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College crisis
Budget cuts slam
Virginia’s higher education, cutting classes, faculty
and entire programs. How far will it go before the state
loses its competitive edge in attracting business?
by Paula C. Squires
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To
get an idea of how the state’s budget crisis is
affecting public higher education, consider the plight
of George Mason University. Overcrowded, it turned away
4,000 students last fall. “We just didn’t
have room for them,” says J. Thomas Hennessey,
the university’s chief of staff. A new 100,000-square-foot
academic building with labs and lecture halls is nearly
complete, but the Fairfax County school doesn’t
have the funds to open or equip it. Even if money becomes
available later, professors might be in short supply.
Virginia hasn’t given them a raise in nearly three
years.
All
across Virginia, students and faculty are feeling the
bruising budget cuts to the state’s public colleges
and universities. The worst budget shortfall in Virginia’s
history means that some schools will lose more than
a quarter of their state funding over the biennium.
The reductions, caused by an unprecedented biennial
budget deficit of more than $5 billion, have sparked
faculty layoffs, hiring freezes, fewer courses, larger
classes and increased tuition.
The
budget crunch comes when growing enrollments threaten
to outstrip the capacity of public colleges and universities.
And if that occurs, some fear it will put at risk the
state’s quality system of higher education and
the competitive edge it brings over many other states.
In recent years, Virginia’s attractiveness as a
business location has been enhanced by the growing reputations
of its flagship universities, particularly the University
of Virginia, Virginia Tech and William & Mary, that
rank among the best in the U.S.
Moreover,
the state is blessed with a strong community college
system that last year worked with 4,000 businesses to
provide work-force training. Relatively low tuitions
have been a big draw for businesses considering locating
in the state. “The diversity, accessibility, affordability
and quality of its four-year institutions set Virginia
apart from most of the states if not all of the states
around us,” says Hugh Keogh, president of the Virginia
Chamber of Commerce. “So any deterioration of that
asset can be serious to the competitive profile in Virginia,
especially for businesses outside of the state looking
at new locations.”
Though
painful, the cuts may spur the kind of soul searching
and re-evaluation that Gov. Mark R. Warner says must
be done as part of his ambitious plan to overhaul state
government and restore it to fiscal soundness. Virginia
may be forced to consider new models for funding higher
education if it wants to preserve its reputation for
quality schools at an affordable price. In an interview
with Virginia Business (page 18), Warner told of his
vision of leaner and more efficient colleges that move
away from trying to be all things to all people. “We
have the value of a decentralized higher system in Virginia
that has allowed us to create a series of world-class
universities. Where some states have a single, flagship
university, we have a Tech, a U.Va., a William and Mary
and rising universities like GMU and JMU... That’s
the upside. The downside is every college and university
wants to have duplicative, degree-granting programs,
and I’m not sure we can still afford that,”
says Warner, who predicts no more major cuts for higher
education.
Not
all state officials agree on how bad things are in higher
education, however. “Are they laying off their
top professors, the people with the highest skills?
I don’t think so,” says Mark R. Kilduff, executive
director of the Virginia Economic Development Partnership.
Others point out that college administrators are pros
at spinning tales of woe and beating drums for more
funding.
At
the same time, the state can’t afford to let higher
education whither away. It is too crucial to Virginia’s
economic development. “The stock market may be
down, but the move towards a knowledge-based economy
has not slowed down one bit,” says Warner. To attract
new businesses for economic growth, “... You’ve
got to have a well-educated quality work force and a
quality of life the community offers. These are the
two most essential criteria.” Warner looks to the
schools to provide the intellectual capital that will
keep Virginia’s economic motor running. “They’re
the factories of the 21st century, because they create
the ideas that are going to create the new companies.”
Doing
so will be a tough pull, university presidents say,
because the budget cuts follow years of chronic underfunding.
A legislative study in 2000 found that Virginia funding
for higher education, compared to levels for peer institutions
in other states and other funding guidelines, trailed
by more than $200 million. “We’re getting
less today per student than we were in 1991,” laments
Virginia Tech President Charles W. Steger. Even before
the budget cuts, Tech carried a shortfall of more than
$20 million, according to the state’s study.
Until
very recently, colleges couldn’t make up the deficit
by raising tuition. As part of the state’s policy
to limit increases for in-state undergraduates, rates
were frozen for six years. The General Assembly lifted
the freeze last year to allow colleges to recoup some
of their losses after the budget cuts. So far, many
schools have raised tuition twice — for an average
of about 10 percent last year. Another hike is expected
in 2003. “Raising tuitions is what they should
do. Virginia tuitions are very low and raising them
only brings them up to the level they were 10 years
ago,” notes Del. Vincent F. Callahan, R-Fairfax
County, chairman of the House Appropriations Committee.
Besides, he adds, many other states are facing budget
shortfalls and their colleges are raising tuitions,
too, so Virginia should have no problem remaining competitive.
In fact, even with the raises, Virginia’s tuitions
remain below that of many peer institutions.
Tuition
increases alone, though, won’t offset all the pain,
say college presidents. U. Va. President John T. Casteen
III told alumni that by the end of the biennium, the
school would lose nearly $98 million. During 2002-03,
a reduced state appropriation of $125.9 million represents
a mere 9 percent of total university revenues. “So
far as I know, no state has ever furnished such a small
proportion of its flagship university’s budget
as will remain after these cuts…and still claimed
that university as a public institution,” Casteen
bemoaned to grads last fall.
Amidst
the budget gloom, there was a bright spot: In November,
voters approved $900 million in bonds for renovations
and capital improvements at all of the public colleges,
including new laboratories, performing arts centers
and academic buildings. Plus, the bonds are expected
to help the state’s sluggish economy, creating
$1.5 billion in economic activity in the next few years
and creating 14,000 new jobs. Had the referendum not
passed, Virginia probably wouldn’t be able to handle
the extra 32,000 undergraduate students expected to
enroll by 2008.
Steger
and others fear tuition increases are only Band-Aids
for what is a potentially mortal wound caused by the
deep budget cuts. The loss for large research universities
like Tech, GMU, U. Va., and VCU, is something more intangible
than mere dollars and cents — it’s the loss
of missed opportunities. College officials are striving
to establish first-class programs and alliances with
businesses to give students real-world experience. Budget
cuts can dash years of effort. Tech faculty, for example,
has been working with business executives, some from
foreign countries, on a project that would plant high-speed
digital cable along the length of U.S. 58. The idea
is to give economically depressed parts of the state
a better chance to lure information technology firms.
But budget cuts have stalled the project.
As
Virginia’s state funding drops, college presidents
worry about other schools picking off young, rising
faculty stars. According to the State Council of Higher
Education, Virginia would need to invest $147 million
into faculty salaries during 2002-04 — based on
average annual pay raises of 5.9 percent — to restore
the state to a 60th percentile ranking for national
peer salaries. That’s where Virginia stood at the
end of fiscal 2000. If nothing is done due to the funds
shortage, Virginia will rank in the 23rd percentile
for the 2002-04 biennium. “I lose faculty these
days to institutions who couldn’t have competed
against us in their wildest dreams 10 years ago,”
says Casteen. Since October 2001, in just one of U.Va.’s
10 schools — the college of arts and sciences —
10 faculty members left for salary reasons. They received
pay increases averaging 35 percent and other incentives,
including as much as $500,000 to start new labs.
Another
concern is the lack of a clear policy on supporting
public colleges hurt by years of underfunding and reduced
reserves to maintain buildings — more than half
of which are 50 years old. Casteen, a former state secretary
of education, also refers to a “crisis in terms
of public policy” since there is no coherent alliance
among the state, the schools and economic development
authorities to set goals and find ways to fund them.
Says Casteen: “Most other states are light years
ahead of us in terms of using the budget to define its
public purpose.”
Meanwhile,
Virginia’s standing is slipping compared to other
states. Studies show that through much of the 1990s,
Virginia ranked near the top of the pack in national
rankings of states based on appropriations of state
funds for higher education. By 2002, Virginia had slid
more than halfway down the chart to 28th place, down
from 12th place two years before. Meanwhile, neighboring
Maryland made a much stronger showing, ranking sixth
in fiscal 2002 and first in 2000, up from sixth 10 years
ago. North Carolina also outperformed Virginia in the
rankings based on operating expenses for higher education
per capita, coming in at No. 6 to Virginia’s 23rd
place in 2002. Both Maryland and North Carolina have
recently passed major bond issues to invest in campus
buildings.
The
Old Dominion’s sinking position means Virginia
Tech will have a tougher time with its ambitious plan
to break into the Top 30 research schools in the U.S.
Some professors are already starting to flee. A young
faculty researcher in life sciences left the Blacksburg
university two months ago for a major institution in
the Midwest, taking with him a $1.2 million research
grant, two postdoctoral fellows and two graduate students.
The competing institution offered the researcher a $25,000
salary increase and is investing in a new research lab.
“They had the potential to bring in millions of
dollars in their career if they had stayed here,”
says Ralph Byers, Tech’s director of governmental
relations.
Warner
told Virginia Business that he agrees with many of the
criticisms made by college presidents. “The state
built a business plan that was a fiscal house of cards.
They said we can go out and cut taxes and increase spending
and assume that the revenue bubble of the late ’90s
was going to last forever. It was a sham. And higher
ed didn’t get the kind of attention and sustainable
needs, if we’re going to maintain world-class institutions,”
he says. And while passage of the bond referendum, which
Warner strongly supported, was encouraging “...The
bad news is that we don’t have the money to get
the equipment or hire the professors to go into the
buildings.”
Meanwhile
private schools are trying to grab students at public
colleges where programs have been cut. For example,
shortly after Christopher Newport University in Newport
News announced the elimination of its nursing, education
and other programs, nearby Virginia Wesleyan College
— a small private liberal arts college in Virginia
Beach — advertised in CNU’s student newspaper
saying, “We’ve got room for you!”
Even
without prompting from private schools, public colleges
are scrambling to function in more self-sufficient ways.
The slow economy has forced them to raise more money
on their own through endowments and capital campaigns.
U.Va.’s loyal graduates have helped build that
school’s endowment to $1.7 billion. Most of the
money is used to endow specific programs, although a
portion of it is unrestricted and can be used for operational
expenses. State law prohibits endowment money from being
considered when it allocates money for public colleges.
Business
can help, too. For example, when GMU opened a new Prince
William County campus several years ago, it wanted to
excel in laboratory sciences. So it sought partnership
arrangements by offering research space to companies
like the American Culture Type Collection, a tenant
that helped draw other experts such as former Soviet
biological warrior Ken Alibek. The upshot is that today
GMU claims a Center for Biodefense on its campus.
Now,
the school is working on academic partnerships that
will make sense for pharmaceutical giant Eli Lilly.
It announced last spring that it would build a $425
million, 600,000-square-foot insulin-manufacturing center
across from the school’s campus that will provide
700 high-tech jobs. GMU officials, including President
Alan Merten, were involved early on with state and county
economic development teams. They met with Lilly officials
to discuss plans for training students in the life sciences,
providing a labor pipeline for Lilly’s new plant
and helping persuade Lilly to locate in Virginia instead
of North or South Carolina. “We’ll be working
with them and partnering with other schools to provide
the trained work force,” says Larry Czarda, vice
president of operations for the Prince William campus.
Czarda
wonders that if another Eli Lilly comes along, the dearth
of state funding might make new partnerships difficult.
Even so, grabbing that plum is touted as an example
of how colleges and public officials can snag new businesses
and jobs. Some regard it as testimony that Virginia’s
quality higher education isn’t in as much danger
as school administrators claim. “Do they (the cuts)
make it impossible to deliver the essential things that
attract business? I don’t think so,” says
Kilduff of the state economic development partnership.
“I refuse to accept that because we have a budget
crisis that the quality of education in Virginia is
just going to fall to nothing. I don’t think the
presidents and the board of visitors will allow that
to happen.” As for the public hand-wringing by
college presidents over budget woes, that’s to
be expected. “They’re presenting their case.
That’s what they ought to be doing. They want more
students,” he adds.
Also
skeptical of the funding crisis impact on higher education
is Secretary of Commerce and Trade Michael Schewel.
“There’s a point — depending on the cuts
— where the valuable functions they perform could
be affected and could affect Virginia business and the
economy. But I don’t think we’re there yet.
... The fact that we’ve been graduating thousands
of very well-trained graduates over the last 10 years
... isn’t going to just go away because we have
budget cuts for a year or two.” Besides, Schewel
adds, the benefits that come to a state from higher
education — the research and spin-off companies
and institutes — tend to accrue over many years.
Since
money could be tight for a while, Warner insists that
the state needs a serious debate over the kind of higher
education system it wants and how to sustain it. “We
need to decide whether we can have colleges and universities
continue to turn out Nobel prize winners and whether
we’re willing to invest in that or whether we want
to have an ‘also-ran’ university system.”
Warner fully expects the colleges to help stretch state
dollars by collaborating more in such areas as technology,
procurement and attaining federal grants.
The community college system, which serves 350,000 students
and provides most of the state’s work-force training,
is already looking for ways to trim costs through collaboration.
The system provides training in such areas as nursing,
information technology, chemical technicians and the
building trades. In metropolitan Richmond, officials
at John Tyler and J. Sargeant Reynolds community colleges
are looking to maximize resources and lower costs by
doing joint advertising, marketing and staffing. “You’ll
see more of these activities across the board in community
colleges,” says Glenn DuBois, chancellor of the
state’s system.
Meanwhile,
ODU’s President Roseann Runte is sick over having
to dismantle the school’s continuing education
program — cutting it off from state funds and making
it totally self sufficient. Yet, she says budget cuts
forced her to make a difficult decision: preserve core
academic programs that took years to build or reduce
community outreach programs that serve hundreds of people
of all ages in the Norfolk community. In the future,
unless there’s a big run up in the economy or Virginia
comes up with a way to inject new funds into its schools,
these are the tough trade offs college officials must
weigh. It’s not fun and it’s not easy. “You
can’t take blood from an anemic person and expect
them to carry on as usual,” says Runte.
Anemic
or robust? That’s the riddle plaguing Virginia
schools as they head into the 21st century. Students
such as Sarah Breedlove, a sophomore at Radford University,
want to be able to graduate on time. Last spring, Breedlove
couldn’t pick up required English or geology courses,
because course offerings were fewer due to the cuts.
She did pick up a course in her major. “The uncertainty
is what gets to you,” she says. “What will
they cut next? You just don’t know.” At nearby
Virginia Tech, Sterling Daniel is one of the lucky ones.
Even though the cuts prevented him from picking up specialty
courses in his major, he’s still on track for the
economics degree he’ll receive this spring.
The
budget cuts troubled him so deeply that Daniel, president
of Tech’s student government association, helped
organize a major protest among Tech students. More than
2,000 of them lined up in formation for a photograph
on the school’s drill field. The message spelled
out by the human chain said, “Cut this?” The
question was in response to Warner’s “Ask
Why” public relations program to spur greater efficiency
among state employees. Basically, the young people were
asking why Warner would cut funds to their school, shortchanging
their futures. It’s a question that’s going
to nag the governor, state officials and legislators
for long time.
Return
to Virginia Business - January 2003
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