Guest Column

Robert B. Archibald and David H. Feldman


A Tuition Tutorial

Chartered status at Virginia's elite universities will broaden access to higher education. Although general tuitions will rise, schools will set aside more money for financial aid for the needy.




The Virginia General Assembly has taken up the “chartered university” proposal that could restructure the relationship between the state and its public colleges and universities. Chartered universities would be able to make many important decisions on campus instead of waiting for decisions in Richmond. Most importantly, chartered institutions would control tuition. 


This frightens many people who fear that rapid tuition increases will close classroom doors on students from lower and middle income families. This fear is misplaced. The state’s current mechanism for financing higher education is what constrains access to higher education. Under the charter proposal access likely will broaden.


The briefing materials from the November Senate Finance Committee retreat paint a clear picture of the way Richmond currently views higher education finance. The state has developed very sensible procedures for calculating the costs of providing higher education, and they have set two funding goals on the basis of these benchmarks. The first is a cost-sharing goal for in-state students. The state would cover two thirds of the costs, with tuition revenues supporting the remaining third. Secondly, the state has set a goal of meeting at least 50 percent of remaining student need (the need after other grants and scholarships). 


The Senate Finance Committee staff says the state will be roughly $200 million short of meeting its cost sharing goal by the end of the current funding biennium. Yet this actually represents major progress. In last year’s budget the “base adequacy gap” was almost $400 million. The forecasts are not as sanguine on the financial aid goal. The Senate Finance Committee staff estimates it will be able to meet 34 percent of the remaining need in the 2005 fiscal year and only 31 percent in 2006.


These two funding priorities affect students and their families very differently. The cost sharing money is a general subsidy provided to all in-state students. It is what permits in-state tuition to cover such a small portion of the cost of higher education. This general subsidy benefits a large number of students who have no financial need. The money behind the second goal provides a targeted subsidy because it finances need-based aid given to students who meet state-defined criteria. Targeted subsidies of this type clearly increase access to higher education because they go to students who would not otherwise be able to attend.


The General Assembly clearly is very interested in meeting the goal for the general subsidy. Their current two-year budget closes half of that deficit.  At the same time they are falling further behind on their goal for targeted subsidies. This is not a sensible public policy if broadening access to higher education is an important social goal.


How would things change if these financing decisions were made by the institutions? Two pieces of information are critical, what the institutions say and what the institutions have done.


First, what have they said? The charter proposals are all based on finding the revenues to meet the state’s own formula for the cost of higher education. The funds to do that will come either through state appropriations or through tuition. Additional tuition increases would be used to close the state funding gap only if state appropriations failed to do so. The universities also commit themselves to increase the percentage of financial need that they cover for admitted Virginia students. 


Second, what have they done? In the last fiscal year, Virginia’s public colleges and universities raised tuition under authority granted by the General Assembly in order to reduce the base adequacy gap. The Senate Finance Committee reports that this year 10 institutions set aside $11.3 million of that new tuition revenue for student aid. By contrast, the state’s own budget contains only $3 million in new aid money per year. These institutions took money that they could have used to make up more of the base adequacy funding gap and used it to meet the needs of an important target group of students. 


Based on what they say and how they have acted, Virginia’s public colleges and universities have a much more sensible notion of how subsidies are best arranged than does the General Assembly. Those who are interested in student access to higher education have more to fear from leaving decision making in Richmond’s hands than they do from chartered universities with tuition authority.


-- January 17, 2005














Robert Archibald and David Feldman teach in the economics department at the College of William and Mary in Williamsburg. Archibald is the author of "Redesigning the Financial Aid System" (Johns Hopkins University Press).





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