As state legislators in the House of Delegates and Senate work to finalize the state budget in the face of a $3.8 billion revenue shortfall, members of the University community continue to have questions about the impact cuts in state money will have on U.Va.

Leonard W. Sandridge, executive vice president and chief operating officer, and Colette Sheehy, vice president for management and budget, fielded this week’s questions.

Q. Can the University tap into its endowment in order to supplement salaries or support immediate needs? Can you explain exactly what the endowment is used for?

A. Approximately 70 percent of the University’s $1.7 billion endowment is restricted for particular purposes so the University must expend the income from those endowments according to prescribed guidelines. However, a portion of the endowment is already designated for faculty salaries. It is also possible to use the endowment for hiring or retention of key faculty.

Colette Sheehy

Because classified employees are part of the state personnel system, we cannot fund across-the-board raises on our own. However, the new performance pay plan does allow bonuses and other one-time salary actions.

The endowment is also used to support faculty research, scholarships and fellowships, fund raising, and residential improvements.

There clearly are opportunities to do some one-time funding initiatives from these sources; however, it becomes problematic to use the endowment to solve ongoing funding needs.

Q. What is the status of present building projects at the University — the South Lawn Project, the new library, and the athletic complex — that are all going forward?

A. Perhaps one of the brightest spots in the whole budget picture is the capital budget. The House of Delegates and Senate have a joint capital program that addresses many of the University’s highest priority projects — new construction, renovation and infrastructure. In addition to state-funded projects, we always have a number of significant building projects that are funded with revenue we generate ourselves either from private gifts, indirect cost recoveries on grants and contracts, or student and user fees. 

Leonard Sandridge

The South Lawn Project, which includes construction of a new building and parking structure on JPA, renovation of Cocke and Rouss halls, and demolition and reconstruction of New Cabell Hall, is in the initial design stages. The state bond package includes funding to renovate Cocke Hall and about 40 percent of the cost of the new building for Arts & Sciences. It is likely that the remainder of the funds will need to come from private gifts.

The Special Collections Library will break ground in the next few months, starting with the demolition of Miller Hall. It is a $26 million project with $10 million coming from the state and the remainder from private gifts.

The arena is also under design and will be funded from a combination of private gifts, student fees, and sales of premium seating and suites. 

Depending on how the balance of the South Lawn project is financed, we do not anticipate that funding for these projects will take away from resources available for salaries or other University needs.

Q. We’ve just gone through a lengthy planning process — Virginia 2020 — and are now embarked on University Envision to set the course for the University’s future. Can we afford to follow through on these plans?

A. The expectations resulting from the 2020 planning effort call for a commitment of existing and future resources and an emphasis on specific areas of the University that have been identified for improvement. The current state budget problems complicate the short-term outlook, but they must not be allowed to dim our long-term prospects.

The recently completed capital campaign and ongoing donor support at unprecedented levels will contribute significantly to our 2020 efforts. External funding for research projects continues to grow. We have a strong financial base that can support the use of debt where appropriate.

Tuition also will play a greater role in the support of the improvements to our instructional programs over the next several years. These resources, coupled with an unrelenting focus on our priorities, will allow us to achieve substantial progress on 2020 initiatives even in this time of serious budget shortfalls.

Q. Is there some concern that if we raise tuition too much there will be a negative impact on admission, recruitment and retention of the best students?

A. Both the House and Senate amendments to the introduced budget contemplate a tuition increase of some proportion for all students at public institutions in Virginia. The incremental tuition revenue generated by whatever rate increases the Board of Visitors approves will be used to partially offset the reduction in tax support over the next two years.

Given the tuition freeze and rollback of the last five years, we believe we have substantial leeway in our rate structure for in-state undergraduate students. Our tuition for out-of-state undergraduates remains well below peer private institutions with whom we compete for students, so we do not think the contemplated increases will have an adverse impact on admission, recruitment, or retention of students.
We do have a concern about graduate student tuition. We will look to limit the increases to the out-of-state graduate students, excluding law, Darden and medicine.

Whenever we have tuition increases that substantially exceed the rate of inflation we consider the impact on financial aid and make plans to add funds to the financial aid budget. I would anticipate this action in fiscal year 2002-03.

Q. Should employees whose retirements are invested in the state’s VRS program be worried about the Senate’s suggestion of tapping into the fund to give state workers a onetime bonus?

A. The VRS has sent clear messages to the Senate that VRS funds should not be touched.

VRS is a “defined benefit” program. That means that the obligations to retirees can be calculated and future demands on the funds can be reasonably projected. Over the last several years, the investments that support the long-term obligations to current and future retirees have performed well. While investments have suffered in recent months, the five-year performance has been strong.

Actuaries regularly compare future demands with the assets in the VRS funds to make sure the projected needs can be met. History reflects the fact that VRS is a well-managed retirement system. Employees should be confident that their retirements are secure and that their benefits will be paid as promised.

Q. Is there any possibility that when the salary freeze is lifted that the lowest paid employees might receive higher percentage raises than the higher salaried employees?

A. The proposals being considered by the General Assembly suggest that there will be standard percentage increases regardless of whether base salary increases or bonuses are ultimately approved. 

Q. Are there incremental things that the University can do to soften the blow for its employees during these tough times?

A. The University is exploring a variety of means of easing the burdens on employees in case compensation adjustments are limited or non-existent.
Already steps have been taken to hold health insurance premiums for U.Va. employees below the statewide rates. It is not realistic to anticipate a rollback of parking or health fees without cutting health benefits or abandoning plans to meet future parking needs. However, future increases will be held to a minimum during this difficult time for our employees.

Send questions to Inside UVA at insideuva@virginia.edu. The answers also will appear online at UVA Top News Daily at www.virginia.edu/topnews.