A New Beginning for Higher
Education in
By Robert B. Archibald and David H. Feldman
The Virginian-Pilot, February 25, 2004 (B11)
The University of Virginia, Virginia Tech. and William and Mary have come forward with a proposal to become “chartered universities” that control their own tuition revenue in exchange for a smaller slice of any future state funding increases that might or might not materialize. Given the huge difference between in-state and out-of-state tuition, the prospect of public universities in full control of tuition policy scares people. It shouldn’t.
In 2000, a joint subcommittee of the General Assembly identified the components of adequate (not gold-plated) budgets for the state’s colleges and universities. Annual spending at the state’s fourteen public four-year institutions is almost $300 million short of the state’s definition of adequate. Even the state concedes there are no magic efficiencies that will preserve quality.
As chartered universities, the institutions would use their new authority over tuition merely to obtain state-defined budget adequacy. Excellence would be financed out of private endowment resources.
Tuition increases would not diminish access to higher education for low-income Virginians because a significant proportion of any increase will be set aside for financial aid. As part of their charter, the universities would guarantee to meet one hundred percent of every in-state student’s demonstrated financial need.
High-income Virginians would pay more, but since a college degree adds over a million in today’s dollars to the average graduate’s lifetime earnings, a public university education will remain a tremendous bargain. And since financially secure universities can offer a higher quality degree, everyone will be buying a better product.
The three schools’ plan is a serious attempt to preserve high quality institutions in the face of state budget realities. The problem is that it doesn’t go far enough. We need to end direct state funding of schools and move to a system of direct tuition grants to students. In addition to broadening the reform beyond the “big three,” a system of direct tuition grants offers several clear advantages.
As in the chartered university idea, schools in a direct
tuition grant system also would control their tuition revenues.
This is essential if schools are to get off the funding roller coaster
that makes long range planning meaningless. George Mason needs this
longer planning horizon no less than the
A tuition grant system also would alter the politics of
higher education funding for the better. At present, college
administrators spend a substantial amount of time and institutional resources
lobbying
For many potential donors the incentive to give is affected by the real likelihood that their gifts will be offset by cuts in state support. Legislators, after all, can argue that there is less reason to support a school that has had a successful fund-raising drive. A cut of fifty thousand dollars in the annual appropriation is roughly equivalent to taxing away a million dollars of endowment. By eliminating direct state appropriations earmarked for each institution, a tuition grant system prevents the state from effectively taxing private giving. This should lead to more successful fund raising to support excellence.
Lastly, a tuition grant system would give the state a
powerful tool to manage the expected surge in demand for higher
education. The State Council for Higher Education in
While we believe that a system of direct tuition grants is
superior to the “chartered university” proposal, we are comparing two very good
ideas. Both are bold departures that solve many problems. Although
tax policy tops the agenda in
Robert B. Archibald and David H. Feldman are professors
of economics at the