have not been drastically affected," said University of Virginia student president Micah Schwartz, a senior majoring in political and social thought. But if smaller classes begin to disappear, "many students here could go to private schools," he added.

Linsay Rousseau-Burnett, president of the student assembly at William and Mary, spoke in the same vein: "The biggest concern is that quality of education is declining, with the state unwilling to raise taxes. I chose to come here as opposed to Brown, because it was more affordable. But we're going to see an outflow," said the senior sociology major.

"This could take us back to the 1960s, when we were exporting our best students," said Donald J. Finley, executive director of the Virginia Business Higher Education Council.

Economist Robert Archibald, director of William and Mary's Thomas Jefferson public policy program, and president of the faculty assembly, predicted that young and talented faculty will leave during the hiring season next spring, and that vacancies won't be filled. That, he said, destroys a basic appeal: that William and Mary "cares about students, offers small classes and interaction." Library purchases have been cut back, and 12 faculty hires were canceled last spring. Archibald closed his own graduate policy research program.

Fellow economist Clyde A. Haulman said he feared that faculty salaries at small, private campuses which William and Mary considers its peers-such as Emory, Williams, Wesleyan and Swarthmore-will be difficult to match in coming years. "We had been at 60 percent plus of the peer group in salaries," he said. "Now my guess is that it will be in the 20s."

George Mason University and Virginia Tech, the state's largest campuses, lack large numbers of wealthy alumni. "We do not have a hundred years of private giving to fall back on. We're dependent on the state," said GMU President Alan G. Merten.

The campus increased tuition more than any other state campus-16.5 percent this fall, ignoring state guidelines that proposed about half that much. Along with increases in mandatory fees, the extra sums raised total undergraduate costs for full-time students at GMU by 25.3 percent, compared with a 9.1 percent increase at the University of Virginia and nine percent at William and Mary.

Merten proudly described a young campus where quality had been improved, "not only across the board but in developing unique programs. So demand goes up, on top of the abnormal impact of the baby boom. We have several new programs in visual technologies, lots of programs with technological components." Last year, seven specialists in experimental economics switched to George Mason from the University of Arizona. "They came here because of the region and because others in this field were already here," said economist and faculty leader James Bennett. "But programs like this can implode."

Enrollment increased by 2,000 students this fall-1,000 more than had been expected-along with steadily improving grade point averages and SAT scores. But next fall, with a $40 million budget cut over the two-year period, the campus will stop accepting last-minute applicants that have consistently exceeded expected totals among first-year students in recent years. About 100 faculty vacancies will remain unfilled.

Without any tax increase in sight, the campus must step back from any further expansion, Merten said. "This is not temporary. You don't stop and start up again next year." In a recent report to the governor and legislature, the GMU president warned that the campus had approached a "moment of truth," when a "lean, young institution is still fragile and vulnerable" and either becomes a "great state university...or just another regional state university."

The outlook is also grim at the state's community colleges, which this fall enrolled 10,000 more students than had been expected. Cutbacks produced long waiting lists for popular courses. Enrollment rose to 235,000 (90,000 full-time equivalent), but the recession and tuition increases at the four-year campuses are expected to increase applicants for admission even more next year.

The two-year colleges, which lost about $63 million in state support over two years, have only one other important source of revenue: the $43 for each semester credit charged students, seventh lowest rate in the nation, according to Susan Hayden, a spokesperson for the system. About 25 percent of the students ultimately transfer to a four-year campus, and three quarters of those students earn degrees. The governor reduced the system's budget by eight percent this year and ten percent next year, even though, according to an informed source, the colleges had warned him that even a seven percent cut would require turning away 5,300 student applicants.

In Richmond, Eugene Trani, president of Virginia Commonwealth University, the state's only major urban campus, hopes to get some help in dealing with a two-year budget cut of $75 million, by increasing research outlays to attract more private firms to the school's new biotech center, thus adding private revenues from overhead charges. Trani said he also hoped to add more out-of-state students, who now make up about 11 percent of the enrollment.

Trani said admissions would not be curtailed, although about 160 full-time staff positions had been eliminated. The campus, at which 70 percent of the 25,000 students work full or part time, and an equal percentage receives financial aid, had to eliminate free student counseling.

Virginia Commonwealth University added $64 million in private donations last year, many of them from people who live and work in Richmond, raising its endowment total to $285 million. "We've done much better than in the past, because people recognize what we're doing and how much we've done," Trani said. Like his fellow presidents at George Mason and Virginia Tech, he has been personally involved for years in efforts to expand and improve his campus. The legislature and governor, he said, must face up to a "structural imbalance in Virginia," brought about by declines in revenues and increases in expenditures, and must "come up with options that will not reduce the numbers of knowledge-based workers."

Virginia Polytechnic Institute, now better known as Virginia Tech, founded in 1872 as a land grant college in rural southwest Virginia, also expanded rapidly in recent years, and President Charles Steger has been personally involved in adding to the $340 million endowment, still not nearly enough to avoid curtailments at a campus with 25,000 full-time students and 220 degree programs.

Politicians were aware years ago, Steger said, of the lack of funding, which has left state campuses falling well below out-of-state institutions they regard as their peers. In 2000, a study sponsored by both houses of the legislature had concluded that Virginia's public colleges and universities were underfunded by more than $200 million, of which Virginia Tech's portion totaled $20 million. During the last recession, the campus lost $46 million out of its base budget. And now it has lost at least another $52 million.

"There's really nothing left to cut," Steger said. "To preserve quality, we can't educate the same number of students. It's a fundamental strategic error to degrade quality."

"Virginia has an intellectual heritage that it is not upholding," said Gordon Davies, who dealt with the challenge for 20 years at the state's Council of Higher Education. "It is not upholding Jefferson's tradition that an educated population is an indispensable ingredient of a democratic society."

Freelance writer Carl Irving lives in the San Francisco Bay area.

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