Board approves endowment payout of almost $14 million

Staff Reports

The Board of Visitors' responses to a rosy financial picture contrasted with its scrutiny of some of the University's financial structures at the June 15-17 meeting.

The board approved the distribution of an increase of 30 percent of this year's endowment income to pour up to $13.6 million more into the deans' coffers and authorized up to $3 million to be used for Medical Center personnel initiatives, along with approving a $1.26 billion budget for 2000-01.

Board members also reviewed whether the Health System has enough autonomy from the state to be competitive, and whether the University's foundations are too independent from their administrative oversight.

U.Va. treasurer Alice Handy reported that the endowment stood at $1.67 billion as of May 31. The University typically increases the payout on the endowment by 4 percent annually to keep pace with inflation. This year, despite the volatility of the market, U.Va.'s endowment has performed exceedingly well, increasing in value over 35 percent for the year, allowing an increase of 30 percent in the income distribution, she reported.

"We can sustain this because of the performance of the endowment," Leonard W. Sandridge, executive vice president and chief operating officer, told the board, which approved the $13.6 million distribution.

These funds will go to chaired professorships, scholarships and fellowships and be available for other purposes to be determined by the deans, said Colette Sheehy, vice president for management and budget, in a later interview. "The distribution will also allow us to establish a science and technology venture fund [a recommendation of the Virginia 2020 Science and Technology Commission], contribute to the costs of the Integrated Systems Project and provide start-up funds for new faculty."

Sheehy outlined U.Va.'s 2000-01 operating budget at the meeting. The $1.26 billion bottom line is up 4.8 percent, or $58.1 million, from last fiscal year. Of the total, $752 million goes to the Academic Division, $487.5 million is for the Medical Center, and $18.6 million is earmarked for the College at Wise.

Tuition accounts for 21.1 percent of all Academic Division revenue, Sheehy said. State general funds come to 22.1 percent, and sponsored programs bring in 26.6 percent. Auxiliary enterprise revenues, gifts, endowment income and revenues from other sources make up the remaining 30.2 percent of the revenue budget. Expenditures are projected to increase by 4.2 percent, or $30.5 million, she said.

The Medical Center's budget is proposed to increase by $24.6 million, or 5.3 percent, in 2000-01, and the budget for U.Va.-Wise is expected to increase by $1.2 million, or 7 percent.

The University's overall budget is largely driven by personnel costs, Sandridge told the board. Salaries and state-approved pay raises make up roughly 65 percent of the total operating expenditures in the Academic Division, Sheehy noted.

Medical Center improvements

The Medical Center's operating margin is projected to be 4.9 percent in fiscal year 2000-01, exceeding the board's 4 percent target. The center's operating revenue is projected to be $512.6 million, and its operating expenses $487.5 million, making its projected net income $30.5 million.

William E. "Nick" Carter Jr., senior associate vice president for operations, attributes the operating margins for the current year and next year, which are higher than that of 1999, to better management practices, especially containing costs.

Due to these improvements, the board authorized the Medical Center to establish a $1 million fund for professional development and training of health care providers, and to spend up to $2 million to hire and retain critical personnel. This $2 million will augment the $2 million approved by the board for this purpose in April. Carter said the Medical Center is looking to hire 110 health care professionals as soon as possible, to meet key personnel shortages.

"Recruiting and retaining good people is crucial," said Sandridge, who is very concerned about the nursing shortage and 23 percent turnover rate. The board backed these initiatives "in recognition of the hard work of our employees and our strong financial results," he and Carter wrote in a June 15 memo to all Medical Center staff.

Consultant: public authority status not preferable

The U.Va. Health System would have little to gain by seeking public authority status, a consultant told the Board of Visitors' Health Affairs Committee. Board members and Health System officials had questioned whether such status would enable U.Va. to be more competitive in the health care marketplace.

In 1996, the General Assembly granted the University increased autonomy and flexibility in some administrative and financial areas. Meanwhile in Richmond, the Medical College of Virginia, seeking similar benefits, chose a different route and was granted status as a public authority -- its own legal entity.

In its report, the Richmond firm of Reed, Smith, Hazel and Thomas concluded that neither system has an inherent advantage, and that most of the specific concerns raised by U.Va. officials can be addressed under the current codified autonomy system.

Based upon interviews with dozens of key administrators, the consultants found that many of them could be better informed about the codified autonomy system, in order to take better advantage of provisions already in place, said Lane Kneedler, who presented the report.

The consultants suggested that the Board of Visitors examine the possibility of constituting a subsidiary board, much like that at the University's College at Wise, to more closely oversee Medical Center operations. Its ranks would include members with more specialized health care experience.

The report also suggested the Health System administrators review procurement procedures to ensure that they are taking full advantage of the autonomy they have been granted; continue to seek the authority from the General Assembly to keep the interest on revenue the Medical Center generates, which would amount to $5 million per year; and study to what extent some functions of the Health Services Foundation, which handles physician billing, and the Health Sciences Center could be combined.

One recommendation -- the hiring of a full-time chief executive officer -- is already being implemented. University President John T. Casteen III recently announced that the University is conducting a nationwide search to fill the newly created position.

Foundations in the spotlight

Management of U.Va.'s 26 related foundations, and the creation of a 27th to benefit the College and Graduate School of Arts & Sciences, dominated the External Affairs Committee meeting.

The foundations, separate legal entities which support the mission of the University, have come under increased political scrutiny. While they allow the University greater efficiency and flexibility in many areas, and provide a legal firewall to protect its liability, they are not under the direct control of the University, said Sandridge. Nonetheless, the University is often held politically responsible for their actions.

The foundations operate under a policy that includes guidelines for fundraising, hiring and retention, investment management, procurement and financial reporting, Sandridge said. The Board of Visitors and the president each appoint one member of each foundation's governing board, and the board annually affirms the entire list of foundation board members.

The Board of Visitors also receives annual compliance reports and must ratify the creation of new foundations and any significant changes to the mission of existing ones, Sandridge said.

"I think the policy works well. It serves the Board of Visitors well and it serves the foundations well," he told the board. "I think the foundations feel that your participation is reasonable and helpful."

Some board members, however, expressed concern with the foundations' accountability, and suggested creating a central office or administrator to coordinate their activities and facilitate communication with the board, which Sandridge agreed is "a good idea."

He noted that the University of Virginia Foundation was created to be an umbrella organization that would fill a similar role, providing support and coordination for the rest. "It does for several of the smaller foundations, but it has not taken off to the extent that we foresaw," he said.

Against that backdrop, the board gave the go-ahead to establish the 27th University-related foundation, to provide fund-raising support for Arts & Sciences. Vice President for Development Robert D. Sweeney said he believes it could raise $20 million in its first year of operation.

Board member Terence P. Ross cast the only vote against forming the new foundation, suggesting that it prove that it can raise the money first.

Campaign riding high

"This might be the best report I've ever brought to you," Vice President for Development Robert D. Sweeney said in updating the board on the status of the Campaign for the University. Through 10 months, this fiscal year has already been the best in the campaign's five-year history, with $162 million raised and $200 million in sight, he said. In April, the campaign surpassed $1 billion in outright support -- not including future pledges -- and Sweeney projected that the overall total could reach as high as $1.25 billion by Dec. 31.

The University's campaign will also receive a "Circle of Excellence Award" from the Council for the Advancement and Support of Education for the fourth straight year, a distinction no other university can claim, Sweeney said.

New professorships and residence hall name approved

The board established two new endowed professorships, bringing the total number to 444. It also named the new residence hall on Alderman Road.

An anonymous benefactor has given the School of Nursing its largest-ever outright gift, $1 million, to endow the new Centennial Distinguished Professorship in Pediatric Nursing.

"This generous donor has set a new standard for School of Nursing development," said Nursing Dean Jeannette Lancaster. "More importantly, this gift will have a major impact on the education and research in the area of pediatrics that we can provide nursing students."

Pediatric health care has long been a strength of the University Health System, which includes both the Children's Medical Center and the Kluge Children's Rehabilitation Center. Income from the Centennial chair's endowment will enhance those strengths by allowing the school to compete for a leader in the field of pediatric nursing when the formal search process begins in the fall.

A new endowed chair in pediatrics was also created, the Robert J. Roberts Professorship, in memory of the former chair of the department and director of the Children's Medical Center, who died in January 1997.

The professorship has been funded with gifts and commitments from the pediatrics department, the Charles A. Dana Foundation and the Office of the Vice President and Provost of the Health System.

U.Va.'s newest first-year dormitory, under construction in the Alderman Road dormitories area, will be named Woody House in honor of the late T. Braxton Woody, an alumnus and member of the faculty in Romance languages for 43 years. While serving as assistant dean of the College, Woody was tapped in 1968 to head the committee that studied and later recommended full coeducation.

Re-visioning the University

Colette Sheehy said that phase one of the planned University Groundswalk, which will include a bridge and connecting walkway across Emmet Street to the Lambeth Colonnade, is scheduled to be completed by fall of 2002. She also mentioned that another pedestrian bridge is being planned over University Avenue to connect the Carr's Hill precinct with Central Grounds near the Chapel.

Sheehy then introduced a discussion on Arts Precinct design issues, which Casteen said would be the first of many talks about how to approach the challenges facing the University as it plans buildings for this "transitional area" on Grounds. He warned that the University's general design guidelines might not always apply. He explained that the needs of the buildings -- in particular the natural light demanded in a studio art building -- would have to dictate their design.

Casteen said that he had been studying studio art buildings at other universities and that University Architect Pete Anderson had been compiling a collection of photographs from around the country. "I think this is going to be fun to work through," Casteen said, "but it also poses issues different from what we've dealt with before."

New information technology initiative proposed

The University should create a new cross-disciplinary center combining computer and information sciences and engineering, said computer science professor Anita Jones, who chairs the Virginia 2020 Science and Technology Planning Commission.

Speaking to the Board of Visitors' Educational Policy Committee, she said her commission is recommending in its report to Casteen a plan to create a new set of "bridge" programs that would allow students to take courses in different schools for new majors. The emphasis would draw from U.Va.'s strengths in computer science and information technology and fulfill the commission's objective of increasing excellence and leadership in science and technology education and research.

Computer and information sciences and engineering (CISE) has emerged as a "substantial intellectual discipline" that fuels advances in hardware and software, but also can be applied to every academic discipline, she said.

The University is presently limited, however, in resources and the number of faculty devoted to the new discipline, Jones said.

Jones proposed retooling the Shannon Center for Advanced Studies, which was originally established to recruit world-class faculty but has languished without funding in recent years, as a good place through which to coordinate the effort. Because it doesn't belong to any one school or department, it would be a place for new faculty to work together across disciplines (they would still be hired into departments). A physical location is needed, she said, adding that a new building in the Engineering School dedicated to CISE is a top priority, but another facility will probably be needed that is connected with Arts & Sciences.

The way data can be retrieved, presented and manipulated electronically is creating a new form of scholarly research. Bridge programs that combine courses from different schools in using emerging technologies might be similar to the kind of projects begun through the Institute for Advanced Technology in the Humanities. New undergraduate and graduate majors in computer science could be established between Arts & Sciences and the Engineering School; right now there is neither a BS degree in computer science, nor a related program in Arts & Sciences.

"I'd love to see a Bachelor of Arts program where you have a double-major in computer science and another subject," Jones said. More information technology courses are needed that go beyond the skill-oriented, short courses offered by ITC and the library, such as the introduction to media studies course being developed.

"If money were not an issue, how soon could this get going?" asked board member William H. Goodwin Jr.

"There's a lot we could do in the next two years," Jones replied.

Board members expressed concern that students are not able to enroll in existing computer science and information technology courses, which Jones said were oversubscribed.

Vice President for Develoment Robert D. Sweeney sounded an enthusiastic note, saying that donors may be interested in supporting this kind of initiative.

Faculty Senate takes up diversity and leadership

This year, the Faculty Senate will pursue a theme that emphasizes two other major initiatives by Casteen: diversity and leadership, said incoming Faculty Senate chair Patricia H. Werhane, Ruffin Professor of Business Ethics.

The University began a year-long effort to study diversity issues after the February conference on "Charting Diversity," and Casteen recently established the Women's Leadership Council, following a recommendation from the 1999 Task Force on the Status of Women. Along those lines, the Senate "aims to raise awareness that excellence, leadership and diversity are all Œof a piece,' and that diversity is not merely about gender or race," Werhane said.

Students' drinking behavior changing

Reporting on the progress of the Alcohol Task Force, William H. Harmon, vice president for student affairs, called its work to reduce irresponsible drinking behavior "a good thing for the University community. . . . many people have been working to curtail the custom and we're beginning to see some signs of change."

He noted that individual students as well as student groups have been supportive of the need for a culture change, and that many have become involved in the work of the task force. Harmon listed changes that have been made in a number of key areas, including policy, education, enforcement and substance-free events. In the works are a Web site that will serve as an ongoing source for data on the status of substance use and abuse at the University; a guide to alcohol-free activities at U.Va. in the Charlottesville community; a parents' guide on college drinking; a new designated driver program.

Board complying with Blue Ribbon Commission's recommendations

Gordon F. Rainey Jr., the U.Va. board member on the ad hoc committee that reviewed the Governor's Blue Ribbon Commission on Higher Education Report, said that the group had done a detailed review of the recommendations and concluded that "with one exception, we're in full compliance."

The exception involves the recommendation that "each institution's budget requests to the Governor and General Assembly should be accompanied by a certification by the board of visitors that it has reviewed and considered the request ..." The timing of the state budget and the schedule of U.Va. Board of Visitors meetings has made it difficult to incorporate time for board members to look at the budget. It was decided that a copy of the final budget would be mailed to each member of the board for review.

Of the 73 Commission recommendations, Rainey said that a dozen applied to boards of visitors. He went through all 12, noting what was being done now and what might be done in the future to further enhance compliance. He referred several recommendations -- including one regarding core curriculum and another on grade inflation -- to the educational policy committee for future discussion.

Dean: Research drives Medical School ranking

Dr. Robert M. Carey, dean of the School of Medicine, estimated that in for his school to order to break into the national top 20, it would need to increase its annual National Institutes of Health research funding from $68 million last year to approximately $120 million.

The school generally ranks between 25th and 30th in the U.S. News and World Report magazine national rankings. A top-20 ranking would enhance the University's ability to recruit and retain top faculty and students, Carey said.

The $120 million goal is attainable, he said, if the University builds another medical research building, labeled "MR6," which is currently in the planning stages. He estimated that a specially fitted building of approximately 180,000 square feet would cost about $50 million. A request to the General Assembly for construction money for MR6 has been unsuccessful for the past two sessions, Carey said.

In other business:

• the Blue Ridge Hospital property was transferred to the U.Va. Real Estate Foundation; and
  
  
• the board approved issuing bonds for construction projects at the Darden School, the National Radio Astronomy Observatory and the College at Wise;
  
  
• the design for the Monroe Lane student residence project was approved; (The building on Jefferson Park Avenue will replace the Gildersleeve Apartment building with a larger, more flexible student residence facility.)
  
  
• the board approved the Virginia Department of Transportation (VDOT) agreement for the Emmet Street Bridge project. (Since U.Va. received $1 million federal grant -- to be administered by VDOT -- the University must request by board resolution that VDOT establish an urban system highway project for the construction of the pedestrian and bicycle bridge over Emmet Street.)
  
  
• This year's College at Wise Samuel R. Crockett Award went to former board member Champ Clark, who Chancellor Jay Lemons called "a beloved person in Southwest Virginia."
  
  -- Rebecca Arrington, Anne Bromley, Dan Heuchert and Carol Wood contributed to this report.