How to run a university like an enterprise


Just 26 percent of Ohio adult workers hold college degrees, below the national average of 31 percent.

Is too much state regulation hindering efficiency at public universities? Ohio Board of Regents Chancellor Jim Petro thinks so, and he unveiled a plan Aug. 11 that would allow the state’s universities to operate as enterprises, also called charters, as well as set up a sizeable merit scholarship program.

Universities that choose to participate in the Enterprise University Plan would receive more autonomy in funding issues that traditionally require approval from the state controlling board, such as enrollment limits, tuition levels, and property sales.

“They’ve asked for—aggressively—I mean, the universities have said time and again, ‘Get rid of these mandates. They’re really slogging us down, we can’t do the things we want to do, we can’t be enterprise-driven,’” Petro said in a press conference. “So the plan is, we get rid of virtually all the mandates.”

In return for freedom from about 40 mandates, the universities would be expected to function much like a private business and take greater control over their costs.

The act of freeing universities from state mandates alone would allow the schools to cut overhead and become “more lean and nimble in their operations,” Petro said. Universities would also be responsible for cutting costs and generating revenue by making investments.

“The enterprise concept is intend[ed] to drive a much higher rate of commercialization. When we have a product that’s the result of research at the university, we want to be able to commercialize it, generate revenue from it,” Petro said. “It’s going to benefit the inventor and the universities. And when we do that more and more, we will drive down the cost of a university education.”

Under the plan, state funding to the universities would be diverted to a scholarship pool for students who rank in the top 5 percent of their high school class, hold a grade point average of 3.8 or above, achieve high standardized test scores, and enroll at an Ohio public university.

Just 26 percent of Ohio adult workers hold college degrees, below the national average of 31 percent, and Petro said too many top-achieving students leave the state for college.

Petro pointed to Georgia’s controversial HOPE Scholarship Plan as an example of how an expansive merit scholarship program can improve an entire state’s economic competitiveness: Georgia Tech and the University of Georgia are consistently ranked among the top national universities and can attract bright future workers.

An aggressive scholarship program, coupled with Ohio’s push for universities to develop three-year bachelor’s degree programs, could reduce student debt and boost attainment of higher education, he says.

Any of the state’s 14 universities could enter into an agreement with the Board of Regents to reach certain benchmarks and become an “enterprise university.” Universities could attain the more selective “international enterprise” ranking by meeting seven of the following nine benchmarks:

•    Unallocated net assets of 30 percent of total operating expenses
•    Five-year graduation rate of 75 percent
•    Achieve a first- to second-year retention rate of 85 percent
•    Endowment of 30 percent of total operating expenses
•    Research expenditures of $250,000,000 or more
•    STEM degree percentage of 20 percent
•    Affordability measured as a percentage of Consumer Price Index (CPI), with a bonus for institutions that lower tuition
•    Twenty percent of FTEs participating in intern/co-op programs
•    Direct articulation partnership with community colleges
Petro said that right now, only Ohio State University and possibly Miami University and University of Cincinnati qualify for international enterprise status.

According to the Dayton Daily News, officials from Miami, Ohio State, Ohio, and Wright State universities said they need to know more details about what it would mean to become an enterprises institution before deciding to participate in the plan.

It is unclear whether enterprise universities will be subject to the current 3.5 percent tuition cap that lawmakers have set for the next two years. Petro speculates that the caps will remain in place because the General Assembly will be reluctant to give up its power to set tuition caps.

Petro acknowledged that lawmakers will continue to change the plan in the next year, but said he hopes the plan will pass in the Ohio General Assembly by May 1, 2012, and go in effect for fiscal year 2013.

Citing his experience with members of the General Assembly, Petro named state legislators Gerald Stebelton and Peggy Lehner as potential sponsors for the legislation.

Petro first pitched the plan in 2005. After being appointed as Board of Regents Chancellor by Governor John Kasich in February 2011, Petro put his framework into motion and the plan was included in Kasich’s budget proposal in March.

“The theory behind all of this is that as a university has the ability to be entrepreneurial and function more as an enterprise and less as a government-sponsored institute, then they will be in a position to control the costs more effectively, and they’ll have ways of generating revenue because of their own engagement in commerce,” Petro said.

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