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Questions and Answers

Budget

What is the size of the University's budget?

There are two basic ways to view the University's finances. One is to look at all University divisions, including the Medical Center's hospitals and clinics and the University's College at Wise. The other is to focus only on the Academic Division, which encompasses all schools and operations but excludes the Medical Center and U.Va.'s College at Wise. For most people, the Academic Division represents the University as they know it. For 2012-13, the University's budget as a whole is $2.6 billion, while the Academic Division's budget is $1.4 billion.

What are the University's main sources of income?

The University depends on several sources of funds for its operations.

For the University as a whole (including the College at Wise and the Medical Center), the sources of funds for the $2.6 billion, 2012-13 budget are:

Patient revenues
45.3%
Tuition and fees, net of financial aid
17.0%
Research grants and cost recoveries
11.7%
Gifts and endowment support
10.1%
Sales and services and other
8.5%
State appropriation
5.8%
Operating cash balances
1.6%

For the Academic Division alone (excluding the College at Wise and the Medical Center), the sources of funds for the $1.4 billion, 2012-13 budget are:

Tuition and fees
32.4%
Research grants and cost recoveries
22.6%
Gifts and endowment support
19.4%
Sales and services and other
12.4%
State appropriation
10.2%
Operating cash balances
3.0%

What are the University's main expenses?

For the Academic Division, 60.5% of the total operating budget will be spent on personal services, which includes the compensation (including fringe benefits) of faculty, staff, wage employees, and graduate teaching and research assistants:

Faculty compensation
30.6%
Staff compensation
23.6%
Wage employees
4.3%
Graduate teaching and research assistants
2.0%

When financial aid and auxiliary operations are excluded, 71.8% of educational expenditures are for the compensation (including fringe benefits) of these individuals.

The Academic Division's projected operating expenses by activity include:

Direct instruction
26.5%
Research and public service
22.1%
Auxiliary/self-supporting operations
15.8%
Scholarships and fellowships
7.3%
Academic support
9.9%
Physical plant maintenance and operation
9.4%
General administration
5.8%
Student services
3.3%

What level of support do state taxpayers provide the University of Virginia?

Since the early 1990s, economic conditions in the Commonwealth of Virginia have resulted in reduced revenue available for state supported programs. Medicaid, mental health, corrections, and K-12 education funding needs have often taken precedence over financial support for higher education, resulting in a series of budget reductions to public institutions of higher education over the last 20 years and a shift in responsibility for paying for higher education from taxpayers to students. Not only has taxpayer support for the University declined, but other revenue sources contributing to the University budget have risen, resulting in a smaller share of the budget supported by the state.

For the University as a whole (including the College at Wise and the Medical Center), the state is slated to contribute 5.8%, or $154.4 million, of the University's $2.6 billion, 2012-13 budget.

For the Academic Division alone (excluding the College at Wise and the Medical Center), the state is slated to contribute 10.2%, or $139.5 million, of the division's $1.36 billion, 2012-13 budget.

What are the trends of state support for the University?

In 2012-13, the University expects to receive an increase of $8 million in the budgeted state general fund appropriation for the Academic Division compared to the revised 2011-12 amount. This is the first year in six years that the University has not faced state budget reductions. The previous five years resulted in a cumulative reduction in state taxpayer support of $51.5 million, or 32% between 2007-08 and 2011-12.

At the same time, the University is being asked to boost its enrollment to support the goals of the Virginia Higher Education Opportunity Act of 2011, which calls for an additional 100,000 degrees to be conferred statewide over the next 15 years. Accordingly, the Board of Visitors has approved an increase in enrollment of 1,673 undergraduate students and 99 graduate students between fall 2011 and fall 2018. In fall 2011, the University enrolled an on-Grounds first-year class that was larger than the previous year's, while maintaining the existing ratio of 69% in-state to 31% out-of-state students. To support a larger enrollment, the 2012-13 budget includes $1.8 million from incremental gross tuition revenues related to the new students and $691,000 in state support from the 2012 Virginia General Assembly.

How does U.Va. compare with its public peers in state funding per student?

The University receives far less state funding per student than most of its public peers. In 2011–12, the Commonwealth of Virginia's General Fund appropriation per in-state full-time equivalent (FTE) student at U.Va. was $8,566, well below that of peer institutions such as the University of North Carolina at Chapel Hill, $22,105; the University of Maryland, $17,494; and the University of Michigan, $13,024. View the State Funding Comparison Chart.

Endowment

What is the endowment? How is spending of the endowment determined?

The endowment consists of funds held in trust for the University. These funds come from private gifts to the University, and to its schools, units and programs, as well as accrued income earned through investing the funds. The endowment comprises more than 1,800 University-affiliated accounts that support a variety of programs. Most of the University's endowment is held in the Long Term Investment Pool managed by the University of Virginia Investment Management Company (UVIMCO), an affiliated foundation.

By its nature, an endowment is established to preserve the body or principal of its funds over time, with only a small percentage of its assets spent annually. The Board of Visitors determines the level of endowment spending in any given year, ranging between 4% and 6% of assets. The University's endowment spending policy ties annual increases to inflation, as calculated by the Higher Education Price Index. The current inflation factor is 3.8%.

What is the difference between restricted/unrestricted funding provided by the endowment? How much of the endowment income is available to spend in a given year?

Donors may designate, or restrict, the use of the income from their gift for a specific purpose, such as a professorship or a scholarship. These restrictions are established through legal contracts donors sign with the University and are enforceable through trust law. Donors also may opt not to restrict their gifts to the University. In the case of such unrestricted gifts, income from these funds is available to spend on needs as they arise. Increasingly, gifts to the University (and to other institutions of higher education) are restricted by donors who want to determine exactly how their gifts are used.

The endowment distribution in the fiscal year 2011-12 totaled $134.9 million. The estimated distribution for fiscal year 2012-13 is about $138.9 million. About 32% is not donor-restricted, but the unrestricted endowment income is currently committed to Board of Visitors' priorities such as AccessUVa, the Commission on the Future of the University initiatives, enhancing faculty salaries, improving the residential experience of students, and graduate fellowships. Additionally, the unrestricted endowment income is used to fund investments such as fundraising.

Why can't the endowment be spent to address salaries for faculty and staff, including our lowest-paid employees or to address other pressing needs?

As mentioned above, the endowment principal itself cannot be spent, only the 4% to 6% annual distribution is available for spending. And 70% of that distribution may be spent only on the purposes designated by the donors when they made their gifts. The income from the unrestricted endowment could legally be spent on wages for staff employees, however, it is currently committed to other purposes.

How does the University balance its budget?

The Constitution requires that the Commonwealth of Virginia have a balanced budget and as a state agency the University must also balance its budget every year. To do this requires a combination of increasing total resources and managing as efficient an operation as possible. The University strives to increase external revenues such as private support, research funding, public-private partnerships, new educational programs, and commercialization of laboratory discoveries. Tuition also plays a major role in addressing certain cost increases. The University has managed costs by reducing employment through attrition; slightly increasing class sizes and reducing numbers of sections; utilizing technology for library collections, communications, and other activities; removing public computer labs and lengthening the replacement cycle for hardware; emphasizing recycling and reducing energy and water usage; and reducing travel, employee development, and supplies expenditures.

What role does philanthropy play in the finances of U.Va.?

Private philanthropy has always provided crucial support for the University of Virginia. When the Virginia General Assembly granted the charter for the University in 1819, it appropriated only $15,000 for the fledgling institution. To ensure the success of his endeavor, University founder Thomas Jefferson raised an additional $40,000 from friends and fellow supporters of higher education. Now, as in Jefferson's day, the University depends on diverse sources of funding, including private gifts. In recent decades, with the decline in state support, private support has become increasingly important.

Currently, funding from private sources — through gifts and endowment income — supplies 10.1% of the operating funding for the University of Virginia as a whole, while state tax revenues provide only 5.8%. Private philanthropy includes annual gifts from alumni, parents and friends; realized bequests and other planned gifts; contributions for building and renovation projects; and gifts to endowed funds, including those held by the University and those held on behalf of the University by related foundations.

The University is currently in the final stages of a campaign to raise $3 billion in private funds for needed buildings, research programs and scholarships, among other purposes. View the State Support vs. Gifts & Endowment Support Comparison Chart.

Tuition

How is tuition determined?

Tuition provides a major revenue source to fund the basic teaching mission of the University, which comprises about a third of the Academic Division budget. The University determines its strategic priorities for the coming year; considers general cost increases like utilities and contractual obligations; and evaluates the various revenue sources available to meet these needs.  Before tuition rates are recommended to the Board of Visitors the University assesses its competitive position among peers and considers funding requirements passed to the institution by the state, such as the University’s share of state authorized salary increases or higher costs for retirement contributions. The impact tuition rates have on student enrollment decisions, student retention, and financial aid are also carefully considered.

Why is tuition going up?

Tuition prices have increased for several basic reasons.

First, the Commonwealth of Virginia (along with other states) continues to shift the responsibility for paying for higher education from the general tax-paying public (by reducing state funding) to University students and their families.

Second, the cost to educate a student continues to rise. University employees have not seen a comprehensive salary increase since 2007 while the cost of health and retirement benefits continues to grow. Meanwhile, as faculty retire and as the student enrollment expands, the cost of hiring new faculty is rising. The annual utility bill for the educational buildings will increase by $1 million to $3 million each year. The University is constantly re-investing in older buildings to chip away at the deferred maintenance backlog. And, as new buildings are constructed to meet enrollment growth, they will need utilities, custodial, and maintenance services.

What is AccessUVA? How much financial aid do U.Va. students receive? Where does it come from?

AccessUVa is the University of Virginia's undergraduate financial aid program, which is designed to keep higher education affordable for all admitted students, regardless of their economic circumstances. AccessUVa offers loan-free packages for low-income students, caps on need-based loans for all other students, and a commitment to meet 100% of demonstrated need for every student. The program not only keeps a U.Va. education affordable for the lowest-income students, but also addresses the concerns of middle-income families who are being squeezed by the rising cost of tuition. By limiting debt - or eliminating it altogether, in the case of students with the most need - AccessUVa offers assurances to prospective students that if they make the grade, they can afford to attend the University.

Since the University of Virginia unveiled AccessUVa in 2003-04, it has seen a more economically diverse student body enroll. It also has seen the cost of the program increase substantially more than expected because of higher tuition prices and a growing population of students qualifying for aid. Total need-based aid to U.Va. undergraduates — from University sources as well as from state, federal and other sources — jumped from $37 million in 2003-04 to $92.0 million in the 2012-13 academic year. While some of those funds come from federal, state and other outside sources, the share paid by University funds has grown much faster than original assumptions.

AccessUVA Statistics for 2012-13
Total number of U.Va. undergraduates awarded financial aid through AccessUVa
4,836
Percentage of U.Va. undergraduates awarded financial aid through AccessUVa
33.0%
Percent low-income students eligible for full grant package
8.9%
Percent middle-income
24.1%
Total number of in-state undergrads awarded financial aid through AccessUVA
3,442
Percentage of in-state undergrads awarded financial aid through AccessUVA
33.6%
Total number of out-of-state undergrads awarded financial aid through AccessUVA
1,394
Percentage of out-of-state undergrads awarded financial aid through AccessUVA
30.8%
Total dollar amount of AccessUVA funding given out in 2011-12, all sources
$92.0 million

(SOURCE: Office of Institutional Assessment and Studies, 2/13)

The Board of Visitors originally designated $16 million for AccessUVa each year, but this year, U.Va. expects to spend $40.2 million in institutional funds for the program. The situation has led the board to review the AccessUVa program with an eye to ensuring its long-term viability.