U.Va.’s ‘Grand Experiment’ Begins
Nation Watches as the Restructuring of America’s Public Higher Education System starts July 1 in Virginia
By Kathleen D. Valenzi
Photo by Dan Addison
What some have called “a grand experiment” begins July 1, when unprecedented management agreements offering the highest degree of autonomy possible from state oversight go into effect between the commonwealth of Virginia and three Virginia public institutions: the University of Virginia, Virginia Tech and the College of William & Mary.
In fact, this grand experiment boldly includes all Virginia public colleges and universities, which — depending on their financial strength and ability to manage day-to-day operations — have become eligible for one of three different levels of autonomy as the result of the Restructured Higher Education Financial and Administrative Operations Act, passed by the Virginia General Assembly on April 6, 2005.
The Restructuring Act was the result of an extensive legislative process that included intense public debate and the input of key stakeholders, including U.Va.’s faculty and staff. It also involved the untiring efforts of numerous individuals — a fact that has not gone unnoticed by U.Va.’s President John T. Casteen III, who has expressed his gratitude for the hard work “done in the University’s behalf by the Board of Visitors, Leonard Sandridge, Colette Sheehy and the many people who helped produce and pass this landmark legislation.”
Confidence is strong that U.Va.’s restructuring initiative will succeed. The institution already has a proven track record in handling many of its business operations locally — including at the Medical Center, which received codified autonomy from state oversight in 1996.
Even so, the stakes are high for ensuring the restructuring process is well handled, not just at U.Va. but at every public institution of higher education in the state that now is part of history in the making.
“The nation’s higher education community is watching, waiting with anticipation to see the outcome,” wrote Lara K. Couturier in “Checks and Balances at Work: The Restructuring of Virginia’s Public Higher Education System,” a report published early this month by the National Center for Public Policy and Higher Education.
For other states where restructuring is being considered, “the Virginia experience offers important lessons,” she added. Among them, “the importance of dialogue — one that includes college leaders, faculty and staff, the governor, the Legislature, business and opinion leaders and the
public — to gain consensus around how public institutions can operate most effectively while serving a public agenda for higher education.”
What restructuring means at U.Va.
According to President Casteen, “restructuring provides a framework for transforming public higher education.
“The passage of this important legislation is grounds for optimism about the future of higher education in our state, and especially about the future of the University,” Casteen said. “Within this new framework, we will carry Jefferson’s early vision of the University forward while preserving the character and quality that make this institution unique among its peers.”
Specifically, the management agreement that U.Va. has executed with the state reestablishes its authority to set its own tuition for a more stable funding stream without state interference, as has happened in the past.
The agreement also makes possible the establishment of best practices and policies in the areas of finance and accounting, construction and leasing, information technology, procurement, and human resources. The creation of these policies at U.Va. — particularly in the HR area — will occur slowly and only after employees have had an opportunity to share their concerns and preferences with policymakers.
“This is not a situation where you throw a switch and things change overnight,” said Leonard Sandridge, U.Va.’s executive vice president and chief operating officer. “You will not wake up on July 1 and notice differences. The changes will be evolutionary, and the full advantages will be gradual over the course of several years. When people look back at this time, I firmly believe they will regard it as one of the most significant moments in the history of the University. Restructuring establishes the framework for the University to chart its own future.”
In exchange for greater autonomy, U.Va. has agreed to meet (or continue to meet) several state goals. These goals include developing a six-year financial plan, meeting financial and administrative performance standards, working actively with K-12 schools to improve student achievement, stimulating economic development in distressed areas of the state, meeting enrollment demands, making college affordable for all Virginia students and enrolling more transfer students from Virginia’s community colleges.
What restructuring does not mean
There remain misconceptions about restructuring. Primary among them: that restructuring will result in privatization.
This simply is not true, say key administrators. “We are clearly a public institution, and we know we are a public institution,” Colette Sheehy, vice president for management and budget at U.Va., said early in the legislative process leading to the Restructuring Act. “We do not want to be private. But we do have a desire to be the best public university we can be, and that takes resources.”
Other things that stay the same under restructuring:
- All U.Va. employees remain state employees
- U.Va. continues to be bound by the provisions, guidelines and regulations of the State’s Grievance Policy for classified staff.
- Employees retain the right to continue to participate in the Virginia Retirement System.
- Employees will continue to participate in the University of Virginia Health Plan as current employees and as retirees under 65 years of age.
- Retirees 65 years of age and older will continue to have the option of participating in the state’s Medicare Supplement Plan, and the Retiree Health Care Credit will continue.
The months ahead
By gaining significant efficiencies in many financial and administrative areas, U.Va. expects to achieve savings of time and money, and to gain the operational flexibility that will allow it to address more effectively strategic priorities in support of its mission.
Ultimately, restructuring provides a framework for better long-term planning. This, in turn, will allow the institution to further streamline processes, and to improve recruitment, retention and compensation of faculty and staff.
There is every reason for optimism, according to the “Checks and Balances at Work” report: “In an era of swirling discussions about changing the relationship between states and their public colleges and universities, the Virginia case represents one of the most coherent and thoughtful efforts to deregulate and decentralize while working toward an explicit state agenda that we have yet seen.”
For more information on restructuring, visit www.virginia.edu/restructuring/.
Some Benefits of Restructuring on Capital Outlay and the Acquisition & Disposition of Real Property
With less bureaucratic red tape, and greater autonomy over financing, the time required to plan, approve, design and construct a new building could drop by about 25 percent. On a research building that currently takes four years to bring from drawing board to occupancy, that means a time savings of a whole year — time during which fewer man hours are required and inflationary costs can be avoided. Additionally, the sooner a research building can be operated, the sooner U.Va. can attract federal funding for research taking place within it. Every million dollars worth of research funding acquired can result in 32 new jobs being created in the Charlottesville-Albemarle community.
Other benefits starting July 1:
- Non-general-fund projects can be initiated without prior state approval.
- Real property can be acquired without state approval when using non-general funds.
- Improvements can be made on land acquired with, or facilities constructed with, non-general funds, and such property can be disposed without state approval.
- The president can appoint a University building official who can issue certificates of occupancy for completed projects.
- Competitive negotiations procurements no longer have a maximum dollar limit.
- Local design review authority is expanded to include fire and life safety review.
Some Benefits of Restructuring on Finance & Accounting
As a result of restructuring, U.Va. will be able to hold and invest monies that it generates or receives, including tuition, fees, research and sponsored programs funds, auxiliary enterprise funds, and all other non-general funds beginning in fiscal year 2007-2008. First, however, U.Va. must obtain certification demonstrating its ability to meet performance standards from the State Council of Higher Education for Virginia and the Auditor of Public Accounts. After the year-long certification process takes place, U.Va. will, for the first time, receive interest on the monies being held and invested by the state provided it meets the above certification.
Other benefits starting July 1:
- Board of Visitors regains full authority to set tuition, fees, room, board and other charges. (Under statute, boards of visitors have always had the authority to set tuition; however, in the mid-1990s the General Assembly intervened with state-mandated tuition rollbacks and consecutive years of tuition freezes. As a result, students at U.Va. actually paid less tuition in 2002-2003 than students were paying in 1995-1996.)
- U.Va. retains the ability to create and implement debt-management policies — including the authority to issue bonds, notes or other obligations that do not constitute state tax-supported debt — without prior approval from the state.
- U.Va. can create and implement its own financial and accounting policies, which will include streamlined methods for reporting travel expenses and more efficient collection of accounts receivable.
Some Benefits of Restructuring on Information Technology
With restructuring, U.Va. becomes exempt from Virginia Information Technologies Agency and Information Technology Investment Board regulations in the areas of IT strategic planning, expenditure reporting, budgeting, project management, infrastructure, architecture, ongoing operations, security and audits. Instead, U.Va. will be able to adopt its own IT policies, standards and guidelines for these areas based on industry best practices — plus avoid new fees now being charged by VITA to recover costs it incurs for governance, oversight and consulting related to IT projects and procurements.
Starting July 1, U.Va. will be able to conduct the following activities based solely on best practices appropriate for the higher-education environment:
- Support faculty in their instruction.
- Provide network capacity to perform innovative research.
- Develop an infrastructure that promotes high-performance computing and supports computational research.
- Secure U.Va.’s network and data.
- Provide students with computing capability that enhances their learning experience.
- Explore leading-edge technology with the ability to accept the risk that comes with implementing new technology.
- Provide an environment that allows faculty, staff and students to use a variety of technologies best suited to their needs.
- Participate in the development of open-source applications.
- Rapidly implement new technologies, such as those that facilitate collaboration among state colleges and universities.
Some Benefits of Restructuring on Human Resources
Restructuring gives U.Va. the ability to create a new human resources system that will, among other things, streamline and expedite current hiring processes; allow more flexibility to recognize and reward employees; and permit the payment of merit-based increases to staff as well as to faculty.
The creation of a new University HR system, however, will not change the following:
- All University employees will remain state employees
- Classified employees will continue to participate in the:
– Virginia Retirement System,
– U.Va. health insurance plan,
– state’s worker’s compensation program, and
– state grievance policy.
As a first step, U.Va. has created a second HR system — one that initially replicates the existing system for classified staff administered by the Department of Human Resource Management.
Beginning July 1, any new employee hired into salaried non-faculty positions at U.Va. will automatically be enrolled in that second system and will be called “University staff” (versus “classified staff”). Classified staff working in other state agencies who accept transfers to U.Va. will also be called University staff, while U.Va. classified staff who accept transfers or promotions within U.Va. will remain in the state HR system.
Initially, University staff will be covered by the same HR policies as classified staff. Over the next 24 months, a new University HR system will be created, and University staff will work under these new HR policies as they are developed (much as existing classified staff would be affected by future changes made to state HR policies).
Current classified staff will be given the opportunity to convert to University staff status each time they accept a transfer or promotion within U.Va. Also, periodically, but no less than every two years, classified employees in the state HR system will be given an opportunity to move to the University system.
Conversion from classified to University staff status is irrevocable.
As the University HR system is developed, U.Va. employees will be given opportunities to comment on the HR policies and procedures being considered.
Some Benefits of Restructuring on Procurement & Surplus Property
Establishing more cost-effective procedures — that may be the best way to sum up the gains that will be realized in this area. As a general rule, activities related to U.Va. procurement and surplus property will no longer be governed by administrative regulation from the Virginia Information Technologies Agency, the Virginia Public Procurement Act or other legislation, unless the institution is specifically named in that legislation as being included.
Other benefits starting July 1:
- State contracts become optional for use in all areas, except telecommunications services, which remain mandatory.
- A uniform set of procurement rules replaces the Virginia Public Procurement Act, including (but not limited to) the following changes:
– Information technologies and telecommunications goods and services can be procured, and federal General Services Agency contracts used, without review and approval of the commonwealth’s chief information officer.
– Advance written determination for use of competitive negotiation, when competitive sealed bidding is not practicable or not fiscally advantageous, is no longer required.
– Multiple awards of term contracts in the procurement of professional services is allowed; establishes professional services contract level at $50,000.
– Small purchase level for goods, professional and non-professional services is set at $50,000.
– The RFP competitive negotiations process is streamlined.
– Several transaction categories, to include speakers and performing artists, memberships and association dues, and conference facilities and services, are exempt from competition.
- Approval requirements to participate in cooperative contracts are lifted.
- Purchases from the Virginia Industries for the Blind become optional.
- A Memorandum of Agreement defines the scope and expectations of electronic
procurement systems operated by the state and the University and connected by
interface or integration.
- Surplus personal property can be disposed of locally.
- All proceeds from the sale of recycling and surplus property are retained locally.