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"The New Deal: Why the University Needs Charter Status"

Alumni News — Winter 2004

The effort to secure formal charters for the University, the College of William and Mary, and Virginia Tech has been much in the news this fall. After operating for almost 15 years under the radically reduced State appropriations that began in 1990, and after understanding that the State is not coming back to the table—at least not as the sustaining partner it was before—the three universities have made what is for Virginia a major move. They have asked for charters that spell out the terms of the deal, that make clear who is responsible for what, and that free entities the State no longer wants to support from costly, often pointless bureaucratic constraints. Most major public universities elsewhere in America have had similar charters since their beginnings, but the issue seems almost new here in the state that invented public universities.

Virginia leaders who have spoken out on this issue generally favor the charter legislation. This includes both declared major-party candidates for Governor, senior leaders in both parties and in both houses of the legislature, and business leaders who have repeatedly warned Virginia since 1990 that to starve the universities is to starve the future. Journalists and others who have commented on this period of cuts and constraints have remarked that the politics of something for nothing has had a brutal effect on the State's infrastructure.

Just how far Virginia has tumbled in its support for the most basic public services (even road construction and geriatric health programs) baffles persons who remember the days of our "education governors" and master plans for improving higher education, and governors' promises that cuts were only temporary. By any standard, the General Assembly's 2004 Session was a landmark event—the longest Session ever (three times as long as 1776, for example), the Session in which the State narrowly escaped the downgrading of its commercial paper, the first Session since the cuts of 1990 to make any real improvements in state support for education.

Yet how little these heroics amount to when one looks at the base numbers. U.Va. was cut no less than $52 million in 2004 as Governor Warner balanced the State's budget after his predecessor left behind a massive, unacknowledged deficit. The landmark 2004 Session had only $7.5 million to add back that comes to us over a 2-year period. The additional support for operating costs could be made up by increasing charges to students. In truth, shifting State responsibility to someone else has become almost standard practice. Since the late 1980s, State tax support has dropped from 28% or so of the University's general operating budget to an historic low of 8%. No other state's legislature has ever let support for its flagship university slip so low. Another way to gauge how it is: In 1985, higher education received 17% of the State's total tax expenditure; in 2004, 10%, despite continual growth in enrollment.

And Virginia has other problems. Try to use the State's highways, especially in northern Virginia or Tidewater; try to save a Virginia locality's economy (Martinsville's or Danville's, for example) as its industries head off-shore; or seek to have the local high school improve its AP course offerings; and the pattern becomes clear. Higher education was hit first and hardest, but essentially anything that could be transferred to someone else's debit has lost ground. Taxpayers who sit in northern Virginia traffic for four hours when trying to get home on a Friday afternoon might say that losing ground has become a way of life.

Something for nothing is a dangerous slogan in state politics because eventually nothing begets nothing. These three universities are unique largely in that they have faced up to the reality of the problem, looked elsewhere for good models (and found them everywhere), and demonstrated that in truth they can function better with less future State support and under a businesslike operating model.

This is not how Virginia's founders intended things to work. Thomas Jefferson set out in the beginning to create "the bulwark of the human mind in this hemisphere," and he planned to protect it by making it a "body corporate," in modern terms, a corporation—a usage that, however quaint and neglected, remains in the Code to this day. This statute and the related "Enactments Relating to the University of Virginia," first collected and published in 1831 and republished in 1841, influenced the founding of public universities across the country. It became, in fact, the model followed by other states in the mid-nineteenth century. Many embedded their universities' rights and relationship with the state in the state constitution, as Michigan did (explicitly copying Jefferson's statute) and as California did as one of its first actions in 1849.

University charters in other statesdeveloped in other ways, but they share common characteristics: Faculty members, and generally staff as well, are university employees, not state employees. Governing boards set their own hiring, purchasing, construction, and enrollment policies, and often also set tuition and fees, and are (a principle explicit in Virginia law but ignored in practice for generations as the State bureaucracies have grown) subject in all matters to the legislature. All have some provision for public audit or audit under terms acceptable to the state auditor. This is the essential link to the legislature, and Jefferson was its originator. In addition, the states with the very strongest university systems (Michigan, California, North Carolina, for example) prescribe in law the least intrusive, least regulatory relationships of all. Most of their state statutes, especially those adopted under the Land Grant College Act of 1862, borrow freely from Jefferson's protective language.

Virginia's constitution, last rewritten long after the universities were established, is all but silent on higher education. It contains no charters. In the absence of clear statutory guidance, court decisions, especially Philips in 1899 (the University…a public institution), executive orders, such as those in the 1990s by which governors took away the Board of Visitors' statutory control over tuition (Code § 23-45, "The board of visitors may fix in their discretion, the rates charged the students of the colleges for tuition, fees and other necessary charges"), and the bureaucracies' propensity to regulate everything in view have gradually converted the public universities from instrumentalities of the State to agencies, and in the process made every agency statute apply without regard to fitness or effect on the universities.

For the last decade or so, governors who understood the inappropriateness of forcing agency regulations on the universities have supported our efforts to find relief, and the General Assembly has repeatedly enacted statutes (usually described as pilot projects) to "test" the proposition that one of only two public universities in America with a AAA rating might be able to manage its own business affairs. All of these tests have come back positive, and these remedies have been valuable, albeit piecemeal and sometimes transitory. The most important change came in 1996, when the Medical Center received codified autonomy, which is essentially what we now seek for the entire University. Since 1996, the Medical Center has been recognized as a top 100 hospital no fewer than five times.

It is painfully easy to misunderstand what is happening in Virginia this year. For example, the General Assembly's leaders take as seriously as we do the direct relationship defined in the Code between the public colleges and the General Assembly. These leaders want the State to accept its core responsibilities. They frequently help us gain the piecemeal exemptions I described above. In 2000, a Joint Subcommittee on Higher Education Funding Policies developed new guidelines grounded in national comparative data as benchmarks for tax funding. Under these guidelines, the shortfall for all of the public colleges was $200 million in 2001. By May 2003, it had grown to $350 million. The State Council's September 2003 recalculation sets it at $399 million. Today, U.Va., Virginia Tech, and William and Mary are together under-funded by no less than $89 million. Our shortage alone amounts to $39 million this year.

Perhaps the most serious consequence is that faculty and staff compensation has fallen woefully behind the marketplace, a shortcoming we feel each year as we patch together funds from non-tax sources to protect our brightest and best. Charlottesville is no longer an inexpensive place to live. State salaries fall in the range of the 25th-28th percentile of State's market-basket comparison group make hiring and retention difficult—the major reason for the Board of Visitors' decision two years ago to use, non-tax dollars to supplement the faculty salary fund. The typical faculty family has lost no less than $34,000 in foregone wages tied to state cuts since 1990, and this price keeps coming back as retirement benefits over a lifetime directly reflect this shortfall.

The tax appropriation per in-state student tells a similar story because it allows direct comparisons to other states. Our tax appropriation per in-state student this year is $8,840. The University of Maryland's is $15,384; UNC-Chapel Hill's is $19,335; the University of Michigan's is $17,296. All of these direct competitors operate under charters or similar statutes that do what we need to have done now.

Under the proposed charter, we would agree to (and be able to plan for) lower increases in future tax appropriations than other public universities will receive. In exchange, we would no longer be subject to state regulatory processes involving capital construction, finance, personnel, and procurement, all now predominantly dependent on funds other than State taxes. The charter would include our commitment to maintain the current ratio of in-state and out-of-state students; to continue to provide the range of services we now provide to Virginia, including uncompensated medical care for indigent patients; to conform fully to all State audit requirements; and to be subject to the State Council's coordinating and other authorities. The Governor would continue to appoint the members of the Board of Visitors—the corporate board. In exchange, the State would agree to live by the law as it is enacted. We plan to be what we have been from the start--public, and to continue to serve the public mandate that began here and spread across the land, but to do it by the strict letter and in the spirit of the law as Jefferson wrote it.

Chartered universities in other states accomplish things that we cannot under the current system of regulation. They build their buildings in less time, a matter especially important when universities build laboratories for scientific research. They have access to financing structures that other states see as economic development investments and Virginia has historically seen as the individual universities' problems. They do their purchasing through national higher education cooperatives, and at prices well below what the State offers us. They package benefits as benefits are packaged in the real marketplace, thus doing a better job for their employees than we can do within the existing State systems.

More than ever, the universities' and the State's fortunes are intertwined. We succeed or fail by the quality of the universities' faculty, and the State, it is now beginning to recognize, depends on these same faculty members for the research products that are necessary to the State's economy and well-being. University-based research is the only enterprise capable of rebuilding the fractured local economies that are one consequence of the lack of basic investment over the past 15 years, especially in Virginia's Southwest, Southside, and Tidewater. Excellent students, no matter the financial condition of their families, must have access to public higher education. Owing to the nation's best student financial aid program (AccessUVa), to moderate tuition charges with space for controlled growth over time, and especially to the most generous alumni and other donors behind any public university, we have strategies and means to carry out our mission, and in the process to contribute to solutions to many of the State's problems.

In the latter years of the 1990s, we ran one of the two or three largest and most successful capital funds campaigns ever mounted in a public university. We are well along in preparing a second great campaign focused directly on the reality that 8% state financing means that excellence comes only as we build and sustain it through well-managed endowments and strategically-driven management of all of the University's resources. By my own estimate, this second campaign is likely to double the one that ended in 2000, and to provide the necessary dollars for academic buildings, for restricted endowments for scholarships and professorships, and for the unrestricted endowment that has let the Board make this university the nation's exemplar of the best that is public in our time.

As this proposal has taken shape, and now begun to be understood for what it is—a way to sustain excellence within the larger framework of our public mission and obligations and to do so despite the financial and political realities of our time--I have been fascinated by the evolution of sentiment about it. Early on, the presidents of some of Virginia's other public colleges, those that currently lack the capacity to manage their own affairs (for several good reasons, none a matter of fault) specifically asked for assurances, which we are eager to give, that the University will remain the champion of the cause of higher education in the State.

Now, after six months of discussion, many are proposing that universities that are newer or smaller or for some other reason unable now to assume the responsibilities a charter implies plan toward something similar in the future. We are working with them in this effort. I think it makes good sense to define real terms of operation and stick to them. At one time, thoughtful employees, particularly those in the State's classified wage grades, raised questions about benefits plans and similar matters. This issue became less pressing because the proposal includes the customary grandfather provisions to protect employees' interests. I still hear objections and questions, especially from persons who hope to see the State allow collective bargaining and unions for public employees—an eventuality that seems improbable to me in the foreseeable future, but one that national labor organizers seem to think is within their reach. But more generally, legislators and other elected officers who know the State's situation best, the faculty and staff and students who have seen the price paid for downgrading the universities as public priorities, and the alumni and key volunteers who sustain the University day in and day out have been clear and consistent in their conviction that Virginia deserves better than what it has seen for the last 15 years, and that this charter proposal is a long step toward setting the house in order.

In the end, what is at stake as Virginia wrestles with these issues is one of our Republic's great legacies, the one Mr. Jefferson imagined and struggled to create: "a system of general education, which shall reach every description of our citizens from the richest to the poorest . . ." If we who live and vote in Virginia assume what we have never accepted—that speaking out is a lost cause, that the public interest is not worth the struggle—we can suffer two real losses. We can lose this campaign to effect fundamental change and build our common futures. And we can lose or abandon the legacy left us by that Virginian who imagined these Grounds and this system of education for free people, and built his vision; who struggled himself for many years to persuade politicians who felt no need for a great university, certainly not a great public university, that this university had to be. The stakes are too high for us to sacrifice that legacy.