Increasing local control Efficiency the goal of decentralization

By Dan Heuchert

Decentralization. Privatization. All these “-ations” — what do they really mean? Decentralization — a general movement aimed at gaining more local control over the business of the University, in the name of efficiency and perhaps cost-savings — has been under way for some time, and now may be gaining momentum. But University officials insist that privatization — severing all ties between the Commonwealth and the University — runs counter to Thomas Jefferson’s founding philosophy, would be prohibitively expensive, and is not in the cards.

Basically, it comes down to this: As Virginia’s contribution becomes a smaller and smaller percentage of U.Va.’s budget — it’s projected to account for just 8.1 percent of all revenue in the fiscal year that starts next month — the University is seeking more freedom to act on its own without approval from Richmond, while still remaining accountable for its decisions.

As President John T. Casteen III put it in his annual State of the University speech in April, “The state is now very distinctly the minority stakeholder within the University.” And in most businesses, minority stakeholders call few shots.

“Essentially what we’re trying to do is capitalize on the best that is there because of the relationship with the state,” Casteen said, “but at the same time permit the Board [of Visitors] and the board’s various functions to assume more and more responsibility for the University and for its operation and financing.”

Colette Sheehy, vice president for management and budget, has led U.Va.’s efforts at decentralization for more than a decade. She bristles at the notion that people in Richmond know more about running the University than people in Charlottesville.

“We have really good employees here, knowledgeable people who can make appropriate decisions about running this place,” she said. She notes that the University runs parking and transportation, housing and dining systems and a bookstore — all auxiliary enterprises that receive no state funds — without a financial loss.

“Why does the state think we would treat taxpayer money any differently than the money we raise? We have limited resources. We want to make them work as hard as possible. It just makes sense to me,” she said.

Of the 12 decentralization proposals that U.Va. advanced in this year’s General Assembly, legislators approved 11.

One measure eliminated a requirement that the state Department of Motor Vehicles preapprove all of the University’s vehicle purchases. The approval had been virtually automatic but added days and even weeks to the purchase process and required that Executive Vice President and Chief Operating Officer Leonard W. Sandridge sign a form for each purchase.

The state will still review vehicle purchases after they are made to ensure that U.Va. is getting a reasonable price. That is a common pattern for decentralization initiatives: instead of advance approval for an action, the state instead audits the results.

Another example: The University and the state send money to each other as many as seven times a day. The University proposed a simpler system under which the two parties would settle accounts at the end of each day and make one cash transfer first thing the next morning. The proposal was withdrawn from the General Assembly to allow the state and the University to work on it administratively. University comptroller Steve Kimata says the two parties are talking and may at least get it down to one daily transaction in each direction.

Other successful initiatives in the 2003 General Assembly expanded the University’s authority to sign leases, as either the landlord or the tenant; provided U.Va. the authority to obtain easements on property it does not own; raised the cost threshold for construction, repair and renovation projects before they require Richmond review; doubled the cost ceiling on maintenance reserve projects; softened the cap on the total number of workers the University is allowed to hire; and exempted colleges and universities from having to advertise open positions in the state Department of Human Resources system.

In many cases, the proposals actually relieve a burden from the state and free up state administrators for other activities. Some measures save money; some don’t. Some even cost a little more but increase efficiency. “It’s time, and time of course is money,” Sheehy said. “And it’s administrative hassles, too.”

She notes that not all state schools can afford to take on more local responsibility, so many measures passed by the legislature apply only to the state’s larger institutions.

Despite progress, the biggest decentralization goals are still out there — giving the Board of Visitors final authority to set tuition rates, and allowing the University to control its own revenues. Currently, all revenues, except gifts and endowment income, must pass through Richmond before being reappropriated to the University.

“I think we have been successful thus far in nibbling around the edges and getting small concessions to be able to do many things locally, but the state continues to question big things,” Sheehy said.

In general, the state has been reluctant to cede tight oversight. She doesn’t expect that to change overnight. “Only when we can get in serious discussions about changing our relationship with the state,” she said.

One such proposal came in 2000, when then-Gov. Jim Gilmore’s Blue Ribbon Commission on Higher Education made the notion of “institutional performance agreements” the centerpiece of its report. The IPAs would have relaxed central control over universities’ affairs in exchange for their meeting certain prenegotiated goals and benchmarks. State funding would also be linked to such performance targets.

U.Va. submitted a massive IPA proposal to the state in October 2000. But the IPA process was delayed and ultimately lost momentum as the governor’s mansion changed hands in the November 2001 elections.

Casteen and other University leaders emphasize that they are not seeking a clean break from state control or public university status. “I don’t think that anyone who’s serious about this argues that this ought to be a private institution,” Casteen said in the State of the University address. “It’s extremely difficult to imagine this University, of all universities, wanting to sever its links to the public. …Jefferson made the judgment in his time, as I think our board has made it in our time, that despite the inadequate level of support, that state link is absolutely essential to the identity of the institution and the work that it does.”