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.