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Original Article:
Virginia Tries Restructuring (summer 2005)


UPDATE

Virginia’s Restructuring
Is a “Work in Progress”

April 2008

THE ATTEMPT by Virginia’s public colleges and universities to obtain more freedom from state control has produced mixed results.

When National CrossTalk reported on this subject in summer 2005, legislation had been passed to grant public institutions autonomy over some operations, in exchange for their agreement to pursue a set of state goals. Since then, the schools have gained considerable autonomy in the areas of capital outlay, purchasing, human resources and information technology. However, the most important change they sought—the authority to set tuition rates—has remained in the hands of the governor and the legislature.

“They got sort of half a loaf,” said David W. Breneman, director of the Master’s in Public Policy Program at the University of Virginia, “but that’s pretty good” for a new set of policies that involves so many changes from past procedures.

“Overall, there are more positives than negatives in the new approach,” said Colette Sheehy, UVA’s vice president for management and budget.

So far, most of the changes have taken place at UVA, Virginia Tech and the College of William and Mary—designated as Level III schools in the plan. (Virginia Commonwealth University became the fourth Level III institution in 2008.)

These institutions now plan and build their own academic buildings without prior approval from state agencies, as long as no state dollars are involved.

“Basically, we now have authority to manage a project from beginning to end, including a certificate of occupancy, without getting approval from Richmond,” Sheehy said. “This saves time and money.” New buildings for the College of Engineering and the College of Arts and Sciences, both financed by private donations, have been added to the Charlottesville campus since the new policy was adopted.

Samuel E. Jones, vice president for finance at William and Mary, said the college was free to build a new $75 million business school, paid for by donations and college-supported bonds, without prior approval from the state. This has cut several months off the process, Jones said.

Officials of the Level III schools agreed that the ability to do their own purchasing, instead of depending on a central office in Richmond, has been helpful. But all three reported some problems in implementing their new authority to handle information technology.

Moving responsibility for “human resources” (including job classification and pay scales) from the state level to individual institutions has been a slow process, encountering many obstacles, but none that seem insurmountable.

However, the all-important ability to set tuition rates for in-state undergraduates, which UVA, Virginia Tech, and William and Mary consider vital to retaining academic quality, has eluded them.

In 2008, with state revenues lower than expected, the legislature approved a tuition increase of only three percent for the 2008-09 academic year, plus an additional one percent for student financial aid. “The General Assembly view was that the state is having tough times, families are having tough times, so higher education will have to pick up its share,” said Don Finley, president of the Virginia Business Higher Education Council.

But most institutions had planned for larger increases. For instance, George Mason University raised tuition 8.5 percent in 2007-08 and had envisioned a similar increase the following year.

In an attempt to hold tuitions down, the legislature created a “Tuition Moderation Incentive Fund” that would provide the schools with an additional two percent (for a total increase of six percent) from the annual tuition and fee revenue that flows to the state. For 2008-09, that amounted to about $17.5 million, to be divided among the institutions.

This fell far short of what the schools said they needed, forcing them to face a dilemma: They could accept the limit, or raise tuition more than that, risking the legislature’s displeasure. But the issue turned out to be short-lived. In 2009, faced with a continuing state budget shortfall, the General Assembly decided to discontinue the incentive fund for 2010, and no tuition increase limit was set for in-state undergraduate students.

“That’s a serious problem,” said Richmond attorney Lane Kneedler, one of the architects of the restructuring plan. “If the major schools decide to raise tuition eight or nine percent, they need to be prepared for a battle to avoid caps.”

“Many think this goes against the whole idea of restructuring,” Finley said.

In return for the new grants of authority, schools must agree to pursue a set of state goals. These include improving student retention and graduation rates and taking steps to make postsecondary education more accessible and more affordable. (“The original 11 goals have subsequently been expanded to include a 12th: “Seek to ensure the safety and security of the Commonwealth’s students on college and university campuses.”)

All of this is spelled out in “management agreements” between each school and the state. The State Council for Higher Education in Virginia (SCHEV) monitors these agreements and issues annual certifications to those that have complied.

“This is kind of murky work, and it’s hard to know what has been achieved,” said Peter Blake, vice chancellor for workforce development in the Virginia community college system. “We’re still looking for a coordinated vision of where the state needs to be” in areas such as enrollment, tuition and achievement.

John Bennett, senior vice president for finance and administration at Virginia Commonwealth University, summed up the restructuring efforts this way: “It’s a work in progress. All of the elements are in place but it’s going to take a while to work out the details.”

—William Trombley


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