The legislation was passed by the House and Senate unanimously.
"Everyone understood the necessity of this action. By revising some of the legal barriers and obstacles, we have enabled the system to save or earn millions of dollars," said Sen. Andy Dinniman (D., Chester), Senate Education Committee minority chair.
The action allows Pennsylvania to catch up to what many other states allow their universities to do, said Daniel J. Hurley, director of state relations and policy analysis for the American Association of State Colleges and Universities.
"Pennsylvania is one of the most restrictive states there is, and it was putting a stranglehold on the higher education sector," he said. "These reforms were badly needed, were way overdue."
Dinniman had no firm estimates on how much money the changes could bring into the colleges. It all depends on how heavily the changes are used by the schools.
"It could have a very significant impact," said Kenn Marshall, a spokesman for the system. "It really puts us on a level playing field with every other college and university, not just in Pennsylvania but across the country."
The system includes West Chester, Cheyney, Millersville, Slippery Rock, Clarion, East Stroudsburg, Kutztown, Edinboro, Indiana of Pennsylvania, Bloomsburg, California, Lock Haven, Shippensburg, and Mansfield Universities.
Previously, professors were barred from commercializing their research because of a conflict-of-interest clause, Dinniman explained. Pennsylvania State University and the other three state-related schools do not have that restriction, he said.
Faculty union heads are cautiously optimistic. They want the focus to remain on teaching and not to fall too heavily on research.
"It's a tricky balancing act," said Lisa Millhous, president of West Chester's faculty union and a professor of communications studies.
Ken Mash, vice president of the Association of Pennsylvania State College and University Faculties (APSCUF) - the statewide faculty union - also said he hoped there won't be "a mad rush" to create doctoral programs that could drain resources from other areas of the school.
Mash, a political science professor at East Stroudsburg, said that the lifting of restrictions on commercialization probably won't affect a lot of professors.
"I don't see that this is going to open up a floodgate of opportunities," he said.
Dinniman said he expected that with time, more professors would want to take advantage.
"If a professor comes up with a new product, that professor now can commercialize that product and a percentage of that profit goes back to the institution, since it was developed in the labs and facilities of that institution," he said.
Despite some concerns, Millhous and Mash said they welcomed the potential for new dollars in an environment of declining or flat state funding. Under the budget just passed, the universities will receive the same funding in 2012-13 as they did in the most recent year. The year before, their funding was cut 18 percent, which prompted Dinniman and other legislators to start looking for alternative revenue sources.
"It creates some really interesting ways to be innovative," Millhous said.
"As we go through these tough economic times, this is one instance where we laud the chancellor's office for looking for opportunities to be more efficient," said Mash.
Students could benefit if the new revenue lessens the need for tuition increases. The state system on Monday is planning to announce tuition for next year.
Before the new laws, presidents or provosts could not lobby for funds for their colleges' foundations because of a conflict-of-interest clause.
"Now they all can work much more effectively together in raising funds for their institutions," Dinniman said.
Indiana University of Pennsylvania will remain the only school that can offer a doctor of philosophy degree, but the others can now offer doctorates that are "applied" or more practically based rather than theoretical.
West Chester already is prepared to launch one in biostatistics to better serve the area's pharmaceutical industry, Marshall said.
Other colleges are looking at applied doctorates in nursing, he said.
Contact Susan Snyder at 215-854-4693 or firstname.lastname@example.org, or follow on Twitter @ssnyderinq