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WHEN ENROLLMENT hit a record high of nearly 29,000 students this fall at Portland State, the University needed more faculty, classes, and support services to educate them all.

No problem, right? Just use tuition to pay for it.

Not so fast.

State lawmakers are allowed to take the University’s tuition revenue and give it to prisons and other state agencies instead. That’s exactly what happened two years ago, when the Oregon Legislature swept about $33 million in tuition and other funds from the Oregon University System to help close a state budget gap.

The risk of such an unexpected state sweep of University money is one of the many drawbacks of PSU’s status as a state agency. As state resources dwindle and demand for higher education increases, leaders of Oregon’s public universities, including PSU President Wim Wiewel, say it is time for change.

“To have our students—who themselves are hardly wealthy—be the ones who wind up giving the state subsidies, that is ridiculous and unfair,” Wiewel says. “We need to keep our students’ tuition money at PSU.”

All seven presidents of Oregon’s public universities have joined the Oregon State Board of Higher Education this year in pushing state lawmakers to restructure the university system, giving campuses more control over their finances and their future.

University leaders say the change would enable them to stretch tuition revenue, control costs, and better educate more students at a critical time of economic uncertainty and global competition.

OVER THE PAST two decades, the state has steadily shifted more responsibility for funding its universities from the state to students and their families in the form of tuition and fees. At PSU, the state’s share of total support dropped from 35 percent in 1994-95 to 16 percent in 2009-10. In the same time period, tuition and mandatory fees rose from 31 percent to 39 percent of total revenue.

As a result, Oregon is among the states spending the least amount per student for higher education (44th in the nation in 2008) and among those with the highest level of state control.

“We’re saying, ‘Things are pretty bad, so let’s try something different,’” says George Pernsteiner, chancellor of the Oregon University System (OUS). “How can we most effectively muster the resources we do have to be effective and raise the education level in Oregon?”

One answer, Pernsteiner says, is to free the university system from its status as a state agency and the rules that come with it.

Under the proposal, OUS would receive state funding in the same way as community colleges and public schools: in a lump sum contingent on annual performance targets and progress reports to the Legislature—oversight that presently is not required of the university system.

The new structure would hold the universities more accountable for how well they educate students, Pernsteiner says. But some student leaders have reservations about the proposed change.

Katie Markey, president of the Associated Students of PSU, says students understand the need for restructuring, but they are worried the change will result in big tuition hikes.

“When students are paying most of the cost, they should have a say in how much they pay,” Markey says.

Oregon University System officials understand those concerns. Pernsteiner says students would have more input on tuition rates under the new proposal, because they would serve on new campus-level review committees. The State Board of Higher Education would continue to set tuition, and the Legislature could continue to ask for limits.

Still, students want more details about how the system will work, Markey says.

“They talk about access and affordability, but they don’t define it,” she says. “You need to make sure that everyone in Oregon can get a college education, and that’s our biggest focus.”

AFFORDABILITY will continue to be key at PSU, Wiewel says, because the University aims to serve a broad range of Oregonians. Tuition rates are based on the level of state subsidy, he says. When state funding for higher education falls, tuition rises.

“You’ve got to pay for higher education through taxes or you wind up paying for it with tuition,” Wiewel says. “I personally prefer to have a model where the public sector supports education fully, and tuition charges are very low. But that is not the world we live in.

“In the end, we need to be able to ensure that we deliver not just access but also quality, because access to low quality education is unacceptable.”

Pernsteiner says the State Board of Higher Education doesn’t want to repeat the mistakes of the early 1990s, when tuition rose by nearly 41 percent in one year and enrollment fell by nearly 6,000 students from 1988 to 1994.

“We basically shut the door on a whole generation of Oregonians,” he says. “They are now in our adult population, and they are less educated than their parents and less educated than is necessary in a global economy.”

In a separate proposal, the University of Oregon plans to ask the Legislature to issue $800 million in bonds, matched by private donations, to create a $1.6 billion endowment to support education at the school.

The State Board of Higher Education voted in December to oppose UO’s financing proposal, saying it shortchanges Oregon’s six other public universities.

IF THE RESTRUCTURING proposal is approved, Wiewel says, students and faculty may not notice any difference initially. Over time, the University will become more nimble and entrepreneurial, saving money and generating more income for educational programs.

For example, the proposal would remove several layers of state review and approval needed to buy a building, streamlining the process and giving PSU a stronger position in price negotiations. Universities also might be able to buy health care benefits at a lower cost than the state. (Employee pension plans would remain with the state.)

Restructuring the university system would not solve the bigger funding problem for higher education in Oregon, Wiewel says, but it is a “quantum leap” forward.

“While this will reduce some of the costs, it’s not going to suddenly make us rich by any stretch,” he says. “At the very least, let’s get rid of unnecessary layers of oversight and bureaucracy.”

Suzanne Pardington is a staff writer in the PSU Office of University Communication.