Koelemay's Kosmos

Doug Koelemay

More than Money

If the Commonwealth isn't prepared to pony up an extra $400 million a year to support higher education, it must give universities more financial flexibility and regulatory freedom.

Two highlights in the recent public investment strategy of the Commonwealth occurred in higher education. Voters in 2002 approved a $900 million bond issue for capital improvements and expansion at universities and community colleges. And two months ago, of course, the General Assembly approved a budget with $240 million annually as a down payment on accommodating tens of thousands of new students and competing to retain and attract star faculty members.

Still, no one suggests that these investments, however sizeable and welcome, are enough. Estimates are that the Commonwealth still is shorting higher education by $400 million a year. So the question has turned simultaneously toward how Virginia ever can gain the capacity to fund its top universities not just adequately, but at the high levels necessary to maintain quality in an increasingly competitive space. Without the right answer to the long-term question, Virginia cannot plan on keeping its best and brightest students, faculty or research programs and, eventually, its competitive edge in business and technology.

The present state of higher education and the dollars to support quality suggest a major organizational change is in order. The future demands more than money. And from general discussions, a legislative mandate and years of intellectual and budget work by university leaders at the College of William & Mary, the University of Virginia and Virginia Tech, the Commonwealth for the first time has a glimpse of what the future demands – chartered public universities with broad authority to manage independently of state agencies, restrictive administrative regulations and budget politics. In return the universities take on the responsibility (with flexibility) to raise revenues sufficient to deliver high quality education to Virginians.

In meetings with a legislative study committee and senior cabinet officers and other communications, the three universities have begun to propose in more detail what a change to “Commonwealth Chartered Universities” would mean for the schools, the state budget, students and taxpayers. The goal is to propose formal charters and enabling legislation in the 2005 session of the General Assembly.

According to discussions and communications underway, legislation being considered can be summarized in six main points that hardly look revolutionary.

• The Commonwealth would grant a Commonwealth chartered university the authority to use its institutional revenue capacity to fund and manage effectively.

• The Commonwealth would reduce the additional general fund dollars it otherwise would appropriate for the institution in the future. 

• The chartered university would maintain full accountability to the Commonwealth, including agreements on performance, enrollment projections and new program approvals.

• The Commonwealth would empower boards of visitors to set tuition and fees relative to institutional costs as determined by state guidelines.

• The Commonwealth would require chartered universities to operate with agreements authorized by legislative and executive branch directives.

• The Commonwealth would make chartered status available to any public college or university meeting decentralization guidelines and state management standards.

Chartered universities would remain public bodies, but not state agencies. They would be fully accountable to the Commonwealth and comply with state laws. The new reality, however, would give a chartered university control of its own personnel, procurement, financial management, debt management and capital project systems. It could keep current personnel, health and retirement plans or it could explore other options.

Streamlining operations could create savings that could be plowed back into university operations instead of returned to the general fund. Governing boards, though still appointed by the Governor and approved by the General Assembly, would have the flexibility to set tuition at a level that corresponds with real needs, not political ones. Boards could budget and allow students and families to budget predictably for the longer term.

Preserving quality and excellence, improving efficiency and management flexibility and stabilizing the funding horizon for schools and students are three of the reasons Virginia Tech President Charles J. Steger cited in favor of chartered universities in a recent letter to interested parties. But Steger also said Tech expects to maintain or increase its current approved level of 15,000 Virginia undergraduates, to benchmark tuition at the 60th percentile of its peer universities and to increase financial aid.

“With long-range prospects of minimal state support,” Steger continued, “Virginia colleges and universities must be nimble, flexible and creative in order to raise necessary revenues, maintain quality programs, pay competitive salaries, and provide top-flight study opportunities for students.

“Freeing schools from bureaucratic controls and fostering market-based management thinking is but a start.”

Considering the description “nimble, flexible and creative,” Stonewall Jackson might have seen Commonwealth chartered universities as “the Valley campaign for higher education.” More likely the father of the University of Virginia, Thomas Jefferson, could have observed that tree of knowledge must be watered from time to time with new enabling legislation and the blood of bureaucrats.

-- July 12, 2004