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Meeting Information

FINANCE COMMITTEE

Friday, April 14, 2000

9:45 - 11:00 a.m.

East Oval Room, The Rotunda

AGENDA

I. CONSENT AGENDA (Mr. Sandridge)
A. Faculty and Staff Housing Rates, 2000-2001
  1. University of Virginia
  2. University of Virginia's College at Wise

B. Delegation of Authority to Amend Faculty and Medical Center Retirement Plans

II. ACTION ITEMS (Mr. Sandridge)

A. Tuition and Required Fees, Academic Year (2000-2001) and Summer Session (2001) University of Virginia

  1. University of Virginia's College at Wise
  2. Fiscal Impact Statement

B. Contract Rates for Dining Services, 2000-2001

  1. University of Virginia
  2. University of Virginia's College at Wise

C. Salary Increases and Reserve Requirements for Medical Center Employees

  • Fiscal Impact Statement

III. REPORTS BY THE EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER (Mr. Sandridge)

A. Endowment Report

  1. Market Value and Performance as of March 31, 2000 (Mr. Sandridge to introduce Ms. Handy; Ms. Alice W. Handy to report)
  2. Report on Actions of Investment Management Company, March 22, 2000 (Mr. William H. Goodwin, Jr. to report)

B. 2000 General Assembly Session

(Mr. Sandridge to introduce Ms. Sheehy; Ms. Colette Sheehy to report)

C. Miscellaneous Financial Reports

  1. Academic Division Accounts and Loans Receivable
  2. Capital Campaign Gift Report
  3. Internal Loans to University Departments and Activities
  4. Medical Center Write-Off of Bad Debts and Indigent Care

IV. EXECUTIVE SESSION

  • Discussion or consideration of a matter relating to a gift, as provided for in Section 2.1-344 (A)(8) of the Code of Virginia.
I. A. FACULTY AND STAFF HOUSING RATES, 2000-2001: Approves rates for faculty and staff residences for 2000-2001.

The University operates 111 faculty and staff housing units, including individual houses, cottages, Lawn Pavilions, townhouses and apartments. The University of Virginia's College at Wise operates eleven units, consisting of seven individual houses and four apartments. State policy requires that rents charged by the University for faculty and staff housing reflect the market rate for similarly sized and equipped properties.

University faculty and staff housing rates are proposed to increase by an average of 4.14 percent. The University of Virginia's College at Wise proposes an average increase of 2.9 percent to its 2000-01 faculty and staff housing rates.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

APPROVAL OF PROPOSED INCREASE IN FACULTY AND STAFF HOUSING RATES FOR 2000-01 FOR THE ACADEMIC DIVISION AND THE UNIVERSITY OF VIRGINIA'S COLLEGE AT WISE

RESOLVED that the faculty and staff housing rates be approved as indicated, effective July 1, 2000. The Executive Vice President and Chief Operating Officer is authorized to increase the rates to market level when a property is vacated.

Proposed Faculty and Housing Rates, Page 1

Proposed Faculty and Housing Rates, Page 2

Proposed Faculty and Housing Rates, Page 3

B. DELEGATION OF AUTHORITY TO AMEND FACULTY AND MEDICAL CENTER RETIREMENT PLANS: Delegates to the Executive Vice President and Chief Operating Officer the authority to make certain technical changes to the Faculty and Medical Center Retirement Plans.

Each time that the United States Congress or the General Assembly amends the statutes that authorize and govern the University-sponsored retirement plans, the plans must be amended to reflect the legislated changes. In the past, these amendments have been presented to the Board of Visitors as consent agenda items. This action would eliminate that step and authorize the Executive Vice President and Chief Operating Officer to amend and supplement the Faculty and Medical Center Retirement Plans to accommodate these compliance issues. The Board will continue to review and approve amendments to the plans that are not solely driven by federal or state statutory changes.

ACTION REQUIRED: Approval by the Finance Committee and Board of Visitors

DELEGATION OF AUTHORITY TO AMEND FACULTY AND MEDICAL CENTER RETIREMENT PLANS:

WHEREAS, the Board of Visitors possesses the authority to amend the Defined Contribution Retirement Plans for the General Faculty of the University of Virginia and the University of Virginia Medical Center (the "Plans") under the terms of the Plans; and

WHEREAS, the Board currently reviews and either approves or rejects both policy and technical changes to the Plans pursuant to that authority; and

WHEREAS, the Plans must be amended periodically to comply with changes in the state and federal statutes that authorize them and govern their terms; and

WHEREAS, the Board of Visitors has approved unanimously several such changes as consent agenda items;

RESOLVED, that the Executive Vice President and Chief Operating Officer be authorized to amend and supplement the Plans as necessary to comply with changes in applicable state and federal laws not involving policy discretion; and

RESOLVED FURTHER, that changes to the Plans made by the Executive Vice President and Chief Operating Officer shall be reported to the Finance Committee on an annual basis.

II.A. Tuition and Required Fees, 2000-2001 - Academic Year and 2001 Summer Session

BACKGROUND: At its April meeting, the Board of Visitors sets regular and summer session tuition and fee schedules for the following year for the Academic Division and The University of Virginia's College at Wise. The resolution covers academic year and summer session tuition rates for undergraduate, graduate and first professional students; a required comprehensive fee; continuing education tuition rates; and various school- and activity-specific fees.

The 2000 Appropriations Act continues the prohibition against increases in tuition and required educational and general (E&G) fees for undergraduate Virginians. The 2000 Appropriations Act limits increases in mandatory non-E&G fees to no more than the rate of inflation on non-personal services and no more than the increase in salaries and wages on personal services. Fees required for debt service on auxiliary capital projects are exempt from these limitations. The Board of Visitors retains authority to set graduate, professional and out-of-state undergraduate tuition and fees.

DISCUSSION: In accordance with the tuition policy approved by the 2000 General Assembly, we recommend no increase in tuition and required E&G fees for instate, undergraduate students and a two-percent increase in tuition and required E&G fees for instate graduate students. We propose a five-percent increase in out-of-state tuition and no increase in E&G fees for out-of-state undergraduate and graduate students. The majority of the funds generated by these increases will cover the institution's share of faculty and classified staff salary increases authorized in 2000 by the General Assembly.

In accordance with the resolution passed in March 1999, the tuition increase for instate Law students is limited to the increase in the Consumer Price Index for the most recent twelve-month period. For the twelve-month period ending February 29, 2000, the Consumer Price Index increase was 3.2 percent. Accordingly, we propose a tuition and fee increase of 3.2 percent for resident Law students and 9.1 percent for out-of-state Law students. In October 1999, we described a plan for the Darden School to move to a $5,000 differential between instate and out-of-state students. This tuition proposal adopts this differential for 2000-01 for entering students only.

The proposal includes an overall increase of 6.3 percent for instate students, with a tuition adjustment of $1,206 for students entering the Darden School in the Fall 2000. The proposal also includes an increase of 6.8 percent for out-of-state Darden students. Incremental revenue generated by these tuition increases will be used to meet salary increase requirements, additional financial aid and general inflationary cost increases. These figures, with the exception of the instate Law increase, are consistent with the long-term plan for the financial self-sufficiency of these schools, as reported originally to the Board in November 1995.

Entering and second year instate Medical School students will pay a $2,000 surcharge, and third year Medical School students will continue to pay a $1,000 surcharge. This is a continuation of the surcharge approved by the Board last year that will raise instate tuition to a level comparable to the other state-supported medical schools. For 1999-2000, the Medical College of Virginia charges resident students $11,626 in tuition and fees, compared with the University's $13,154 for first year medical students. Tuition at the Medical College of Hampton Roads is substantially higher at $16,495. The base tuition and fee increase for instate and out-of-state Medical School students are recommended at 4.8 percent and 4.9 percent, respectively.

The University maintains one of the lowest required fee schedules among Virginia colleges and universities. The University proposes a $30 increase, or 2.9 percent, to address commitments and inflationary increases in University Transit, Recreational Facilities, Athletics and Student Health.

When the required fees are combined with tuition and room and board increases, the cost of education for instate students will increase by 2.4 percent in 2000-01 while the cost for out-of-state students will increase by 4.7 percent.

In keeping with state policy, The University of Virginia's College at Wise recommends no increase in tuition and required E&G fees for instate, undergraduate students. Out-of-state tuition and E&G fees are recommended to rise by five percent. This adjustment is required to move the College toward the State's expectation that out-of-state students pay at least 100 percent of the cost of education. Funds generated by these increases will cover the institution's share of salary increases authorized in 2000 and increases in fringe benefit costs. The required auxiliary fees at the College will increase by $138, or 10.9 percent. Of this amount, $100 will be earmarked for debt service on the new student activity center.

For the 2001 summer session, the University recommends no increase for instate students and a five-percent increase for nonresident students. An increase of $11, or 7.2 percent, in the special session comprehensive fee is proposed. The comprehensive fee includes increases for University Transit, Recreational Facilities, Student Health and Arts. The first three of these increases are similar to the inflationary increases recommended for regular session students. The fourth (Arts) is a new addition to the special session comprehensive fee to give special session students access to ART$ which can be used at various exhibits, concerts and performances on grounds, similar to the access available to regular session students.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

RESOLVED FURTHER that the Executive Vice President and Chief Operating Officer is authorized to approve reduced tuition rates for residents of Kentucky who live in counties that are within a 50-mile radius of The University of Virginia's College at Wise and who are enrolled at the College in accordance with Section 23-7.2:1.B of the Code of Virginia.

Proposed Tuition and Required Fees, Page 1

Proposed Tuition and Required Fees, Page 2

Proposed Tuition and Required Fees, Page 3

Proposed Fees Allocation

Proposed Tuition and Required Fees for Wise

UNIVERSITY OF VIRGINIA FISCAL IMPACT STATEMENT

PROJECT/PROPOSED BOARD OF VISITORS ACTION: Increase tuition and Required Fees for the 2000-2001 Academic Year and 2001 Summer Session.

DESCRIPTION: The following general tuition and fee increases have been proposed:

Fiscal Impact of Tuition and Fees Increase

FISCAL IMPACT: For the University of Virginia, the net effect of these changes is nearly $4.3 million of additional tuition and fee revenue over the 1999-2000 projection, a 0.6 percent increase over 1999-2000 total Academic Division budgeted revenue. This analysis assumes that the new rates do not adversely affect admissions yield or student retention. Among seventy peer institutions, here is how the various programs would probably rank in terms of published total costs for tuition and fees:

Comparison of Rankings

CONCLUSION: The University of Virginia should adopt the above schedule of tuition and fee increases. Funds generated by these increases will be used to support salary increases and expenses associated with the implementation of the Enterprise Resource Planning System. Moreover, they are consistent with prior Board decisions and they do not materially alter our pricing competitive position.

RECOMMEND APPROVAL OF BOARD ACTION:

Leonard W. Sandridge

April 15, 2000

II.B. Contract Rates for Dining Services, 2000-01

BACKGROUND: The University provides a variety of contract meal plans for students, ranging from unlimited dining to six meals per semester. The University's pricing policy calls for room and board rates to be lower than the average of the rates charged by all public colleges and universities in Virginia. The University charged $262 less than the statewide average for room and board in 1999-2000. During the same time period, The University of Virginia's College at Wise charged $166 less than the statewide average for room and board. Revenues received from contract dining, retail operations, vending, concessions and catering must cover all operating costs, including food, labor, capital and indirect costs. The University contracts with ARAMARK for dining services. The College at Wise contracts with Chartwells for these services.

DISCUSSION: Proposed University meal plan rate increases for 2000-01 range from 3.6 percent to 4.1 percent, with an average increase of 3.9 percent. No new plans have been added to those presented last year. In 1999-2000, approximately 6,800 University students purchased contract meal plans.

The College at Wise meal plans are proposed to increase by 3.0 percent to cover cost increases passed along by the vendor and renovation costs incurred in the dining hall. The College serves approximately 400 students on contract meal plans.

ACTION REQUIRED: Approval by the Finance Committee and the Board of Visitors

Proposed Contract Rates for Dining Services

II.C. Salary Increases and Reserve Requirements for Medical Center Employees

BACKGROUND: The codified autonomy legislation, which became effective July 1, 1996, authorized the Board of Visitors to establish competitive compensation plans for employees of the University of Virginia Medical Center. Several factors are considered in setting increases including Medical Center revenues, from which staff increases are taken, and the relevant labor market. Based on first quarter 1999 revenues, the Board agreed to a four-percent increase effective January 9, 2000.

DISCUSSION: Health Care Professionals are recruited primarily in the Southeast, Northeast and Midwest with the remaining sections of the country serving as a secondary recruiting market. Other Medical Center employees are usually recruited locally and regionally.

The Health Care industry is experiencing a significant shortage of professional employees, especially nursing personnel. The Advisory Board Company has reported that enrollment in nursing schools dropped from 268,000 in 1995 to 238,000 in 1997. Additionally, 50 percent of nurses are over the age of fifty. These trends combined with growth in inpatient days have created a serious shortage of nurses.

Compensation surveys, turnover analyses and Bureau of Labor Statistics compensations trends are used to consider adjustments to our existing compensation structure. The Medical Center's budget for fiscal year 2001 will include a proposed compensation adjustment, plus market (equity) adjustments to be made throughout the year as required to meet essential needs.

This salary adjustment is necessary if the Medical Center is to retain its exceptional employees and recruit equally competent replacement staff. The compensation survey data supports the adjustment of the salary ranges by four percent at the minimum and six percent at the maximum.

ACTION REQUIRED: Approval by the Finance Committee and report to the Board of Visitors

APPROVAL OF SALARY INCREASES AND RESERVE REQUIREMENTS FOR MEDICAL CENTER EMPLOYEES

WHEREAS, the codified autonomy legislation expanded the Board of Visitors authority to establish compensation plans; and

WHEREAS, compensation surveys and trends data of salaries paid by area, state and regional health care and other employers have been conducted and analyzed; and

WHEREAS, the results of this information support an average salary increase of 4.0 percent, for Medical Center employees, effective fiscal year 2001, with up to an additional 2.0 percent of total fiscal year 2000 salaries to be used to adjust salaries of critical personnel to market rates, if required.

RESOLVED, that the performance-based salary adjustments for Medical Center employees of 4.0 percent, and additional adjustments for critical personnel not to exceed 2.0 percent of total fiscal year 2000 salaries, are approved.

RESOLVED FURTHER, adjustment of salary ranges by 4.0 percent at the minimum to accommodate salary increases is approved.

UNIVERSITY OF VIRGINIA FISCAL IMPACT STATEMENT

PROJECT/PROPOSED BOARD OF VISITORS ACTION: With its fiscal year 2001 operating budget to be put before the Board at the June meeting, the Medical Center proposes to increase salaries for all employees by four percent in fiscal year 2001. Salaries for certain employees may also be increased to adjust for market conditions. This latter expense will be paid from a pool of funds equal to two percent of the current salary expense.

DESCRIPTION: Currently, the Medical Center proposes cost of living and merit salary increases for all employees, the weighted average not to exceed four percent of the current total expense. Moreover, certain employees (defined as critical personnel) will share in a pool of funds generated by an additional two percent increase from fiscal year 2000 salary expenses to adjust their salaries to current market rates.

Fiscal Impact of Med Center Salary Increases

The Medical Center anticipates funding this proposal by increasing revenue through rate increases, expanding existing programs and new ventures and decreasing costs through productivity improvements and reductions in other expenditures. In fiscal year 2001, the Medical Center is committed to achieving a four-percent operating margin.

CONCLUSION: The University of Virginia should adopt the proposed rate and salary increases.

RECOMMEND APPROVAL OF BOARD ACTION:

Leonard W. Sandridge

April 15, 2000

III.A. Endowment Report

ACTION REQUIRED: None

Market Value and Performance as of March 31, 2000

BACKGROUND: The Rector and Visitors of the University, particularly the University of Virginia Investment Management Company (UVIMCO), oversees the major component of the endowment that benefits the University. A report on the endowment is made at each Board of Visitors meeting.

DISCUSSION: The results of the endowment performance as of March 31, 2000, were unavailable at the time of this printing. At the meeting, Ms. Handy will provide a report highlighting March performance. Following is a summary of the performance as of February 29, 2000, the most recent date for which confirmed performance data is available.

Since June 30, 1999, the endowment grew by $394.5 million to $1.65 billion. Most of the growth is attributable to the appreciation of the Pooled Endowment Fund, the main investment pool for the endowment, representing 95 percent of total endowment investments.

Fiscal year-to-date, the Pooled Endowment Fund returned 34.5 percent (versus 6.1 percent on the target benchmark) and 0.4 percent on stocks (as measured by the S&P 500 Index) and -0.2 percent on bonds (as measured by the Merrill Lynch 7-10 Year Government Bond Index).

The Fund is diversified across a broad spectrum of assets, with a targeted allocation of 20 percent to domestic equities, 12.5 percent to international equities, 25 percent to marketable alternatives (hedge funds), 22.5 percent to private equity and real estate, and 20 percent to fixed income.

As has been the case since late last fiscal year, extraordinary returns on the endowment's venture capital portfolio have been the key driver of the strong returns posted thus far. Venture capital is not the only driver, however. Fiscal year-to-date, the international equity portfolio is up 26.6 percent and marketable alternatives are up 20.3 percent. The domestic equity portfolio, which retains a bias toward lower-priced, value stocks, offset the technology focus of the private equity portfolio (down 11.8 percent thus far this fiscal year). Details of the returns on the endowment through February 29 are reported on the following Investment Report.

Actions of the Investment Management Company

BACKGROUND: The University of Virginia Investment Management Company (UVIMCO) meets regularly and reports all of its activities at the following meeting of the Finance Committee.

DISCUSSION: The UVIMCO Board met on March 22, 2000, in Charlottesville. The Board approved an additional investment of $25 million in Sloane Robinson, an international hedge fund based in London, subject to the approval of the international subcommittee; $15 million with Battery Ventures V; $25 million with Spectrum Equity Investors IV; $25 million with Welsh, Carson, Anderson & Stowe and $25 million each with a large cap and small cap growth manager subject to the approval of the domestic equity subcommittee. The Board also approved of Deutsche Bank, AG as the agent for securities lending program.

The Finance Committee of the Board of Visitors met during the same meeting to approve of guidelines on the use of derivatives.

Investment Report, Page 1

Investment Report, Page 2

III.A. 2000 General Assembly Report

BACKGROUND: The General Assembly concluded its 2000 Session on March 11. The Governor has until April 10 to sign or veto legislation, including the Appropriations Act. Ms. Sheehy wrote the Board of Visitors on March 23 to provide a summary of the 2000-02 Educational and General budget for the University and the College at Wise, significant language provisions approved by the Joint Conference Committee of the General Assembly and pertinent legislation that passed the General Assembly.

DISCUSSION: Ms. Sheehy will use this portion of the Finance Committee meeting to inform the Board of any further developments prior to the April 19 veto session.

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