Time for Another Round of Higher-Ed Restructuring?

W. Taylor Reveley IV addressing SCHEV.

Longwood’s Taylor Reveley IV says Virginia’s elite universities should consider generating more revenue by admitting more out-of-state students.

The Commonwealth of Virginia faces chronic budget pressures — the growth of Medicaid, pension liabilities, and more — that will make it difficult for the General Assembly to bolster state support for higher education. W. Taylor Reveley IV, president of Longwood University, delivered those cautionary words to the State Council of Higher Education for Virginia (SCHEV) this morning shortly before it endorsed a committee recommendation to increase higher-ed spending by $350 million over the next two-year budget.

Perhaps it’s time for the state to consider another “restructuring” of the higher-ed system, Reveley suggested: Give leading universities more freedom to admit out-of-state students paying higher tuition, reduce state support for those institutions, and let the savings flow back to the other colleges and universities.

A legislative deal in 2005 gave Virginia universities more autonomy over procurement, IT, human resources, and other business processes in exchange for more accountability for achieving state goals. The legislation created three levels of autonomy, depending upon each college or university’s institutional capacity, Tier 1, Tier 2, and Tier 3. Only four institutions — the University of Virginia, the College of William & Mary, Virginia Tech, and Virginia Commonwealth University — have attained Tier 3 status with the most autonomy.

Reveley’s restructuring idea would create a “Tier 4” exempt from the state requirement that no institution enroll more than 25% of out-of-state students in their undergraduate student body. The percentage of out-of-state students at Virginia’s elite universities is a political football between the institutions and politicians. Universities like out-of-state students because they pay, on average, 163% of the tuition of in-state students, yielding more revenue. But General Assembly members are sensitive to constituent complaint of their children being displaced by out-of-state students.

Percentages based upon 206-2017 academic year numbers. (Click for more legible image.)

Admitting more out-of-state students could yield a “nine-figure” sum to reinvest in the higher-ed system, Reveley said. Rather than redistribute that sum between the other colleges and universities, the state could consider dedicating the funds an “investment pool” to advance a strategic aim such as advancing university research & development or (mentioned in a side chat with Bacon’s Rebellion) improving the graduation rate. Not only would reducing the number of college drop-outs prevent personal tragedies for students who spend thousands of dollars and drop out without receiving a degree or certification that would allow them to earn more and pay off the debt, it would enable colleges to award more degrees without the need to expand capacity at great public expense.

Most college presidents invited to address SCHEV council meetings use the opportunity to plug their institutions. Reveley took the opportunity instead to talk about the issue he says is “front and center” in higher education today — cost. Even adjusted for inflation, college is far more expensive today than it was in the 1960s and 1970s. “That same trend cannot repeat itself over the next two generations.”

Reveley drove home two other key points:

Personnel reform. Pore through university budgets, and you’ll find that 75% to 80% of the cost is tied to personnel, Reveley said. To some degree, he attributes higher-ed inflation to the phenomenon of “cost disease,” an affliction of labor-intensive economic sectors requiring lots of human interaction such as dentistry, teaching or the arts. It takes just as many people to play Beethoven’s 9th Symphony today as it did 100 years ago, he said. “I think that’s a lot of what’s driving the cost issue in higher ed.”

But it’s not the only thing. Virginia’s public higher-ed system operates according to civil service-like rules that were put into place to give government employees protections against wholesale replacement by new governors. Pork barrel politics is not an issue for colleges and universities. But the protections make it difficult to fire, reward and motivate employees, Reveley said. “It’s tough to exhort the troops when you can’t reward the ones who have worked their hearts out.”

Over and above the civil service rules, colleges and universities have a “dozen different flavors of employee.” These classifications creates conflict and hinder the ability to move people within the organization.¬†While Reveley did not identify specific reforms, he said he would like to see a personnel system that resembled large not-for-profit organizations in the private sector.

Career prep. Reveley has been an outspoken voice in Virginia defending the virtue of a liberal arts education over career-prep degrees. Colleges play a critical role in preserving democracy and building civil society by teaching students how to engage with ideas and participate in organizations, he said. A liberal arts education “is not just a luxury good,” he told SCHEV. If career-prep is the goal, there may be less expensive ways to achieve the goal than sending students to four-year colleges.

Reveley is not the only person in Virginia to suggest another round of higher-ed restructuring. SCHEV staff had suggested the idea of increasing out-of-state enrollment to raise revenue and redirect state support to other institutions. Minnis Ridenour, a former Virginia Tech COO and a SCHEV board member, told the council he has discussed the idea with senior people at Tier 3 institutions, and that they are thinking it over. But Reveley is the first university president (to my knowledge) to publicly endorse the idea. He also is the first to suggest dedicating the freed-up revenue to a specific strategic goal rather than parceling it out among all the colleges and universities.

If higher-ed institutions want to run with the idea, they had better move quickly, said SCHEV chairman Heywood Fralin. There is little time to work out the details of any enabling legislation before the General Assembly session starts in January.

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2 responses to “Time for Another Round of Higher-Ed Restructuring?

  1. Tier 4 makes sense to me. But, get the GA focused on “fixing” something and the fix that emerges from that sausage mill may turn out worse than the disease.

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