The need for restructuring arose from the volatility of state funding over the last several decades as Virginia's public colleges and universities experienced vast fluctuations and declines in revenue streams from the Commonwealth. In the early 1990's and then again in the beginning of this decade, Virginia experienced two major recessions resulting in declines of state funding; funding for higher education represented approximately 17 percent of the state's general fund appropriations in 1984 and just 10 percent in 2004. At the same time, Virginia's government was regulating in-state undergraduate tuition and fees through a series of rollbacks and freezes. Despite decreased state funding and increased control over other revenue sources, state leaders expected higher levels of performance and greater accountability from higher education. Long-term planning for new goals and initiatives, however, became extremely difficult given the volatility and unpredictability of state appropriations.
In an effort to ease demand on the budget and to promote continued excellence in public higher education in Virginia, three of the state's leading institutions – Virginia Tech, the College of William and Mary, and the University of Virginia – developed a proposal to establish a new relationship with the Commonwealth. Introduced in 2004, the Commonwealth Chartered Universities and Colleges Act failed to pass during the 2004 General Assembly Session, but provided a framework for the Restructured Higher Education Financial and Administrative Operations Act of 2005 (Restructuring Act).
The Restructuring Act passed the General Assembly with broad bipartisan support, was signed into law by then-Governor Warner, and became effective on July 1, 2005. With the passage of the Restructuring Act, Virginia's public institutions of higher education gained greater control over certain financial and administrative operations and obtained a more reliable funding model in exchange for the commitment to meet clearly defined statewide goals. In addition, the Act created a three-tiered system allowing single institutions to enter into agreements with the Commonwealth and negotiate even greater levels of operational autonomy.
On June 10, 2005, the University's Board of Visitors committed to meet the statewide goals defined in the Restructuring Act, and voted to pursue the highest level of autonomy by negotiating a Management Agreement with the Governor which would be subsequently approved by the General Assembly in 2006. In the same year Virginia Tech and the College of William and Mary also entered into Management Agreements with the state. Virginia Commonwealth University, in 2008, successfully negotiated a Management Agreement with the state. All four institutions are now classified as Level Three institutions pursuant to the provisions of the Restructuring Act.
Level Three status grants the Board increased autonomy and flexibility in managing the University's operations in six core functional areas: capital projects, leases of real property, information technology, procurement, human resources, and financial operations and management. The Restructuring Act and Management Agreement together also reaffirmed the Board's authority to set tuition and fees and granted the Board the authority to better align employee salaries with market levels.
In exchange for this additional autonomy and authority came greater accountability in the form of various performance measures on which the University must annually report its progress to the state. In addition, the Management Agreement provided for the creation of a new University Human Resources system, which is projected to "go live" in 2009.
The Restructuring Act also requires each public institution in the Commonwealth to guarantee that tuition levels will not become barriers to access through increased financial aid awards. To ensure that no admitted student is excluded from attending due to financial constraints, U.Va. has committed to meet 100 percent of the need of all undergraduate students, replace loans with grants for students whose families are at or below 200 percent of the federal poverty line, and cap debt for eligible middle-income students through an innovative program known as AccessUVa.
This landmark legislation and new relationship with the Commonwealth provide a unique opportunity for higher education in Virginia, and especially for the University. The Restructuring Act places great demands on every public institution in the Commonwealth, and the University is no exception, but with the dedication of all members of the entire University community, we have the opportunity to take Jefferson's early vision and carry it forward for generations to come.