Governor Recommends Modest Spending Hikes for Higher Ed

SCHEV Director Peter Blake (left) and DPT associate director Michael Maul discuss the governor’s budget proposals for higher ed.

Virginia’s colleges and universities aren’t getting all that SCHEV asked for in the FY 2019-20 budget, but the outgoing McAuliffe administration proposes giving higher-ed much of what it wants.

If’ you’d asked Michael Maul last October what was in store for Virginia’s higher-ed budget in the upcoming biennium, he would have said the question was how big the cuts would be. The state would have to make up $300 million in one-time funding from the last biennial budget achieved by tapping the Rainy Day fund. The state also was scheduled to update its Standards of Quality (SOQs), minimum inputs into the state’s public K-12 schools, which he expected to require significantly more state spending. As always, Medicaid costs were crowding out spending for everything else in the General Fund — and that wasn’t including an expansion of the program backed by the new governor.

As a percentage of its budget, Virginia has one of the smallest fund reserves in the country, said Maul, associate director of the Virginia Department of Planning and Budget in a report to the State Council of Higher Education for Virginia today. After the bond-rating agency S&P rapped Virginia’s knuckles by giving a “negative” outlook on the Commonwealth’s AAA bond rating, budget planners were under pressure  to start rebuilding the rainy-day fund instead of drawing it down — a swing of hundreds of millions of dollars. The prognosis for higher-ed funding look grim.

But by mid-November the picture had changed, Maul told the Council. When the SOQ data came in, the state’s obligation for extra K-12 funding wasn’t as large as expected. Medicaid spending increases were more subdued than anticipated. And a faster growing economy expanded revenue projections for the next two-year budget. Now, said Maul, it looks like the proposed budget for FY 2019-2020 will provide Virginia’s colleges and universities much of what SCHEV had recommended — not everything it asked for, but a lot.

Among the highlights of the proposed two-year budget from the governor’s office, which is subject to General Assembly approval:

  • $45.5 million in additional financial aid to in-state undergraduate students over the next two years.
  • $21.6 million in “base adequacy funding,” the higher-ed equivalent to K-12 standards of quality, to be distributed between Old Dominion University, Eastern Virginia Medical School, Virginia Military Institute, and Richard Bland College.
  • $17 million for a 2% salary increase in FY 2020 for state employees and faculty.
  • $14 million to George Mason University to help cover enrollment growth.
  • Restoration of $6.7 million in interest earnings and $6.3 million in credit-card rebates.
  • $4 million extra for the Virginia Research Investment Fund .
  • $3.8 million for the University of Virginia’s College at Wise.
  • $1.3 million for Norfolk State University cyber-security/cyber-psychology and eco-friendly bio-fuels programs.
  • Numerous miscellaneous adjustments less than $1 million.

The outgoing McAuliffe administration also is recommending that Virginia colleges and universities be allowed to set up institutional reserves funded by unspent balances from the previous year. Educational institutions have the theoretical ability to do so already, but legislation will provide assurances that accumulated reserves will not be snatched away by a penny-pinching General Assembly. However, said Maul, the reserves would be capped at 3% to discourage institutions from raising tuition for the purpose of building up the reserves.

The budget includes less-than-normal sums for capital spending projects — $50 million for equipment and $282 million for renovations, expansions and new buildings. The state is bumping up against the limits of how much bond debt it can support without jeopardizing its AAA bond rating, Maul explained.

In response to a question why the state can’t guarantee more stable funding for higher education, Maul made some observations not normally heard at a SCHEV meeting.

“There’s nothing in the world that’s guaranteed,” he said. He deemed it “odd” that people would think that higher-ed was uniquely worthy of protection from Virginia’s budgetary vicissitudes. Other agencies have seen their budgets slashed, and they have refocused and redefined their missions. Higher-ed has not had to make the same kind of hard choices, he said, adding that increases in higher-ed costs have consistently outpaced the rate of inflation.

Maul cited the innovative Math Emporium, a program of computer-assisted math instruction at Virginia Tech, that is widely (but not universally) considered to be successful at reducing costs without hurting performance. “Why don’t other math departments try it?” he asked. The higher-ed sector could adopt this and many innovations to cut costs but have not done so.

The proposed 3% reserve will give institutions a significant tool to offset future budget cuts. Such reserves, said Maul, would not have compensated for all the budget cuts imposed by the state, but they would have softened them by more than half.

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5 responses to “Governor Recommends Modest Spending Hikes for Higher Ed

  1. The Governor proposes, the General Assembly disposes…and that is doubly true for the lame duck budget. So we’ll see. Were I still on SCHEV my first question would be what stick goes along with the carrot, how will increased state support be leveraged to hold tuition in line…or do we just cross our fingers.

    Every state agency if managed well ends the fiscal year with a bit left over. Every state agency then has to apply to the Governor and DPB for permission to retain that surplus and carry it forward into the next fiscal year, usually by identifying a good use for the money. (In the AG’s office we used it for a big computer refresh.) The universities have traditionally gotten that permission, but I am not persuaded it should be automatic or that they should be allowed to build up a major cash reserve. Should VDOT be allowed to build up a cash reserve? DMAS? Some local high school? Would the schools be willing to pledge the money toward some specific purpose?

    As noted, the state is under pressure to build up its own overall cash position to satisfy the ratings agencies, and starting to parcel the money out to the various sub-accounts seems counter to that. But I didn’t hear the whole presentation.

  2. How do state agencies that actually sell stuff or rely directly on earmarked taxes to fund their operations.

    I can name two – DMV and VDOT . There are many others at the local levels that collect taxes to fund things like Country govt, public safety and K-12 schools.

    None of them seem to have the “inflation” and escalation problem that higher ed seems unable to fix.

    On a cost per student basis – K-12 in Va has remained remarkably stable… while cost per student in higher ed has gone bananas…

    DMV deserves special mention.. that seems to be a lean, mean machine that get’s it’s job done with the fees it collects with increases far and few between.

    VDOT also has to do more and more with less and less gas tax.. VDOT used to be more than 10,000 employees under George Allen and now they are 7000 employees (not without one or two really bad apples in NoVa).

    So no other agencies in Va including K12 schools seem to have the “problem” than Higher Ed has… and I think it is because we continue to fund the schools instead of vouchers for Va students… that would help students in Va similar to how students in NC, NY, and California who can get a basic degree for a modest sum.

    I think the “Higher Ed” problem in Va also.. directly impacts the economic and workforce issues that Mr. Moret is addressing…

    Give kids vouchers sufficient for them to attend Community College and let them utilize those vouchers for 4 year institutions.. to “shop” for price and quality… AND stipulate that NO MONEY in those vouchers can be used for mandatory student fees for sports… period…

  3. After the bond-rating agency S&P rapped Virginia’s knuckles by giving a “negative” outlook on the Commonwealth’s AAA bond rating, budget planners were under pressure to start rebuilding the rainy-day fund instead of drawing it down — a swing of hundreds of millions of dollars. The prognosis for higher-ed funding look grim. But by mid-November the picture had changed, Maul told the Council. When the SOQ data came in, the state’s obligation for extra K-12 funding wasn’t as large as expected. Medicaid spending increases were more subdued than anticipated. And a faster growing economy expanded revenue projections for the next two-year budget. Now, said Maul, it looks like the proposed budget for FY 2019-2020 will provide Virginia’s colleges and universities much of what SCHEV had recommended — not everything it asked for, but a lot.”

    So what happened – why this quick change in Virgina’s finances from gloom to its rolling in the sunshine of High Cotton.

    My, Oh, My – What a Difference A Trump Makes.

  4. In response to a question of why the state can’t guarantee more stable funding for higher education, Maul made some observations not normally heard at a SCHEV meeting.

    “There’s nothing in the world that’s guaranteed,” he said. He deemed it “odd” that people would think that higher-ed was uniquely worthy of protection from Virginia’s budgetary vicissitudes. Other agencies have seen their budgets slashed, and they have refocused and redefined their missions. Higher-ed has not had to make the same kind of hard choices, he said, adding that increases in higher-ed costs have consistently outpaced the rate of inflation.

    Maul cited the innovative Math Emporium …”

    Now, here’s a Virginia official who is truly serious about improving higher education in the State, DPT Associate Director Michael Maul.

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