State Strategies to Manage Budget Shortfalls

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Case Study: Higher Education Funding in Virginia

Like many other states, Virginia’s general fund support for higher education has declined while tuition has increased. During the recession years of the early 1990s, general fund support for higher education was reduced by about 20 percent. In FY 1996, nongeneral fund support per full-time equivalent student exceeded general fund support for the first time. According to state officials, tuition increases are not a long-term option for additional revenues if higher education is to remain affordable: Between 1986 and 1994, tuition and fees increased 117 percent, while per capita income grew only 47 percent. Tuition increases were capped by the General Assembly at 3 percent for the FY 1996 budget year. In comparison, the average tuition increase in Virginia was 15.1 percent in FY 1993 and 10.4 percent in FY 1994. {Virginia Senate, Senate Finance Committee, Higher Education (Richmond, 1994): 7.}

With the prospect of large enrollment growth, coupled with constraints on both general funds and tuition, Virginia’s colleges and universities have started to address how to maintain quality yet ensure student access and affordability. The 1994 appropriation act set out the direction and criteria for higher education to develop a plan to effect long-term changes. The objective behind the restructuring is to educate more students at a lower average cost, while improving the quality of education. The proposals for restructuring fall into four broad areas:

Moving students through the system more quickly by managing enrollments.The principal strategy of managing enrollments includes reducing credit hours for most undergraduate degrees from 128 to 120. Also, full semesters would be offered during the summer session and tuition incentives would be provided to students to increase summer enrollments. "Credit for competency" would allow students to "test out" of courses or to otherwise earn academic credits outside the classroom. Plans also include developing articulation agreements with community colleges to allow students to take the first two years of a degree program at lower cost. Part of the strategy would include restructuring tuition to create disincentives for repeating courses or taking unnecessary electives.

Seeking greater productivity from current faculty and resources. This includes establishing minimum expectations for faculty and conducting post-tenure evaluations to ensure teaching effectiveness and appropriate workloads. This broad strategy also includes providing additional capacity through distance learning initiatives, new campuses and higher education centers. Other elements of the plan reallocate faculty resources from graduate to undergraduate programs and eliminate costly graduate programs or low-enrollment baccalaureate programs. Other plans include collaboration among institutions to offer courses that may not have sufficient enrollment on one campus, which allows for team teaching and sharing faculty across departments and curricula.

Changing the definition of how and when learning occurs and improving the quality of instruction. One plan being examined under this strategy is the development of courses that use computer-based discussion and materials rather than the standard lecture format. Faculty would be trained to create course materials for both traditional classes and self-directed courses using computer-assisted instruction and other technologies.

Implementing administrative changes to reduce overhead, generate additional revenues and improve service to the instructional program. This strategy would implement more out-sourcing and privatization of operations to cut costs or generate revenues. Other plans include improving space utilization, sharing space at colleges, streamlining operations and delegating administrative responsibility to academic departments. Another possibility is centralizing functions such as human resources, accounting and procurement.

The broad guidance on restructuring higher education in Virginia provided by the legislature and its subsequent hands-off approach to its implementation is being viewed as a successful approach. The results thus far seem to indicate that colleges and universities can reduce their costs at a time of rising enrollments and tight state budgets.

Return to State Strategies to Manage Budget Shortfalls

Written December 1996, posted January 2003, reviewed December 2003
Email statebudget-info@ncsl.org for more information.
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