September 10, 2004

By Dan Heuchert

University officials on Thursday began laying out the details of the proposed Commonwealth Chartered Universities and Colleges Act, which could reshape the relationship between the state and the University of Virginia, the College of William & Mary, and Virginia Tech.

If the proposed legislation is approved, current U.Va. faculty and staff will continue to receive the same — or perhaps increased — pay and benefits, but may be able to opt into additional retirement plan options. The Board of Visitors will regain the exclusive right to set tuition and issue bonds, and the University will no longer have to seek state approval for building projects. University revenues will remain in Charlottesville, rather than being deposited into state coffers and re-appropriated back to the University.

In exchange, the three universities pledge to forego some, but not all, of their state appropriations. The funds thus freed up could be reinvested in the state’s non-chartered institutions, University President John T. Casteen III suggested at a media briefing held Thursday in the Rotunda.

“What we’re proposing is not revolutionary,” Casteen said. Even at U.Va.’s founding, Thomas Jefferson anticipated that the state would not be able to provide the resources needed to fund an institution he proclaimed would be “the bulwark of the human mind in this hemisphere,” so he sought other funding sources, Casteen said. “He was the University’s first fund-raiser.”

The proposal goes before the state’s General Assembly in January. If approved, the three universities will then formulate their own charter agreements with the state before receiving final sign-off from the governor.

If all goes smoothly, the earliest a charter could take effect would be July 1, 2005.
Both Casteen and Leonard W. Sandridge, executive vice president and chief operating officer, stressed that the University would remain a public school, and committed to a public mission.

The chartering initiative is “anything but an attempt to become a private institution,” Casteen said.

U.Va. would maintain its current 67 percent ratio of in-state enrollment. Though tuition would likely gradually increase toward a market rate, all three universities are committed to maintaining access for low- and middle-income students, Casteen said. Earlier this year, the University unveiled its “Access UVa” financial-aid plan, which caps or eliminates student loans for qualifying students; both Casteen and Sandridge said the program is a vital part of the charter plan.

According to copies of the legislative proposal and a template for a possible charter agreement, University employees would technically go from being “state employees” to “public employees,” though there is little difference. They would retain many of the rights and obligations of state employees, and they would still be able to participate in the state grievance system and the Virginia Retirement System. Health-care and other insurance benefits would not change, although new employees hired after the charter’s effective date may be required to pick up a greater portion of their life insurance and disability premiums.

Employees of the U.Va. Medical Center, which received similar codified autonomy from the state eight years ago, would not be affected by the charter plan.
In fact, classified employees stand to gain from charter status, Casteen said. Though the University has been able to offer faculty members additional salary increases funded privately, it has lacked the authority to offer similar increases for classified staff. Under the charter plan, the University would have the freedom to set its own compensation levels for classified employees as well, including the ability to offer better raises than the state approves.

“It’s in our best interests to do the best we can for our employees,” Sandridge said after the media briefing. “We have every incentive to make sure they are compensated appropriately to the extent of our ability, in a market-appropriate fashion.”

The University’s ability to control its own tuition is “vitally important” to the charter proposal, Sandridge said. Though current state law delegates that authority to the boards of visitors at public schools of higher education in Virginia, in practice, the Commonwealth’s governors and legislators have often overridden that authority and mandated freezes, and occasionally rollbacks, of tuition.

The charter proposals would combine state appropriations and tuition to meet the state-calculated “cost of education.” The amount of tuition increase necessary to meet that figure, then, would depend upon the state contribution, as well as market factors, Sandridge said. He anticipated that tuition would increase by an average of less than 10 percent annually over the next five years.

By its own standards, the state’s $365 million appropriation to the University is $39.3 million short of its obligations. Similarly, Virginia Tech faces a $34.3 million shortfall, and William & Mary, a $15.2 million deficit.

By agreeing to a reduced state appropriation, the universities estimate that $13.8 million annually would be available for investing in the state’s other public colleges, universities and community colleges.

The three universities would also agree to enroll a combined 2,450 new and transfer students from Virginia, according to a fact sheet.

Another key component of the proposal is the ability to issue bonds and forego state approval of capital projects, Casteen said.

Currently, the state issues bonds, and the legislature must approve all capital projects. By localizing control of the financing and planning process, the University could speed projects to completion in as much as 25 percent less time, Sandridge estimated.

This could allow universities to build additional research facilities more quickly and provide a major economic benefit to the Commonwealth, by speeding the transition to a “brain-based economy,” Casteen said. The University estimates that 35 new jobs are created for every $1 million in additional research funding.

Casteen stressed that the three universities making the proposal have remained successful despite a lack of support from the state relative to their national peers.
“The elements to move into the top 15 of national universities are largely already in place,” he said. “The chief missing element is the reliability of the funding stream.”