Two members of a governor-appointed panel proposed yesterday that Virginia's 15 public colleges be given individual contracts tying their state funding to how much they improve graduation rates, faculty productivity and other measures of performance.

The proposal, presented at a meeting in Charlottesville of the Governor's Blue Ribbon Commission on Higher Education, was designed to meet objections to an earlier plan for a funding system that would apply the same performance measures to all state universities.

Yesterday's plan was authored by George Mason University President Alan G. Merten and Minnis Ridenour, Virginia Tech executive vice president and chief financial officer.

In an interview after the meeting, Merten said the new plan would allow each university to either negotiate a six-year contract with the state, with increased funding if performance goals were met, or stick with the current system of hammering out a new deal from the General Assembly every two years. In contrast, the earlier plan, proposed by the State Council of Higher Education, would require every college to switch to a performance-based funding system.

About two dozen of the commission's 39 members were at yesterday's meeting, and several of them spoke favorably of the new proposal, Merten said, adding that many details still need to be worked out.

The commission will present a final report to Gov. James S. Gilmore III (R) by December, and any proposals to change the way colleges are funded would need approval from the legislature.

Del. Vincent F. Callahan Jr. (R-Fairfax), co-chairman of the House Appropriations Committee, said yesterday that he likes the Merten-Ridenour approach because the provisions in the funding contracts would be tailored to individual schools.

"Each of our universities is unique, and I think this way has merit," he said. Callahan and several other key legislators had criticized the state council's proposal, saying it would dilute the important differences between colleges.

William B. Allen, the council's executive director, denied that his agency's plan would work against each school's individual strengths. He said that it would make higher education funding more rational and that the colleges would gain autonomy and have a more predictable source of revenue.

Merten said his proposal gives the colleges more flexibility. Although the schools would not be required to sign the performance contracts, many would choose to do so because the six-year funding cycle would allow for longer-term planning.

He said the negotiations over each university's contract would include legislators and the governor's staff.

In the outline of his proposal that he released yesterday, Merten listed 12 topics that would be addressed in each contract, including restraint in raising tuition and fees.

The performance goals would cover areas such as graduation rates, faculty teaching loads and efficient use of space, he said.

Merten also proposed that the colleges issue a "warranty" that their graduates have proper skills.

Some public school districts have offered warranties on their high school graduates, promising to pay for any remedial education that the students need in college or after employment. Merten said he envisions a different sort of warranty under which a college would agree to assess the skills of a sample of recent graduates, perhaps by giving them an exam, and to make appropriate changes in the training of current and future students.