Virginia Department of the Treasury

1
Virginia Department of the Treasury

• Higher Education Restructuring

Jody M. WagnerState Treasurer
2
Key Provisions of the 2005 Restructured Higher
Education Financial and Administrative Operations
Act

• The 2005 Virginia General Assembly approved the
  enabling legislation for the restructuring of
  public institutions of higher education that
  extends, upon the satisfaction of various
  conditions, various degrees of autonomy to such
  institutions.
• Establishes broad state higher education goals.
• Requires institutions to prepare six-year plans.
• Provides incentive performance benefits,
  including receiving interest on tuition and fees
  deposited into the state treasury and automatic
  reappropriation of unexpended balances.
• Three levels of autonomy are made available with
  the level of autonomy depending on each
  institutions financial strength and ability to
  manage day-to-day operations.
• Basic Delegated Authority (Level I)
• Memorandum of Understanding Authority (Level II)
• Management Agreement Authority (Level III)

3
Broad Higher Education Goals

• In order for institutions to avail themselves of
  such decentralization authority, the state
  established broad state higher education goals
• Provide access to higher education for all
  citizens in accordance with anticipated demand.
• Ensure higher education remains affordable.
• Offer a broad range of programs consistent with
  mission.
• Ensure programs and course offerings maintain
  high academic standards.
• Improve student retention such that students
  progress from initial enrollment to timely
  graduation.
• Develop articulation agreements with uniform
  application to all community colleges for
  admission.
• Contribute to economic development of the
  Commonwealth and the area in which the
  institution is located.

4
Broad Higher Education Goals (continued)

• Increase the level of externally funded research.
• Work with public schools to improve student
  achievement, upgrade knowledge and skills of
  teachers and strengthen leadership skills of
  administrators.
• Prepare a six-year financial plan that addresses
  the institutions academic, enrollment and
  financial plans, including proportion of in-state
  students, and planned tuition increases.
• Conduct business affairs with maximum operational
  efficiency and meet the states financial and
  administrative management standards.

5
Basic Delegated Authority (Level I)

• Once the institutions board of visitors commits
  to the broad state higher education goals,
  delegated authority includes
• Tuition flexibility
• Construction of capital projects without state
  review
• Contracting with the locality for building code
  reviews
• Entering into operating and capital leases
  without state review
• Establishing policies for administrative and
  professional faculty
• Disposing of surplus material locally and
  retaining proceeds
• Acquiring and conveying easements without state
  review
• Selling surplus property less than 5.0 million
• Exemption from procurement reporting
• Exemption from reporting information technology
  projects to central state IT agency

6
Memorandum of Understanding Authority (Level II)

• Memorandums of Understanding (MOU) currently
  exist for several institutions in the areas of
  finance and capital outlay.
• The legislation directs the Governor to recommend
  in the next budget bill potential areas and
  eligibility criteria for additional decentralized
  authority.
• Effective July 1, 2006, any public institution
  may enter an MOU with the appropriate cabinet
  secretary designated by the Governor for
  additional operational authority in areas adopted
  by the General Assembly.
• Demonstrated competency in a specific operational
  area for at least two years is a prerequisite for
  progressing from Level II to Level III.

7
Management Agreement Authority (Level III) -
Eligibility

• Commitment by the institutions board of visitors
  to the broad state higher education goals.
• Agreement to reimburse the state for additional
  costs to provide health or other group insurance
  benefits or risk management program benefits.
• Within the past five years the institution has
  (1) received an unenhanced bond rating of at
  least AA- or the equivalent or (2) the
  institution has participated in finance and
  capital outlay decentralization pilot programs
  and demonstrated management competency in these
  areas and has received additional operational
  authority under a MOU in at least one area and
  has demonstrated management competency in that
  area for at least two years.

8
Management Agreement Authority (Level III) -
Process

• Two-thirds majority of the institutions board
  must vote to move to Level III status and request
  the Governor to consider Level III status.
• The board must adopt policies for each area of
  institutional management authority under a
  Management Agreement.
• The board must give consideration to potential
  future impacts of tuition increases on the
  Virginia College Savings Plan.
• The institution must commit to meet all remaining
  financial need above the level stated in the
  appropriation act the Commonwealths goal.
• Each Agreement must include provision to allow
  the Governor to void the Agreement for
  noncompliance.
• The Governor determines whether the institution
  has the capacity to govern itself under Level III
  status and designates the appropriate cabinet
  secretary to execute the Management Agreement.
• Approval of the Agreement is included in the next
  budget bill and the General Assembly must
  concur.
• The initial Agreement will remain in effect for a
  period of three years and subsequent Agreements
  will be operative for a period of five years,
  based on an initial review by the Joint
  Legislative Audit Review Commission and the
  Auditor of Public Accounts

9
Management Agreement Authority (Level III)
Broad Areas of Authority

• Maintaining independent financial operations and
  systems
• Establishing investment guidelines for investment
  of funds and retaining investment income
• Developing independent employee classification,
  compensation and benefit systems
• Forming entities, joint ventures, and nonprofit
  organizations
• Placing bonds and investments, issuing notes and
  obligations
• Making capital outlay decision
• Procurement of goods and services
• Information technology management
• Human resource management, including compensation
  and benefits