At its May meeting today, the State Council for Higher Education in Virginia (SCHEV) explored letting Virginia’s elite universities charge higher tuition and/or admit more out-of-state students. Giving Virginia’s powerhouse institutions authority to generate more revenue would allow the state to reallocate state support to institutions that don’t have the pricing power to offset state cuts in support for higher education.
It is official policy for the state to pay for 67% of the cost of education for in-state students, while students pay for the other third. Funding cuts in recent years have reduced the state percentage to 47%, putting considerable pressure on public colleges and universities to raise tuition in order to maintain their spending plans.
Council members have consistently voiced their preference for the state to increase its financial support for the higher-ed system. But if it fails to do so, members have agreed, SCHEV needs to consider giving colleges alternatives to raise revenue.
Giving universities even more leeway to set policy than they enjoy now, said council member Marge Connelly, “takes on the flavor of the next iteration of restructuring.” By that, she was referring to the 2005 Restructuring Act which created three levels of autonomy regulatory in exchange for meeting state goals for enrollment, affordability, research, and other priorities. Re-writing the relationship between higher ed and the state along the lines of the ideas in the SCHEV list of options would constitute a second-generation restructuring.
The options include:
- Out-of-state-enrollment. Institutions would be authorized to increase out-of-state undergraduate enrollment. The current appropriation act restricts out-of-state participation to 25%. Because out-of-state students pay considerably higher tuition, increasing the percentage would create an influx of revenue. Highly ranked institutions like the University of Virginia, the College of William & Mary, and Virginia Tech presumably have the cachet to attract far more out-of-state students. (With its niche educational product, so does the Virginia Military Institute, which has 39% out-of-state enrollment.) The flip side is that fewer slots would be available for in-state students. (See table above.)
- Different funding ratios. Instead of maintaining a consistent funding ratio for all institutions (currently 47% of tuition), the state could adjust support according to need, “whereby students would receive a greater subsidy at one institution than they would at another.”
- “Free” community college tuition. Other states are implementing “free” community college tuition policies. In Virginia, community colleges generate about $500 million in tuition revenue — potentially a huge loss of revenue. However, other states impose numerous restrictions on who qualifies for the free tuition. Therefore, states SCHEV, the fiscal impact of such a policy on Virginia’s community colleges would be considerably less than a half billion dollars.
- More freedom to set tuition. In theory, the Code of Virginia authorizes the governing bodies of public colleges and universities full authority to set their own tuition, although the General Assembly has the power to override its own laws. While the General Assembly has largely respected university tuition-setting autonomy over the past decade, legislators responding to dramatic tuition increases over the past several years may not be willing to continue maintaining a hands-off attitude. SCHEV’s idea is to let some institutions set rates higher and direct limited general fund support to those lacking that capacity.
- Charge out-of-state-students more. Appropriation Act language requires institutions to charge out-of-state students at least 100% of the cost of education. The General Assembly could direct them to charge more than 100% of the cost — in effect to increase the profit margin on out-of-staters — and redirect General Fund support to other institutions. (See table below.)
- As part of the restructuring deal in 2005, colleges and universities gained more control over procurement, human resources, capital spending, IT, and other functions, depending upon their administrative capacity. Perhaps, says the SCHEV list of options, “the Governor and the General Assembly could implement other changes for some or all of the institutions that would result in greater savings.
Council members’ reaction to the idea of having options was positive, although some took issue with particular options.
“My perception is that people don’t want to increase the percentage of out-of-state students,” said Heywood Fralin, a University of Virginia alumnus and SCHEV vice board chair.
Katy Webb, a retired lobbyist, said the discussion was “worthwhile” but urged caution on the grounds that “how one institution would be affected would be very different than another.”
Institutions with the flexibility to raise tuition or enroll more out-of-state students might not appreciate seeing their efforts being undercut fiscally by having the General Assembly reducing their state support, suggested Minnis E. Ridenour, a former Virginia Tech budget director.
SCHEV took no action on any of the ideas.
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