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In
the early 1980s, Virginia
legislators were slow to understand the implications
of interstate banking. Prescient North Carolina
lawmakers, by contrast, permitted intra-state bank mergers
early on. As a consequence, when interstate banking became a reality, Tarheel
banks were the biggest in the Southeastern
U.S.
and better positioned to acquire depository
institutions in other
states. In time, every major Virginia bank was gobbled by out-of-state
predators, mostly North Carolina competitors.
Two
decades later, Virginia
risks making a mistake of even greater
magnitude. Ruled by short-sighted, parochial
considerations, the General Assembly is slowly
strangling
Virginia’s
leading public universities. The foreseeable
consequence is
the crippling of one of the
Commonwealth’s greatest competitive advantages in
the Knowledge Economy.
The
only solution on the table, short of jacking up
taxes to unprecedented levels, is to grant a large
measure of freedom -- charter status -- to the University of Virginia, Virginia Tech
and the College of William & Mary.
Quasi-independence would allow these elite
institutions to compete more effectively, while
freeing resources to be diverted into Virginia's
up-and-coming colleges and universities.
Charter
status would represent a scary change, but it's
become increasingly obvious that the old model of
higher education is broken. State support for higher ed has
fallen
steadily behind that of other states. The facts are
well known. These come from Virginia Commonwealth
University President Gene Trani’s February
presentation to the VCU faculty senate:
By
another measure, the
Commonwealth looks even worse:
Ironically,
when doling out extra funds in recent years, Virginia
has been stingiest with the state’s most
prestigious institutions, UVa, Tech and W&M, presumably on the grounds that
their vast and affluent alumni networks could make
up the difference.
Legislators
lament what's happening to Virginia’s
universities but they’re caught in a policy
gridlock. K-12 is higher on the funding food chain
than higher ed, transportation is more visibly in
crisis, and most Medicaid expenditures are federally
mandated. Likewise, lawmakers don’t like Virginia
universities to raise tuitions: Too many constituents enjoy access to
low-cost college education. There simply isn't
enough money for Virginia universities to do their
job as well as they'd like to.
Most
folks agree about the nature of the problem.
But there's no consensus on the solution. The
Pavlovian response -- Need more money, Woof!
Woof! Raise taxes -- is to tighten the screws on
taxpayers. But as
loyal Bacon’s Rebellion readers might
surmise, I do not
regard higher taxes as a valid solution.
Innumerable
studies have demonstrated conclusively that higher tax rates crimp
economic growth. The more you raise taxes, the more
you stifle your economy, the more you constrain the
long-term growth of your tax base, and for what
it’s worth – an incidental concern to the
political class, to be sure, but one that resonates
with the rest of us -- the more you depress the
after-tax income of the citizenry.
No,
raising taxes to perpetuate the higher-ed status quo
is a solution that only the
brain dead could love. Fortunately, we do have options.
Virginia
lawmakers traditionally have emphasized excellence
in undergraduate education. As a result, the Old
Dominion can boast some of the finest public
undergraduate institutions in the nation. Indeed,
many Virginians regard inexpensive access to a
first-class college or university as one of the
greatest benefits of living in the state. But the
role of higher education has evolved in recent
years.
As
manufacturing and service jobs increasingly move offshore, the
United States
relies for its competitive advantage upon the
productivity and creativity of its citizenry.
Virginians can maintain their standard of living in
the face of intense global competition only if they
are superior at researching new technologies,
spotting new market trends, developing new products,
building brands, conducting complex
transactions and managing global supply chains.
Colleges and universities,
obviously, are places where
people learn the skills and disciplines required to
undertake these higher-order tasks. But Virginia's
system of higher education contributes to the
economy in less evident ways. Universities, especially those
with extensive research programs, have taken on new
roles. Today, colleges also are:
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Sources
of economic growth and direct employment.
Universities, the knowledge factories of the
21st century, provide a service -- education
-- that bring money into the state economy
and support high-paying jobs.
-
Magnets
for the creative class. Universities are centers
of cultural and intellectual diversity that
attracts members of the so-called creative
class, those artistic, scientific and
entrepreneurial innovators who create a
disproportionate number of new growth companies.
Funding levels for
Virginia's Ph.D.-granting institutions,
where nearly all R&D occurs, have not kept pace
with the expanding missions of the
21st-Century University. The problem is that
engineering, life-science and other hard-science
programs are far more expensive to support than
undergraduate programs in English, history or
sociology. They require lab space, costly equipment
and a legion of graduate students to serve
as acolytes to the research scientists. Furthermore,
R&D superstars capable of attracting federal or
industrial sponsorship command outsized salaries.
In
his proposed Fiscal 2005/2006 budget, Gov. Mark R.
Warner has recognized the new role of public
universities in Virginia's Knowledge Economy. The
governor proposes dedicating $19.7
million to research-related initiatives over and
above a $42 million increase in general operating
funds earmarked for the state’s nine
Ph.D.-granting institutions. (See "It's
a Start," January 5, 2004.)
Unfortunately,
the two-year increases in operating funds for the
top three research institutions amounts to less than
the projected rate of inflation:
| College
of William & Mary |
$2,044,000 |
1.9 % |
| University
of Virginia |
$3,670,000 |
1.6 % |
| Virginia
Tech |
$3,494,000 |
1.3 % |
(George
Mason, No. 4 and rising fast in R&D rankings, gets more money because of
anticipated increases in enrollment.)
Based
on minimum funding standards required to ensure the
competitiveness of Virginia colleges and
universities, UVa, Tech and William & Mary
calculate that they face a combined annual deficit
of $145 million to meet operating costs.
Fortunately,
UVa, Tech and William & Mary have come up with a proposal that does not ask to raise
Virginians' taxes: Confer upon them a new status
known as a "chartered" university.
As
chartered
universities, the troubled troika would remain part
of the state system of higher education but would be
liberated from state procurement regulations and
would enjoy
greater freedom to set budgets, raise tuitions and
issue debt. Perhaps most importantly, they would
able to modify state personnel and pay
policies, which are geared to a state civil service,
not academic institutions. Such freedom is crucial
if these world-class institutions are to compete
effectively to recruit and retain top faculty.
All
three universities are willing to settle for a
diminished share of state funding in exchange for
the flexibility that chartered status would give
them. The chartered solution sounds like a
reasonable compromise between granting them total
independence and consigning them to a slow,
agonizing decline.
The
General Assembly punted this session the decision to enact
charter status in favor of studying the issue -- no
surprise given the ferocious budget impasse that has
consumed everyone's attention. I have no idea of how
the proposal will be received, although it's predictable
that some legislators will object to any measure that
might result in higher tuitions.
But
Virginians can't afford such blinkered thinking.
Yes, we lose something from chartered status -- these
elite institutions may choose to increase the number of
out-of-state students who pay the full freight, and they
might hike tuitions for Virginia residents as well. But
Virginia gains much from the bargain as well.
We
must constantly remind ourselves, and our legislators,
of three key points.
First,
inaction also has its costs. Maintaining starvation
diets for UVa, Tech and W&M will make it nearly
impossible for them to maintain their elite status
for much longer. With the status quo, Virginians
still may get their subsidized tuitions -- they just
won't get world-class educations. One way or the
other, Virginians will lose.
Second,
what's good for UVa, Tech and W&M is good for
Virginia. Healthy, growing R&D universities
create jobs, attract members of the creative class
and stimulate entrepreneurial activity. They are
Virginia's economic anchors in a ruthlessly
competitive global economy.
Third,
the state can reinvest money saved from diminished
support for the aforementioned troika by applying it
to up-and-coming institutions like Virginia
Commonwealth, George Mason, Old Dominion and James
Madison. The goal would be to build these
respected regional institutions into nationally
acclaimed universities -- which Virginians still could
attend at modest expense.
Dilatory
leadership in the 1980s cost Virginia its
regional prominence
in commercial banking. We cannot afford to let
myopic concerns relegate our top universities to
second-class status. The General Assembly needs to
enact the charter legislation in 2005.
--
March 15, 2004
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