Associated Press

Gov. Bob McDonnell (at podium) speaks during the first full meeting of the Governor's Commission on Higher Education Reform, Innovation and Investment at the John Tyler Community College in Midlothian on Monday.

RICHMOND -- Gov. Bob McDonnell challenged his commission on higher education reform Monday to "dream big" as it develops a blueprint for increasing degree attainment, expanding research and development partnerships and controlling the escalating cost of attending college in Virginia.

At a time when state funding of colleges has been reduced, the commission has its work cut out for it.

"I look at this as a seminal moment -- not just for financial reasons, but for qualitative reasons," McDonnell said during the first meeting of the Governor's Commission on Higher Education Reform, Innovation and Investment at John Tyler Community College in Midlothian.

"There are trends that will overtake us if we're not on top of it and will put Virginia in a position that we're not going to be able to compete in the global economy," McDonnell said. "I believe if we do the work of this commission right, Virginia will become an international leader in higher education."

The panel is one of three high-profile gubernatorial commissions working on McDonnell's major policy initiatives, and it is wrestling with an issue that has become urgent for many families with college-age children. McDonnell told the panel that he wants to slow the pace of tuition increases.

"Tuition has doubled over the last 10 years," McDonnell said. "I call that an unsustainable level of tuition growth that we cannot continue to pass on to the young people and their families. We cannot have many people in the middle class shut out of the American dream. We cannot have young people coming out of college with five to 10 years of debt."

State funding for public colleges has been on a roller coaster over the past decade and was slashed during two economic downturns. State support for educational and general programs at public colleges has decreased by 7 percent since 2000 while enrollments have increased, according to an analysis by the Department of Planning and Budget. Colleges have increased tuition rates to help cushion the impact of the state cuts.

State funds covered 59 percent of colleges' education and general program costs a decade ago. Now, they cover just 35 percent.

Virginia Tech President Charles Steger, a member of McDonnell's commission, said state colleges have ranked high nationally in performance and efficiency. But, he said, the institutions need long-term policies that are less vulnerable to economic swings and political changes.

College presidents have warned the governor that they could face another critical situation when federal stimulus funds expire next year. Stimulus funds reduced a possible 15 percent budget cut to 4 percent for the current fiscal year.

McDonnell has to balance the funding needs of state colleges against other priorities as Virginia emerges from a deep recession. But he also wants the commission to develop cost-saving reform strategies and propose alternative paths to degree attainment. The commission is planning to come up with initial recommendations in November, and then continue its work into next year.

Among other things, McDonnell said the state should improve the utilization of community colleges and should provide more dual-enrollment opportunities for high school students to reduce operating costs at four-year schools.

Commission Chairman Tom Farrell, the president and chief executive of Richmond-based Dominion Resources, said the state "needs clear policy and incentives -- and disincentives -- to focus resources on the kinds of degrees that command the highest wages and that fill the most pressing economic needs."

McDonnell said he wants to attract more students to science, technology, engineering and math disciplines and to areas such as health care and advanced manufacturing. He also called for more public-private partnerships, work force development and research.

In a presentation to the commission, Steger outlined principles to create a "stable, predictable environment" for colleges, revising financial aid policies to ensure access for middle class families and developing funding policies that take into account the schools' differences in the marketplace.

Steger said the state should establish broad goals for degree production and incentives, but it should avoid micromanaging the colleges.

"If we're not running the enterprise effectively, then I say fire the management," Steger said. "But let us run it, and I promise you we will do it very effectively in the process."