U.Va. gets $20 million for arena; board OKs budget

Staff Report

The University will receive $20 million to kick off its fund-raising campaign for a proposed athletics and special events arena on Massie Road, U.Va. President John T. Casteen III announced to the Board of Visitors during its three-day meeting last week.

The anonymous gift represents about one-third of the core funding needed to begin the arena project, estimated to cost $125 million. The gift, the second largest gift ever for U.Va. athletics, will finance the planning of the project, slated for completion by fall 2006.

“This extraordinary commitment is wonderful news for men’s and women’s basketball,” Casteen said. “The need for a new facility is clear. The larger community will also benefit. We are deeply grateful to the donor for expressing a firm dedication to excellence through this gift.”

Aside from basketball, the arena could be used for concerts, major addresses and other special events, he said.

The board authorized strategic planning for a new arena in October 1998 and included it in a six-year capital spending plan this past spring.

$1.41 billion budget approved

The Finance Committee approved a $1.41 billion budget for the 2001-02 fiscal year, which begins July 1. The spending represents a 7.4 percent increase over the current year.

The budget includes $816.3 million for the academic division, $575.6 million for the Health System, and $18.8 million for U.Va.’s College at Wise.

The failure of state legislators and Gov. Jim Gilmore to agree on a package of amendments to the two-year state budget left faculty and staff members without a pay raise. However, Leonard W. Sandridge, executive vice president and chief operating officer, expressed some optimism that the current state budget would be amended in January to provide for raises, which could be made retroactive. No employees, however, will receive raises unless the legislature approves them in the budget.

“We expect that there is a good chance that, as part of a caboose budget, there will be some effort to bring those in this year,” he said.

The University anticipated those costs in preparing the projected budgets of the Medical Center and auxiliary enterprises, Sandridge said, and assumed that the legislature would come up with the funds for the rest of the employees, since the University budget had to be built upon current revenue assumptions.

The Medical Center’s budget forecasts a $30 million operating margin, representing a 4.9 percent margin of revenue over expenses. Non-operating gains are predicted to push the net income to $39.3 million. In the current year, budget officials project a 2.2 percent operating margin and an $18 million net income.
Larry Fitzgerald, chief financial officer for the Health System, acknowledged that the new budget is “a stretch.”

“If you don’t set the bar at 14 feet, you’re never going to jump 14 feet,” he said. “We’re going to try.”

The Health System budget anticipates spending $17 million in higher salary costs, in part to attract candidates for unfilled positions — vacancies that have caused some beds to be closed in the past few months. It also includes $6 million for new information technology, including $3.6 million for the Medical Center’s Integrated Health Information Management System.

To cover the increased expenses, the board authorized unspecified room rate increases of between 5 to 17 percent, depending upon market factors. The budget also projects a 2.4 percent increase in admissions, which would reverse a two-year decline.

For the academic division, the largest source of revenue is sponsored programs, projected to account for $222.2 million, or 27.1 percent of total income. Tuition and fees account for $182.4 million (22.4 percent) and state appropriations $168.3 million (20.6 percent).

About 60 percent of the spending will go toward education and general expenses, including instruction, academic support and student services.

The budget includes $10.34 million in discretionary spending of new funds identified late in the budgeting process, including $3.77 million to implement and support the new Oracle administrative systems; $2.24 million for graduate student aid, including health insurance, tuition adjustments and fellowships; $1.17 million for library support; and $1 million for international distance education programs.

The academic division budget projects adding the equivalent of 344 new full-time employees, including 178 paid for by research grants and contracts. Another 67 are Facilities Management workers already employed, but previously paid for from the Medical Center budget. Subtracting those two categories, employment growth will be 1.4 percent, said Colette Sheehy, vice president for management and budget.

Nearly 60 percent of the U.Va.-Wise budget will come from state appropriations, and 70.7 percent will go toward education and general purposes.

Of the University’s overall $1.41 billion budget, only 12.4 percent will come from the state’s general fund, a figure that inches up to 14.8 percent if reimbursements to the Medical Center for indigent care are included. That compares to 27.1 percent state funding in 1985-86, Sheehy said.

The Finance Committee also heard a presentation from Yvonne Hubbard, director of Student Financial Services. About 25 percent of U.Va. students need aid, the lowest in the state for public institutions, while 70 percent of the students at Wise need aid, the highest in the state.

Of the available aid, about 28 percent is loans, which prompted board member Terence P. Ross to question how much debt was being loaded onto students. Casteen explained that the interest rates were lower than conventional loans. Board member William H. Goodwin Jr. said the board should have a discussion about applying non-allocated endowment money to student aid.

University Treasurer and U.Va. Investment Management Company President Alice Handy gave a report on the endowment, which lost $16.7 million as of May 31, bringing its total to $1.7 billion. Handy noted that it has been difficult to determine where to invest money during the past five months. Goodwin assured the board that U.Va.’s earnings are in the top quartile among 35 schools with a similar endowment.

The board also heard from U.Va.’s new vice president of finance, Yoke San L. Reynolds, who outlined her long- and short-term agendas. In the short run, she will work with the switchover of business computers to the new Oracle program; investigate the University’s reimbursement for the cost of research; and modify financial reporting to allow better comparisons with other schools. Long-term, she wants to optimize federal reimbursements and external partnerships and improve administration efficiency.

Block and Ayers address board

Enriching the undergraduate experience and moving forward the VA2020 plan top the agendas of both Gene D. Block and Edward L. Ayers when they assume their new posts as vice president and provost and dean of the College of Arts & Sciences, respectively. The two men were formally introduced to the board June 15.

Ayers said that in “trying to figure out how we’re the No. 1 public university when we’re not No. 1 in any one area, I came up with the understanding that we’re stronger as a whole than individually.”

Cooperation with the rest of the University to “make all of us stronger” is one of the goals he has set as dean of Arts & Sciences. He also told the board that he will request that more junior faculty be hired to teach the College’s largest classes. He plans to offer more graduate student fellowships as well, and to improve classroom and lab space “sooner rather than later.” He hopes to create new programs, based on students’ interests, and wants students and faculty to have as much contact with him as possible. To this end, he will schedule weekly open office hours. He will also implement the VA2020 plan.

Block told the board that he will develop a timetable to carry forward the VA2020 initiatives. He will also make “a concerted effort to bring more women and minorities to top leadership posts,” improve graduate student incentives to attract the brightest and best, maintain outstanding libraries, improve facilities and plan more exchange and study abroad programs to “internationalize” the University.

U.Va. distinguishes itself as offering a unique research experience for undergraduates,” he noted.

Both Block, a biologist, and Ayers, a historian, said they plan to continue teaching and conducting research.

Health affairs

Dr. Robert Cantrell, vice president and provost for Health Sciences since 1994, reported to the Health Affairs Committee for the final time June 14, reviewing changes in health care that have occurred both nationally and locally since his appointment.

“These have been interesting times, and I am reminded of the old Chinese curse — ‘May you live in interesting times,’” he joked at the outset.

Advances in medicine have led to people living longer, healthier lives, but those gains have come at a cost, he said, citing skyrocketing drug prices. As the population ages, it requires more and more expensive medical care, he said, noting that half of all Medicare funds are expended in the last six months of people’s lives.
Yet the U.Va. Health System has remained successful, Cantrell said, citing the growth of outlying clinics, joint ventures with other hospitals, new departments, better technology and additional research facilities. The campaign raised $246 million for the Health System, he said, and the hospital has thrice been named as one of America’s 100 best.

He concluded — his voice choking with emotion — “I wish godspeed to you and to all those involved with the University of Virginia Health System.”

Earlier, officials reported that the Medical Center is likely to fall short of its budget targets for the current fiscal year. They blamed labor shortages that have forced some beds to be closed for several months, increased salary costs needed to fill those vacancies, and higher-than-anticipated increases in drug costs.

Through the first 10 months of this fiscal year, the Medical Center has an $11.2 million or 2.5 percent margin of revenues over expenses. “By industry standards, that is a very good margin, but it is certainly not up to the goal we set for this year,” Fitzgerald said.

In other business

The board established seven new professorships, bringing the total of endowed chairs at U.Va. to 462.

They also agreed that a board member should make a presentation on the Honor Code at student orientation sessions.