Finding a way to fund higher education
Where will Virginia get the money to produce 100,000 more college graduates?
- October 27, 2011
Taylor Reveley, the president of the College of William & Mary, has spent a lot of time thinking about college financing, and he knows some of his ideas are politically unpopular.
But that hasn’t stopped Reveley from proposing a striking new model for the 318-year-old school that that could help ignite a debate on the way Virginia funds higher education. Since state funds are shrinking, he reasons, why not let the market determine college costs?
Thirty years ago, state funding represented 43 percent of William & Mary’s operating budget. In 2000, it provided 28 percent. Today, state money represents about 13 percent and is, in Reveley’s words, “heading south.”
William & Mary’s situation mirrors problems at many public colleges and universities across Virginia for whom the state has become an increasingly unreliable financial partner.
One part of Reveley’s multifaceted model involves sharply increasing in-state tuition at W&M’s historic campus in Williamsburg, letting the market decide what an acceptable price would be. The current total cost at William & Mary for in-state undergraduates — including tuition, fees, and room and board — is $22,024, while the price tag for out-of-state students is $44,854.
Reveley says the cost of attending W&M for out-of-state undergraduates is just about at the saturation point, making increased charges for in-state students the only reliable way to provide more dollars for the institution in the face of declining state support.
In return for being able to set market-rate tuition for in-state students and having a “viable percentage” of out-of-state students, William & Mary would use a portion of the extra dollars generated by families who could afford to pay full price to provide financial assistance to middle-income and poor families.
As long as need-based aid increased in step with in-state tuition, affordability is not compromised, Reveley says. “If Virginia is to sustain its system of public education, it must be creative about how to do it,” the William & Mary president says. “I’m just deeply concerned that the money [from the state] isn’t going to be there. We’ve got to pursue other means of sustaining ourselves.”
Reveley’s proposal comes at a time when Virginia Gov. Bob McDonnell — who holds a bachelor’s degree, two master’s degrees and a law degree — has made higher education a focal point of his administration. Finding a sustainable financial model to support the state’s public colleges and universities will be crucial in his push toward making Virginians better prepared to compete in a global economy.
“The problem is that the percentage of funding that the state has made available to pay for education has been going down every year. There is no clear strategy for replacing that investment,” says Richmond attorney Jacob Lutz, a former member of the State Council of Higher Education for Virginia (SCHEV) who once served as rector of Virginia Tech.
Virginia now provides only 51 percent of the cost of an in-state student’s education at a public college or university, down from the target of 70 percent set in 1976, according to a recent SCHEV study.
Moreover, state support for higher education for fiscal year 2012, which began July 1, is 30 percent lower than 2001 when figures are adjusted for inflation, the study says.
In supporting higher education, Virginia falls well short of some of its closest neighbors. The commonwealth ranked 38th for state and local appropriations per student, according to a 2009 report from the State Higher Education Executive Officers. By contrast, North Carolina and Maryland ranked 10th and 11th, respectively.
During the past two years, the state’s public colleges and universities have benefitted from federal stimulus funds that helped offset state budget cuts. The General Assembly allocated $75 million in fiscal year 2010 and $201.7 million in fiscal year 2011 from the State Fiscal Stabilization Fund to help reduce the need to increase in-state tuition. But that money will be unavailable in fiscal year 2012.
To mitigate the end of stimulus funds, tuition and fee increases for in-state students were set by many colleges and universities over a two-year period. That helped reduce the need for dramatic tuition hikes this year.
Tuition and mandatory fees rose an average of 7.9 percent this year after increasing 10.9 percent the year before.
Virginia’s Sputnik moment?
Higher-education financing will likely be a priority at the upcoming session of the General Assembly, which earlier this year passed the Virginia Higher Education Opportunity Act. Some have described the legislation as the most ambitious educational initiative in Virginia since the establishment of the community college system in 1966.
In short the act calls for:
- Expanding classes to create 6,000 new slots for in-state students at colleges and universities this fiscal year.
- Adding 100,000 state residents with college degrees over the next 15 years, with an emphasis on science, technology, engineering and math (STEM) education.
- Improving graduation and retention rates.
- Expanding technology-enhanced instruction.
- Using higher education’s physical facilities and instructional resources year-round.
If its successes are as high as its aspirations, the Higher Education Opportunity Act could be Virginia’s Sputnik moment.
Sputnik was the world’s first artificial satellite, launched into orbit by the Soviet Union in October 1957. Its blinking light, seen by millions of Americans, shattered any pretense that the United States was the world’s leader in technology.
Sputnik’s appearance triggered a frantic response among America’s leaders, prompting a mammoth national investment in science and math education in a headlong dash to try to keep up with the Soviet Union.
There is no longer a blinking light in the sky to warn that America is falling behind in the global race for technological and economic supremacy, but academic, business and political leaders in Virginia — including McDonnell — have sounded the alarm.
Consider that the United States now ranks 29th out of 109 countries in the percentage of 24-year-olds with math and science degrees. For many, that’s a flunking grade.
Teresa Sullivan, president of the University of Virginia, used a Sputnik reference recently in arguing for a dramatic uptick in federal and state funding for higher education. Comparing the U.S. economy to a bus stuck in the mud, she described higher education as an engine of talent, research and innovation that can get things moving again. “Our competitors are investing in higher education now, and we need to do the same just to keep pace,” she told an audience at U.Va.’s Miller Center.
McDonnell says the biennial budget he will introduce in December for fiscal years 2013 and 2014 will address higher education funding, but it is unclear what tack the governor might take.
Virginia ended the 2011 fiscal year with a budget surplus of $544.8 million, but McDonnell has said he remains concerned about the weak economy and possible federal budget cuts. To that end, he allocated $132 million of the surplus to the state’s “rainy day” reserve fund. Most of the rest of the surplus has been spoken for.
In addition, McDonnell’s chief of staff, Martin Kent, has asked state agency heads to propose cuts to their 2013-14 budgets ranging from 2 to 6 percent. The governor also is assembling work groups to recommend savings in the state’s costliest programs, including higher education.
Colleges under pressure
State colleges and universities are under pressure to add seats for in-state students, create efficiencies in their operations, and boost revenues, while keeping tuition increases manageable.
As part of the Higher Education Opportunity Act, colleges and universities have begun receiving shares of a one-time infusion of $100 million to help them meet the act’s goals. James Madison University, for example, has said it will use the $6.5 million it receives to help expand classroom instruction, adding 240 in-state students this year.
The schools also have searched for ways to cut costs and create new sources of revenue. Virginia Commonwealth University — which the governor scolded for raising tuition 24 percent in 2010 — has trimmed millions of dollars from what it says was an already tight ship.
Last year, a study by the Goldwater Institute in Arizona listed VCU, with an enrollment of about 32,000, as the most efficient university in the country between 1993 and 2007. The institute cited “a 45 percent increase in enrollment [against] a 75 percent decrease” in the number of administrators for every 100 students and a 5.5 percent drop in the number of faculty per 100 students.
President Michael Rao said the efficiencies weren’t entirely by choice. “Between fiscal year 2001 and 2012, VCU lost $4,270 in state support for each in-state student. Since VCU is already heavily dependent upon Virginia students [90.2 percent of the undergraduate enrollment in 2010] the impact of those cuts was substantial,” Rao said in a recent statement.
George Mason University, the largest university in Virginia by headcount (32,500) is transforming its budget so that it is increasingly less dependent on state support. During the past 10 years, as state support dipped from 58.9 percent of total revenue to 29 percent, GMU nearly quadrupled its funded research (from $38 million to $150 million) and doubled its private fundraising, from $26 million in 2001 to $52 million in 2010.
Part of the financial and philosophical tug-of-war about the state’s financial model for higher education will invariably touch on the appropriateness of an institution having a high percentage of out-of-state students.
Some legislators say some of the state’s most sought-after colleges and universities — such as the University of Virginia, the College of William & Mary, Virginia Tech and James Madison — need to reduce the number out-of-state students, to allow more Virginians in.
The schools with the highest percentage of out-of-staters, based on 2010 undergraduate enrollment, are: U.Va. (33.5 percent); William & Mary (33.3 percent); Virginia State University (29 percent); JMU (28.4 percent) and Virginia Tech (26.2 percent). (The college with the highest out-of-state enrollment is Virginia Military Institute (40.2 percent), but it’s considered a special case because of its citizen-soldier mission.)
Schools with large numbers of out-of-state students say the money paid by those students is critical in compensating for the decline in state support.
On average, out-of-state students pay 159 percent of what it costs to educate them. Some colleges command even more. The top three are U.Va. (185 percent); George Mason (164 percent) and William & Mary (161 percent).
At JMU, a projected 58 percent of total tuition and mandatory fees will come from out-of-state students this school year. At Virginia State University, a historically black institution, out-of-staters accounted for more than 53 percent of total tuition and fees. And at Virginia Tech, a spokesman said tuition from out-of-state students now exceeds the funding the institution receives from the state.
A legislator’s perspective
While state funding to colleges has been dropping, the chairman of the state House Education Committee, Delegate Bob Tata, R-Virginia Beach, says public colleges and universities need to spend their money more wisely. “The faculty is bloated. They rarely teach a full load,” Tata asserts. “In my next life, I always thought I wanted to be a lobbyist. But now I want to come back as a college professor — sit on a desk and pontificate and collect $100,000.”
(Most college leaders would dispute that characterization. U.Va.’s Sullivan has noted, for instance, that universities now conduct 55 percent of the basic research in the U.S., compared with less than 20 percent by industry. )
Tata also is not all that keen on pushing more Virginians into college. “We’re putting people in college who should never be there,” he says. “I know it sounds harsh for someone who is chairman of the Education Committee. [But] I think there should be limits.”
Tata says that, if McDonnell wants to increase the number of Virginians with a college education, the governor could easily do it by restructuring community colleges so they can also award four-year degrees. “He doesn’t listen to me,” Tata says gloomily.
In 18 states, according to a 2010 update by the American Association of State Colleges and Universities, community colleges already are empowered to offer baccalaureate degrees, although the degree programs are limited.
Leading up to the legislative session, the Virginia Higher Education Advisory Committee, a group created by the 2011 higher education act, will be looking at all possibilities, from a new funding model for higher education to an expansion of long-distance learning.
Laura Fornash, Virginia’s secretary of education, is bullish on technology and distance learning as a way to increase the number of graduates while reducing the overall cost of a college education. “We need to find ways to target our limited resources,” Fornash says.
In 1998, while director of information technology at Virginia Tech, Fornash launched a Web-based master’s degree program in Northern Virginia to transition professionals into the IT field.
The lackluster economy, she says, is forcing higher education to become more creative. She noted that four public universities — George Mason, U.Va., Virginia Tech and JMU — are partnering with the technology company Cisco Systems to link their campuses.
One objective in connecting the schools is to increase the number of students interested in STEM degrees and to provide dual enrollment options for high school students. Dual enrollment allows high school students to simultaneously enroll in a higher education institution, earning high school and college credit.
Fornash also praised the Virginia Community College System for efforts to streamline operations and contain costs, as part of the state’s efforts to increase the number of Virginians with an associate or a bachelor’s degree.
Beginning next spring, for example, community colleges will permit remedial math students to focus only on math concepts that they have not mastered, rather than taking semester-long courses. “We will get you up to speed in months, not years,” says Glenn DuBois, chancellor of the community college system. “We want to get more people through here faster and at a higher success rate.”
DuBois says that, if 100,000 additional state residents are to obtain college degrees during the next 15 years, the “supermajority” of them will come through the community colleges, either earning their associate degrees there or preparing to transfer to four-year programs.
A boon for community colleges?
William & Mary’s Reveley says community colleges could gain under his proposal to increase W&M’s in-state tuition rates to whatever the market will support.
“If the state gives us a flexibility to use William and Mary’s strength in the market, then we would agree that new state operating money [the college would keep the operating money it already has] could then go to community colleges. No one else has offered to do that,” Reveley said.
The William & Mary president’s proposal to end what he called “one-size-fits-all” state funding has a number of other possible aspects, including a willingness to grow undergraduate enrollment; add more in-state students; increase long-distance learning; and use facilities year-round.
Reveley’s idea of using tuition dollars for student financial aid — once solely a private-college model in Virginia — builds on a practice already in existence.
“If you go back 12 to 15 years ago, there was only one [public] institution that was taking tuition-fee dollars and putting it into student aid. That was the University of Virginia, which was the first to do it,” says Don Finley, a former state secretary of education who now is president of the Virginia Business Higher Education Council. “Two years ago, the last four-year institution adopted the practice, Christopher Newport University. So, what you’ve seen is an evolution.”
In large part, the goals of the Virginia Business Higher Education Council are those of the Higher Education Opportunity Act, calling for 100,000 more Virginians with college degrees, primarily in the high-demand areas of science, technology, engineering and math. The group shares the governor’s concern about the need for a better educated work force in a fast-changing, high-tech economy.
As the state looks for a way to fund its ambitions for higher education, Finley says, another potential crisis is emerging: the growing debt among college graduates.
The SCHEV study found that the average total cost for an in-state student (including room and board) rose to 43.7 percent of Virginia’s per capita disposable income this year, up from 32 percent in 2002, making Virginia’s institutions of higher learning historically less affordable than they have been in more than 20 years.
Another alarming statistic: Per capita income in the state grew by only 1.7 percent from fiscal year 2010 to fiscal year 2011, while the average total costs of Virginia public four-year institutions increased by 10.6 percent.
For many students and their families, the situation means taking out more loans, and resulting college debt has become a defining issue for many graduates.
The Institute for College Access & Success, a nonprofit organization, placed the average student debt in 2009 for all Virginia public four-year and private nonprofit four-year institutions at $19,918, which ranked Virginia 38th among the states. Fifty-seven percent of state graduates carried debt. “We need new models for making education more affordable,” says Finley.
Traditionally, higher education funding in Virginia has waxed and waned with the economic cycle. What worries Finley is that, despite all the ambitious plans afoot for higher education in Virginia, another recession in the next several years is possible, given the weak global economy.
“If that be the case, then higher education along with everything else is going to have to bear the burden of less funding. It’s a fact of life,” Finley says.