Virginia will begin testing a new law July 1 that gives the state’s senior-level public colleges and universities wide-ranging opportunities for self-governance in exchange for committing to a set of state-education goals.
The measure passed both legislative chambers of the Virginia General Assembly in late February, and Gov. Mark Warner amended it before the legislators met for their April 6 reconvened session.
All schools must commit to the state’s education goals by Aug. 1 to be eligible for benefits scheduled to begin in 2006. Warner and the legislators’ objectives include maintaining affordable tuition and high-academic standards plus contributing to state and local-economic development while conducting business affairs as efficiently as possible.
In effect, the state’s senior universities enter into a three-tier system: basic delegated authority, memorandum of understanding, and management agreements.
Schools qualify for the first tier of basic-delegated-authority by committing to the state’s education guidelines while developing and updating six-year plans for academic and for financial progress by Oct. 1 of each odd-numbered year. Areas of basic autonomy consist of capital-building projects, purchasing and personnel.
Incentives for meeting the state-education goals include reimbursements as interest on tuition from the state treasury and as a share of a statewide rebate on credit- card purchases of $5,000 or less.
Tier-two universities cooperate via a memorandum of understanding with the commonwealth, whereby the governor and senior institutions can recommend additional financial and capital outlay areas of independence to the state legislature. The first recommendations are to become effective July 1, 2006.
Tier-three schools negotiate contracts with the commonwealth, called management agreements, which allow the most administrative freedom.
VCU President Eugene P. Trani said the contracts will be catered to match each school’s individual needs and abilities.
Third-tier universities must fulfill the requirements of the first level and have a minimum AA- bond rating, participate in finance and capital-outlay decentralization pilot programs and agree to reimburse the commonwealth for any financial losses caused by decentralization.
According to a statement from the governor’s office, Warner’s amendments before the legislators voted to exact the new law focused on personnel issues. The now-approved act allows current university employees to choose between the state’s personnel system and university personnel systems, which is available only to tier-three schools that qualify for the right to create their own personnel systems.
Warner also clarified language that requires a university to reimburse the state if it loses money through its financial practices because of decentralization – a measure the governor calls cost containment.
Because of the importance of every school committing to the education goals, one of the governor’s amendments strengthened the link between university adherence to the state’s objectives and its institutional performance.
Initially proposed in fall 2004 as a charter school initiative by the University of Virginia, the College of William and Mary, and Virginia Polytechnic Institute and State University, the three universities sought general autonomy from government oversight.
Trani said the three schools wanted to earn governmental authority status that would have allowed each university to operate similar to a county government.
The VCU Health System, Trani said, may have been the template for the three charter schools to follow when making their proposal to the legislature. VCU’s health system is a political subdivision that takes the university’s clinical operations out of the state’s personnel, capital outlay and purchasing systems.
However, when the legislature created the VCU Health System in 1996 it also gave UVa. limited authority to make administrative decisions for its medical center.
Consequently, all state senior-level universities gained a more democratic system that follows a template of partial autonomy, more likely based on the UVa. Medical Center.
Now, potentially every state senior-level institution can earn the same self-governance as the big three, if it can convince the commonwealth it deserves the status.
In February, Trani told VCU’s Board of Visitors that VCU qualifies in every category for the third tier, but he expects it to apply for tier-two status.
“I don’t see that there are great benefits to doing stage three,” he said. “I just don’t feel that those things are worth the procedures you have to go through to get the extra flexibility.”
With increased flexibility comes increased accountability. This means, VCU would have to enter into a major contract with the state, he said, and in doing so, the state eventually could end up controlling tuition or out-of-state enrollment.
Don Gehring, vice president for government relations and health services for VCU and VCU Health Services, said in February that VCU most likely will adopt a wait-and-see policy toward decentralization.
The big three universities, Gehring said, can rely on name recognition to increase tuition, yet maintain their enrollment levels, which makes them less reliant on the commonwealth for income and more likely to enter management agreements. VCU, on the other hand, needs base adequacy (money from the state) to function.
Furthermore, he said, it is typical of major legislation that some things work out differently than what was intended. The unintended consequences of this law, which was revised five times in the week before it passed the legislature in February, he said, will get worked out during the next few years of its slow evolution.
Gehring said Virginia already has entrepreneurial institutions that don’t have much oversight. Thus, he said, VCU will watch what happens to other universities going through the decentralization process to gauge the benefits and burdens.
Trani and Gehring said they expect the big three to apply for management-agreement contracts soon. UVa., the leading advocate of the initial proposal, most likely will move to third-tier status, Gehring said, or else it could risk upsetting Virginia’s legislators because of the time and effort it took to construct and approve the legislation.