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Larry Sabato began day two by suggesting that agreement had been reached on a great number of items. His short list included:
Discussion on Warranty Programs
Drs. Sabato and Schilling reviewed their proposals on "Warranties" of Graduates.
Dr. Sabato proposed that each college produce a "warranty" that would state the skills and abilities that would be taught to every student. Separate schools could develop separate warranties for different majors. These warranties would be approved by the respective board of visitors, not SCHEV. Warranties would be a requirement attached to the new block grant funding mechanism.
Every five or more years, SCHEV may choose to evaluate a warranty. SCHEV may make recommendations as a result of the evaluation but final decisions would be left to the colleges.
Colleges may provide evidence of the warranty by means of: (a) scores on comprehensive exams, (b) student portfolios, (c) data on student achievement, (d) alumni surveys, (e) employer surveys, or (f) some combination of these.
According to Dr. Sabato's plan SCHEV would not be able to reject a warranty or plan of evaluation. SCHEV would, however, produce a report that would disseminate the results of its evaluation for all tested colleges.
Dr. Schilling's plan was more structured and gave SCHEV more responsibility for developing the warranty and the evaluation process. He suggested that warranties needed to address the broader goals of higher education (e.g., writing, thinking, problem-solving, speaking , computer skills, etc.). The purpose of the warranty would be to assess the institution, not the student.
Both Sabato and Schilling suggested that the penalty for poor performance by the institutions should be the "free market." Students would not attend institutions and businesses would not hire graduates from schools where poor performance was identified.
There was a great deal of discussion on this topic. Members of the Commission disagreed on terminology. Some anticipated legal problems with the notion. Several Commission members made the point that institutions couldn't really "take the student back and fix the problem." One member suggested that the warranty idea was a "cheap gimmick."
There was also good debate about whether the "warranty" meant that schools certified that certain things would be learned or whether schools were certifying that certain things would be taught.
While the particulars of a "warranty" were not agreed to, most Commission members were in favor of the notion of quality assurance practices.
Dr. Irwin, from James Madison University, suggested that the spirit of what is being proposed is not new and in fact has been worked on for over a decade. He suggested that selecting a random sample to assess quality does not work. Students do not cooperate and do not perform if there is no incentive for doing so.
At the end of the discussion, Mr. Flippen appointed a subcommittee to write a short paper that would pull together the major themes discussed here.
WORK SESSION II: FUNDING HIGHER EDUCATION IN VIRGINIA
Overview of Traditional Funding Models
Rob Lockridge reviewed the background, current policy and practice, and possible policy changes in faculty salaries, enrollment growth, the higher education trust fund, maintenance reserve, nonpersonnel service, and the operation and maintenance of new buildings.
Faculty salaries have been tied to the 60th percentile of an institution's national peer group for many years. Almost every institution will be at this average by the year 2000.
The item receiving the most attention was a request by Dr. Cormier to allow institutions to use salary savings for purposes other than salaries. Eighty percent of an institutions budget is tied to personnel costs. Currently, salary saving cannot be used for any purpose other than personnel costs. This gives institutions very little budgetary flexibility. Several business persons on the Commission supported the idea that this should be changed.
In previous years, additional funding has been given for enrollment growth. Beginning in the 1996-98 biennium, however, institutions were required to absorb two percent enrollment growth annually as part of their restructuring activities. Some school officials suggest that the continuation of this policy will result in enrollment gaps at a time when the number of Virginians graduating from our high schools is increasing.
The Higher Education Tuition Trust Fund was created in 1986 to help schools purchase needed equipment for instruction and research. To date $295 million has been allocated. This program has strong support. School officials suggest that additional flexibility might be helpful.
Maintenance reserve is a growing and serious problem. In 1992, the institutions and SCHEV identified a backlog of $700 million in deferred maintenance needs.
The policy on nonpersonal services may be the highest priority item. While it comprises only 20% of an institutions budget, no increases for inflation have been made since the mid-1980s. Requests are handled on a case-by-case basis. A recent DPB study did not result in any recommendations to change the current policy.
Virginia provides additional O&M funds for new buildings once they are ready for use. The calculation is simple and probably outdated. Basing increased funding on square footage may not be the best cost estimator.
Performance Funding Policy Options
Mr. Lockridge reviewed a handout prepared for the Commission which highlighted various policy options. the following questions focused the conversation:
In the conversation that took place after the presentation, Commission members supported funding performance and agreed that measures must be carefully chosen to reinforce the right behavior. Mr. Landsidle reminded the Commission that decentralization should not be used as a non-monetary reward. Doing well on performance measures may not be at all related to an institution's ability to handle additional autonomy.
Contracts By Institutions
Mr. Atkinson reviewed the most current funding option being developed by the Commission. The funding contract seemed to show a great deal of promise. Mr. Atkinson suggested that the model may address many of the concerns expressed by Senator Chichester and Delegate Diamonstein.
Multi-year contracts would be developed with the institution, DPB, SCHEV, the Governor and the General Assembly. Institutions would identify their funding needs, their performance measures, and their performance targets. All of these parameters would be driven by the institution's mission and strategic plan.
Dr. Merten walked the Commission through a sample "Funding Contract." Dr. Merten suggested that this new approach was a significant improvement because the 'memorandum of understanding" would include stable and predictable funding, increased decentralization, performance /incentive funding, and accountability all in the same document. His handout listed the types of issues that might be included in each area.
Mr. Ridenour reviewed his handout entitled, "Provisions for a Pilot Funding and Performance Contract." His suggestion was that this model might be phased in as institutions found themselves ready to participate. His model addressed affordability, base funding, and adherence to traditional funding policies such as faculty salaries, cost controls, delegation and decentralization, performance measures, capital outlay, and maintenance reserve.
Impact of Tuition Restraints and Rollback
Dr. Allen reminded the Commission that the 20% rollback applies to tuition only and not the total cost paid by the student. He walked the Commission through an example.
If tuition makes up only 25% of the total cost to the student, then a 20% rollback (.20 x .25) would result in an approximate 5% reduction in the total cost paid by the student. Some parents and students seem confused about this and mistakenly think that the rollback applies to the total cost. They expected to pay only 80% of the bill, not 95%.
He reminded Commission members that as a result of the tuition and fee policies of the last six years, families were now spending approximately 35.60% of income to for college cost, as compared to 35.7% in 1989.
Dr. Allen also stated that the percent of unmet student financial aid covered by the Commonwealth had risen to 47%. During the mid 1990s, the figured hovered around 33%.
Impact of Institutional Action With Regard to Mandatory Non-E&G Fees
Some Commission members expressed concern that institutions were now raising their non-E&G fees as a result of this rollback. Minnis Ridenour suggested that any increase in those fees were approved by their respective boards of visitors and fell within guidelines established by the Governor and the General Assembly since non E&G figures are also appropriated in the Appropriation Act.
Dr. Merten reviewed with Commission members how this played out at his institution.
Dr. Mikalson suggested that some of these non E&G expenditures were being made in response to consumer demand. More comfortable residence halls, more choice in board plans, larger recreational facilities have become part of student and parent expectations.
Impact of Renewed Affordability of Public Institutions on Virginia's Independent Institutions
Mr. Bob Lambeth, Executive Director of the CIVC, suggested that the 20% rollback was accomplished through an increase in state subsidies to Virginia parents. He reminded Commission members that private colleges charge close to 100% of cost to Virginia students. Virginia students attending public institutions are charged only about 35% of the cost.
The cost gap between public and private institutions has increased by about $1000 as a result of the rollback. TAG previously made up 29% of this gap. It now makes up about 27% of the gap. Mr. Lambeth estimated that a $200-300 increase in the current TAG award would be necessary to make up for the 20% rollback. The TAG award per student for this year is $2700.
Virginia residents who attend private institutions full-time are eligible for TAG awards for four years. The award is neither need nor merit-based. Those attending for-profit private institutions are not eligible. One or two Commission members suggested that the award ought to be need based.
Mr. Lambeth stated that TAG was not need-based since the Commonwealth had always viewed TAG as a tuition equalization measure, not financial aid in the traditional sense.
With respect to capacity, Mr. Lambeth assured the Commission that Virginia private institutions could absorb another 10,000 students without having to build new facilities. He declined to identify where those extra spaces were but did say that almost every private institution has extra space. He also reminded Commission members that most private colleges are spread over a wide geographic area and most are not highly selective.
In a previous meeting, Mr. Farrell suggested that increasing TAG may encourage more Virginia students to attend private colleges, thereby saving the Commonwealth money. Mr. Atkinson suggested that a study ought to be undertaken to calculate the cost effectiveness of increasing the TAG award.
Delegate Bryant urged the Commission to encourage the development of partnerships between the private and public systems. He expressed concern that the privates may be left behind if the Commonwealth did not factor this resource into its planning process.
Dr. Allen stated that the private colleges were included in the Virginia Plan.
Ms. Matsen announced that the next meeting would be held in Southwest Virginia on September 8. The topic will be Governance.
Mr. Flippen also announced that the Commission will begin a series of public hearings where citizens will be invited to share their thoughts with the Commission. These meetings will be held throughout the Commonwealth and scheduled in the evening hours.
The meeting adjourned at 3:55 p.m.
Posted: July 11, 1999
By The
Educational Policy Institute of Virginia Tech
sjanosik@vt.edu