A chart yesterday incorrectly labeled Maryland aid to colleges and universities. It should have shown operating budgets of $579.8 million for public institutions, $17.9 million for private; and capital budgets of $53.6 million for public institutions, $5.5 million for private. (Published 2/25/88)

When the Eastman Kodak Co. was thinking of locating its new pharmaceutical division in Maryland, the Baltimore Economic Development Corp. enlisted one person it believed could land a major corporate catch.

Over dinner one night in 1986, Johns Hopkins University President Steven Muller tantalized Kodak executives with the prospect of joint faculty appointments for company scientists, of Hopkins' expertise spurring Kodak's research enterprises, of the cultural advantages to the division's several hundred employees of a world class university in their midst.

In the end, Kodak spurned Baltimore in favor of Philadelphia. But in restrospect, economic corporation President Bernard Berkowitz said recently, "Hopkins was probably the strongest thing we had going for us that differentiated us from other places. It was a very, very big plus."

If Hopkins, as Maryland's third largest private employer, is a major resource for the state, the university's contributions -- and those of Maryland's 13 other private colleges -- have been rewarded handsomely.

Maryland pays its private colleges an unusual direct subsidy, which amounts to nearly $18 million this year. And it is one of a few states that help private colleges pay for new buildings, with grants this year of $5.5 million.

"The state recognizes the importance of its independent institutions and acts accordingly," said Laslo V. Boyd, the education aide to Gov. William Donald Schaefer.

This symbiosis -- a generous stream of income in exchange for the school's tangible and intangible benefits -- has existed for more than a decade, with a peaceful rapport among the private colleges, the public ones and the state's politicians.

But now, the relationship between private colleges and the state government may be altered, as part of a reshuffling of Maryland's higher education system that is Schaefer's top priority for the current 90-day General Assembly session. For the people who run those colleges, the prospect is unsettling.

The changes, embedded in complex legislation that senators and delegates are now wading through, would leave the subsidies intact. But in exchange for that money, the state government would intensify its regulation of private colleges, assuming more control over the schools' "mission" -- that is, their role in the state's higher education scheme -- and even over their curriculum.

"Since it's public money, that's the fair way," said Lt. Gov. Melvin A. Steinberg, whom Schaefer entrusted last year to design the new college system.

Steinberg and other Schaefer administration officials contend that the changes are subtle and would leave the schools plenty of independence. But Maryland private college presidents and national authorities on private higher education say that they could lead to an unusual intrusion by state government into the affairs of private colleges.

"No state agency can or should have the authority to determine our mission," Hopkins' Muller said in a recent interview. "If they can do that, we're not independent anymore."

The issue, certain to surface tomorrow during the first major legislative hearing on the higher education proposal, has emerged here at a time when the role of private higher education is being reexamined around the nation.

Spurring inquiries in a number of states is an increasing blurring of the once-neat distinction between private and public higher education.

Private schools, for instance, attract major government research grants. Hopkins has for several years received more federal contracts than any other university in the nation. And, as the schools' tuition has risen, many states have devoted large portions of their scholarships to students at private colleges, in order to help the schools remain competitive. Maryland gives two-fifths of the $5 million in its main scholarship program to students at independent colleges.

Conversely, public colleges now undertake ambitious fund-raising campaigns that were once the sole province of independent schools. "It all comes down to money," said Michael O'Keefe, president of the Council for the Advancement of Private Higher Education in Washington.

Like many East Coast states, Maryland historically has depended heavily on its private colleges to educate its young people. In the 1970s, Maryland taxpayers began to shoulder part of their expenses, after the private schools persuaded the state's higher education officials that soaring costs and small endowments had left them financially vulnerable.

Currently, the state pays public and private colleges on a per-pupil basis, giving the independent schools 16 percent of whatever aid their public counterparts receive. The method has proven ingenious, virtually eliminating financial squabbling between the two sets of colleges by joining their financial fortunes.

This method also has meant that Maryland subsidizes its private colleges more generously than other states while giving relatively modest aid to its public institutions.

According to federal figures, Maryland ranks fifth in the nation in the percentage of private colleges' income that comes from state and local money. For its public colleges and universities, the state ranks 32nd.

This year, the state's $7.9 million subsidy of Hopkins, which offers courses throughout the state to 13,000 students, is greater than its subsidy of St. Mary's College, a public liberal arts school of 1,300 in Southern Maryland.

Although there is widespread support nationally for the policy of state financial help for private colleges, most states provide that help in the form of scholarships to students, rather than direct grants to schools. Direct aid, such as Maryland provides, "is sensitive, because there is a limited amount of state tax dollars," said Richard Novak, director of state relations for the American Association of State Colleges and Universities.

But in Maryland, there has been little complaint in the past decade, including from the public universities. "I have been very supportive of the formula that exists," said John S. Toll, president of the University of Maryland. "It builds a sense of partnership. The challenge to us now is to get a comparable commitment to public higher education."

Until now, the state has provided money to the private schools with relatively few regulations. But the pending legislation would allow a proposed statewide higher education commission to evaluate private colleges' missions, a power that the current State Board for Higher Education does not have. While "missions" tend to be general statements, they matter deeply to college administrators because they determine the academic directions in which schools grow.

In addition, the state would gain more authority over the schools' curriculums. Currently, before a private college can create an academic program -- such as business or nursing -- it must submit the idea to the higher education board, which gives the school advice on whether to start it.

Under the new method, the commission could penalize a private college financially if it disregarded that advice. For the first time, too, the commission could reassess existing academic programs and eliminate subsidies for ones that it decided had needlessly duplicated similar programs at other colleges nearby.

"It's intrusive as it can be," said Garraway, who emphasized that she nonetheless likes most of the bill.

Hopkins' Muller predicted that the new powers would have little practical effect because private colleges always have heeded the state's advice, for fear of jeopardizing their subsidies. "We're not suicidal," he said.

But some private college administrators disagree.

"For the state providing a modest subsidy," said O'Keefe, of the private higher education council, "the state is taking an awful lot of control."