I am pleased to be with you this morning to share my thoughts about higher education in Virginia. Studying Virginia's colleges and universities has become something of a cottage industry. At last count, I think I could identify three or four active efforts underway on this topic. One might think that the colleges would be flattered by this attention. I suspect they're probably just confused and anxious.

I have not come to this topic just recently. I have served on the Senate Committee on Education and Health, which oversees higher education, since I was elected to the Senate in 1978.

I was Chairman on the Commission on the Future of Higher Education in 1994 and 1995. I have served on the Senate Finance Subcommittee on Education for a number of years, and I now serve as Co-chairman of the Finance Committee.

I am also now Co-chairman, along with Delegate Alan Diamonstein, of a legislative study group which is charged by the General Assembly with developing a lasting set of funding guidelines for higher education.

I say all of this to you not to impress you with titles, but simply to convey to you how long and how deeply I have been involved with higher education in Virginia. Many of my colleagues, including Delegate Diamonstein, have been involved as long as I.

Some of the central funding themes and systems which exist in higher education today -- the peer group system for faculty salaries, the Higher Education Equipment Trust Fund, Maintenance Reserve funding, and the push toward decentralization, for example -- were either developed or shaped over the years, as the result of that involvement.

I think you can expect that our involvement with higher education will continue to be active and visible. In Virginia's system of government, it is the General Assembly which provides long-term perspective and continuity. Next January, it will be our task to take all the recommendations that you and others have made and to shape them into a coherent policy for higher education policy into the future.

I genuinely appreciate Ed Flippen's invitation to appear today. It seems to me that little is served by having your Commission and our Joint Subcommittee strike out in fundamentally different directions. I would therefore like to share with you where I think we need to go with regard to higher education in Virginia, and where I think our Joint Subcommittee is headed.

But first, let me share with you my perspective on where I think we have been.

Before the recession of 1990-1992, Virginia had in place a working set of funding guidelines for higher education. We knew about how many faculty and staff were required for a given institution's size, mission, and mix of disciplines. We had a quantifiable objective for faculty salaries, based on comparisons with a unique set of national peer institutions for each Virginia school. We had a policy on how to share the cost of education between students and the Commonwealth. And, we had in hand a series of special studies detailing equipment deficiencies in several disciplines, identifying for us funding actions we needed to take.

Together, these policies and funding principles defined our approach to higher education funding. These guidelines and funding policies were far from perfect. They did not provide much incentive for change and innovation. They overstated the true cost of enrollment growth. And, they failed to adequately recognize how technology could revolutionize instruction.

But -- the funding guidelines established an implicit "contract" between the state and the institutions of higher education. Our colleges and universities knew -- within a reasonable range -- the amount of resources they could expect to receive. And, we knew -- within a reasonable range -- what we could expect from them in terms of service to Virginia students.

With the fiscal constraints of the recession, most of this funding framework fell into disuse, and was ultimately abandoned. With that abandonment, the colleges found themselves in the posture of having to react to shifting priorities, but without the ability to plan. Most of them came to see that their best bet for securing the additional funding they were convinced was required was to invent initiatives which seemed to respond to the priorities of the moment. I refer to them, not altogether kindly, as initiatives du jour.

It seems to me that one of our most fundamental tasks is to re-establish a rational set of funding guidelines on which to base our appropriation decisions about Virginia's colleges and universities.

If you listen only to the rhetoric regarding higher education, you may think that the concepts of accountability, efficiency, and affordability are new to Virginia. Let me assure you that they are not.

If you read the 1996 report of the Commission on the Future of Higher Education, which I chaired, you will find these three themes centrally placed throughout the recommendations. Let me cite one example from the report:

"Virginia's system of higher education has made "accountability" one of its three key goals since the Virginia Plan for Higher Education was first published in 1974. [Note: The other two goals are "access" and "high quality."] We are interested now in clear demonstrations of what taxpayers, tuition-payers, and other investors in Virginia higher education are getting for their money. This is the "new accountability" in higher education."

Another portion of our report that still resonates is our recommendation for continued decentralization. Quoting from the commission report: "We propose that the Council of Higher Education develop . . . a plan whereby Virginia might assign selected colleges and universities greater responsibility for their daily operations and for their long-term development. We see this as the continuation of the restructuring and decentralization efforts that currently are reshaping our system of higher education. Eventually, all of Virginia higher education might participate in this extension of results-oriented accountability."

These quotes sound to me like the same things that are being espoused today. I doubt that there are many among you who would disagree with them.

By the way, when we said "decentralization," we meant selectively delegating to the colleges and universities more direct authority to operate and administer personnel, purchasing, capital facilities' projects, and other functions -- as one means to increase efficiency and promote innovation. We recognized then that not all the colleges were prepared to accept that operational authority and its accompanying responsibility. Some are not prepared today to accept it.

We did not intend then -- nor do I think we would accept now -- that decentralization means cutting the colleges loose to do their own thing -- without continuing and active oversight from the General Assembly and Governor.

The General Assembly has a long and close association with Virginia's public colleges and universities. Moreover, our Constitution assigns to the General Assembly unique responsibilities with regard to appropriations and oversight. I cannot envision how any proposal to weaken that relationship or limit that responsibility would be a step forward.

So let me try to be constructive and speak plainly. My expectations for our colleges are demanding and clear. I doubt that they are much different from yours. This is what I expect, and what I think my colleagues in the General Assembly expect:

1. We expect our colleges to provide a challenging and thorough post-secondary education;

2. We expect them to train graduates and professionals for a host of specialized professions;

3. We expect them to maintain educational access to all classes of Virginians, by holding costs down to the minimum acceptable level;

4. We expect them to serve as economic catalysts for their regions and state;

5. We expect many of them to conduct cutting-edge research - to create knowledge, and to transfer that knowledge, where possible, into practical applications for firms and businesses in Virginia;

6. We expect them to re-examine themselves regularly, to look for different and more effective ways of delivering instruction for undergraduates, graduates, and anyone else who is seeking specialized training or re-training;

7. We expect them to lend their expertise to the public schools, so that we can move toward an effective, seamless system of pre-kindergarten to post-baccalaureate education; and

8. We expect them to recognize their obligation to the Commonwealth's citizens by actively seeking ways to serve the public interest.

In simplest terms, the question that I think we have all been wrestling with, and the question that next needs to be answered is -- what level of resources is required for our colleges to meet these expectations in an efficient way?

If we allow ourselves to be diverted from this central question, then we prolong unnecessarily a public debate that has been going on for over a decade.

The funding guidelines study that Delegate Diamonstein and I chair will be working over the next 6 months to answer that question. We will be looking first at the issue of base funding. By that I mean:

• How many faculty and staff are required to operate our instructional programs, as they are currently configured?

• How much is required to operate the instructional program?

• How much is required to operate and maintain the physical plant of each institution? And,

• How much is required for library materials, and academic computing facilities?

We will then turn our attention to the future. We will try to determine how to make the funding guidelines dynamic. We will decide:

• What adjustments should be made to the funding base as we move out in time -- to capture both savings and costs, as technology evolves, enrollment changes, and curricula and the mix of disciplines change?

• What incentives should there be to promote innovation?

  What incentives should there be to promote efficiency?

I recognize that what I am describing is an evolutionary process. Evolution is the way I see it.

When we are confident that the Commonwealth is fairly providing the resources necessary to meet our expectations and objectives -- then and only then -- I can comfortably advocate evolving toward significantly increased operational freedom -- toward setting quantifiable goals and basing funding more on measurable performance.

Even when this evolution occurs, however, I do not anticipate that increased operational freedom will ever mean independence -- or complete autonomy. Our colleges and universities bear a unique role as state institutions. Moreover, our state colleges and universities are a unique resource for this Commonwealth. I expect that the General Assembly will always be active in overseeing how that role is carried out and in overseeing how this unique resource is developed and utilized.

And now, because I mentioned performance funding, let me take a moment or two longer to offer a couple of thoughts on this topic.

Performance funding is one of concepts that is very attractive because it seems to promise what we are all looking for -- more precise accountability and results-oriented rewards. Because the concept is so attractive, however, it would be very easy to do poorly, and very difficult to do well. I cannot emphasize this point enough.

There are three principles I think are central to success in this area.

First, performance measures must capture the value added by each institution. This is much easier said than done. We accomplish very little if we put in place performance criteria that largely measure only inputs.

Graduation rates at some institutions are very high because the quality of their incoming students is very high. Knowing that fact tells us very little about the value that has been added by the institution while the students were enrolled.

Second, there should be no illusion that "one size fits all" -- that the same measures will apply equally to each institution, regardless of mission, discipline mix, and student characteristics. We pride ourselves on our diverse system of higher education. Any meaningful system of performance measures will have to reflect that diversity.

Third, we all need to recognize that performance measures provide incentives to improve behavior. We absolutely need to provide incentives -- but we want to provide the right incentives. We need to beware the "Law of Unintended Consequences." The last thing I want to see is a system that seems to improve performance but which really encourages less stringent standards of grading or student achievement.

Developing a system of performance measures which are accurate and will stand the test of scrutiny will require an open process which includes extensive collaboration with the colleges, as well as carefully considered buy-in from policy-makers -- before the system is put into place.

Let me close by reiterating my appreciation to Ed Flippen for inviting me to appear today. I came because I think it very important that we understand each other's perspective on the issues we are considering, and that we look wherever possible for common ground. Delegate Diamonstein and I have extended to Ed Flippen an invitation to sit with the Joint Subcommittee, and to hear the results of our analyses, as our work proceeds.

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Posted: July 17, 1999
By The Educational Policy Institute of Virginia Tech
sjanosik@vt.edu