Under the 2005 Restructuring Act, Virginia universities got more autonomy in exchange for more accountability. Today, they still have autonomy but there’s less accountability. This is the first of four articles exploring higher-education accountability in Virginia since enactment of the 2005 “Restructuring Higher Education Financial and Administrative Services Act.”

The year 2005 was a watershed for higher education policy in Virginia. Lawmakers struck a grand bargain that gave Virginia’s public colleges and universities greater autonomy from state regulations in exchange for more accountability in meeting state goals.

Virginia’s elite universities — University of Virginia, Virginia Tech and the College of William & Mary — had been lobbying for “charter” status that would liberate them from suffocating state controls and reaffirm their right to raise tuition without interference from politicians. At the same time, Governor Mark Warner was articulating what he wanted from the state’s higher education system: expanded enrollment, access for minorities and the poor, and greater progress in obtaining external R&D funding, among other priorities.

Lobbyists and lawmakers struck a compromise: All of Virginia’s colleges and universities would get more day-to-day operational freedom, with the elite three gaining the greatest latitude, and Warner would get more accountability for progress toward state goals. The 2005 “Restructured Higher Education Financial and Administrative Operations Act,” or “2005 Restructuring Act” for short, spelled out the new covenant between the state and its universities.

“Warner worked really hard to get a consensus around it,” recalls Pat Callan, president of the National Center for Public Policy and Higher Education, who was involved in articulating the accountability goals. “It had a pretty good shot at being successful.”

Mirroring a tug of war between states and public universities taking place in every state, the 2005 Restructuring Act garnered widespread attention in the world of higher ed. Some observers speculated that the law would provide a model for other states.

“The Virginia case represents one of the most coherent and thoughtful efforts to deregulate and decentralize while working toward an explicit state agenda that we have seen,” wrote Lara K. Couturier, a colleague of Callan’s, in a 2006 analysis.

But the jury was still out on whether the impact of the legislation would be positive or negative. Would legislators respect the spirit of the legislation and remain hands-off on tuition? Would universities prompt a political response by continuing to raise tuition aggressively? Would the benefits of autonomy outweigh the burden of compiling more reports and statistics? How effectively would the state hold colleges accountable to Warner’s goals, often referred to as the “state ask”?

In 2008, the Joint Legislative Audit and Review Commission (JLARC) published a two-year review of the Act, with special attention to the management agreements that UVa, Tech and W&M negotiated with the state. “It appears that the management agreements have generally worked in a satisfactory manner to date,” the report concluded. Streamlined procedures didn’t address every gripe university administrators had, but the new arrangements were a clear improvement over the old.

It was too early at that time to gauge the impact of restructuring on students, but signs seemed positive. The three universities covered by management agreements had committed to increase access for underrepresented student populations and to facilitate transfers by community-college students, JLARC said. “The management agreements should also make college more affordable for most students,” the authors added hopefully.

In 2011, however, higher education policy took a sharp turn with the passage of “The Virginia Higher Education Act of 2011” during the McDonnell administration. Also referred to as the “Top Jobs” act, this legislation set a new goal of awarding of 100,000 additional degrees by 2025. The shift in priorities entailed the creation of some new accountability measures and the abandonment of others.

By 2017, the grand bargain of 2005 was showing signs of breaking down. State support for higher ed was eroding, putting pressure on Virginia’s public universities to shift costs to students. Runaway tuition was making higher education increasingly unaffordable, not just for the poor but the middle class. In line with national trends, Virginia students were taking on ever heavier debt. Although a college degree was perceived as an admission ticket into the middle class, the high cost of attendance required ever greater financial sacrifices. Responding to constituent complaints, lawmakers submitted a slew of proposals to assert more state control over college tuition and governance. Higher-ed’s friends in the legislature bottled up those bills in committee, but the educational establishment was on notice — the natives were getting restless.

Since JLARC issued its two-year review in 2008, no one has taken a comprehensive look at the 2005 Restructuring Act. The commission did conduct several narrow-bore studies in 2014 that illuminated drivers of higher costs such as administrative bloat, academic productivity, spending on athletics, and cuts in state support for higher education. But no one has thought to question the premises of the 2005 Restructuring Act.

Perhaps it is time that someone asked if the law has lived up to expectation. Have colleges and universities benefited from their freedom from state controls? Have Virginia’s higher-ed institutions delivered the “state ask”?

In articles to follow, I will argue that the Act delivered on some of its promises but contributed to a bigger, over-arching problem: an affordability crisis for the middle class. Among the conclusions:

• Accountability has been narrowed to a few metrics. Of the 12 “state ask” goals, some are impossible to quantify, and some are no longer of interest to legislators. Today, the state tracks mainly enrollment and the number of degrees awarded, along with compliance with administrative and financial standards.
• Falling short of performance goals incurs no sanction. The State Council for Higher Education in Virginia works quietly with institutions behind the scenes to get them back on track.
• Struggling to define “affordability,” the state did not adopt an affordability benchmark or metric until 2011, and then the Top Jobs act suspended it. Universities suffer no rebuke for increasing tuition aggressively.
• The state does not monitor the cost drivers of tuition. Other than two JLARC reports published in 2014, the state has conducted no formal analysis on the relationship between increasing higher-ed costs and increasing tuition.

The state goals enshrined in the 2005 legislation and the metrics that flowed from them ignore cost drivers such as athletic subsidies, faculty productivity, administrative costs, building maintenance, obsolete programs, and the “Club Ed” effect on dorms, cafeterias and other student amenities.

As the old business adage goes, “You manage what you measure.” The overseers of Virginia’s higher-ed system didn’t establish cost-related metrics, so the institutions didn’t make a priority of managing them. As institutions sought to achieve other goals against a backdrop of shrinking state financial support, raising tuition & fees was the path of least resistance. The result: more students are borrowing, and they are borrowing more.

In Part II, I will discuss the benefits of the 2005 Restructuring Act to Virginia’s colleges and universities.