More Transparency Coming for Higher Ed?

by James A. Bacon

The General Assembly is considering three bills that would improve transparency and governance in higher education. If enacted, they would a add small measure of accountability to Virginia’s colleges and universities.

A better accounting of costs. HB 927, introduced by Del. Carrie Coyner, R-Chesterfield, would provide for the State Council 0f Higher Education for Virginia (SCHEV) to collect financial data from public colleges and universities broken down by program and discipline. The data would include operational or instructional costs, General Fund and Nongeneral Fund revenue, and planned expenditures.

This would be fantastic. For years I have been calling for deeper analysis of the cost structures of Virginia’s public universities, and SCHEV is the logical organization to collect and examine the data. SCHEV is already doing some of this. For instance, right now it embarking upon a five-year review of the number of degrees granted and majors declared in different programs and departments. HB 927 would drill deeper.

Universities love to grow new programs but hate to shrink old ones.

When it comes to building a new innovation campus or nanotechnology center, they’ll shake the philanthropic tree, lobby the General Assembly, and scrounge up the money one way or another. But how many programs do they cut? Not many. No successful business operates that way. Corporations continually analyze their product offerings — and a college degree is a product offering — for growth and profitability. Corporations divest or shut down unprofitable or slow-growth product offerings in order to reallocate capital to fund products and services that offer greater profit and growth opportunities. But higher-ed administrations don’t have to answer to outside constituencies like shareholders. Administrators answer to internal constituencies, whom they they hate to upset by cutting or eliminating programs.

Maybe there are solid reasons for retaining unpopular departments. But in an ideal world, Virginia’s public institutions at least would know how much their product offerings cost and what they generate in revenue. They would know how much they spend on faculty and instruction, on administrative support, on facilities, on technology, and whatever else. They also would know how much revenue they generate.

Thus, to pick an example for purposes of illustration, the University of Virginia would know what it costs to maintain the Philosophy Department, it would attribute revenues to the department based upon the number of students enrolled in philosophy classes, and it would know whether the Philosophy Department was operating at a surplus or loss. If the philosophy classes were full and growing, and if philosophy were the hot new college major, then the department would get more money to fund expansion. If, conversely, enrollments in philosophy classes were shrinking, the university would reduce the number of instructors and overhead to keep costs in line. In extreme circumstances, it would consider a radical restructuring, such as a merger with another department, partnering with other institutions to share students via online classes, or even shut down the program entirely.

Perhaps such a thinking process goes on, but I have seen precious little sign of it. If you want to know why college is so unaffordable, why costs ratchet ever higher, an unwillingness to cull low-demand programs and departments may be a factor. So, let’s let SCHEV find out.

A better accounting of foundation money. Another worthwhile initiative is contained in HB 1223, introduced by Jason Miyares, R-Virginia Beach, which would require public higher-ed institutions to release annual reports on their foundations. The reports would include total annual expenditures by the foundation as well as the percentage of expenditures applied to financial aid, faculty compensation, program costs, equipment and technology, and administrative support.

Yes, yes, yes! A significant percentage of foundation funds, donated by philanthropists, have strings attached. The philanthropist dictates the use of the gift, so there’s not much that can be done. However, universities also generate endowment revenues from internal financial sources. The most widely publicized of these is the University of Virginia’s Strategic Investment Fund. Virginia Commonwealth University has a similar fund almost as large, and other institutions have smaller funds. These income streams have no strings attached. The public has a right to know how this money is spent, and universities have an obligation to make the readily and easily accessible.

Trustee training. SB 897, submitted by Sen. Bill, DeSteph, R-Virginia Beach, would require all members of public higher-ed governing boards to participate in educational programs that address the role, duties and responsibilities of those boards at least once every two years. Higher-ed issues are specialized, and it takes board members considerable time to learn enough to become a meaningful participant. Any program that accelerates the learning process is a bonus. Any program that equips them with the conceptual tool to ask tough questions of administrators is even better.

All three bills were submitted by Republicans, which may be the kiss of death in a Democratic-dominated legislature. However, the trustee training bill has passed the Senate, while the other two bills have made it out of House Committee, so the signs are positive.