March 22-28, 2002
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Budget deal allows BOV to set tuition

By Matt Kelly

The University will have more control over tuition increases under the final
budget approved by the General Assembly.

The two-year, $50.5 billion spending plan also contains a one-time bonus for classified state employees for fiscal year 2002-03 and sets aside money for a pay raise in the second year.

Under the plan, which Warner must approve or modify, the Board of Visitors will be authorized to set in- and out-of-state undergraduate tuition rates, ending the state-imposed tuition freeze introduced by George Allen in 1996. Colette Sheehy, vice president for management and budget, said the state recommends capping tuition hikes at 9 percent a year. Her office will likely recommend increases of between 5 and 9 percent to the Board of Visitors at its April 4-6 meetings. This week, Virginia Tech was the first of the state’s universities to implement a tuition increase — 9 percent for both in-state and out-of-state students.

In the coming fiscal year, classified state employees will have a choice of a 2.5 percent bonus, payable Dec. 1, or two weeks off with pay. The bonus would be taxed at 40.4 percent. Bonuses are taxed at a federally required flat rate, as supplemental income, since they cannot be taxed in a specific pay period. The federal rate is 27 percent, while state withholding is 5.75 percent and FICA withholding is 7.65 percent. There is no additional tax implication on the time off, which would have to be used by Dec. 31, 2003. Employees would have to elect their option in writing.

The plan also provides a pool of money equivalent to 2.5 percent of faculty salaries to be used for one-time bonuses or other incentive programs to retain faculty.

In the budget’s second year, $101 million has been designated for pay increases for state employees. This would increase employees’ base salaries, but would not take effect until December 2003, for the last six months of the biennium.

The University also must absorb a $25.4 million cut in state operating-fund support in the first year and $33.3 million the second year. Even with a tuition hike, Sheehy estimated that the University’s administrative support departments would have to cut their budgets by 4.6 percent and the schools by 4.3 percent.
In addition to the base cuts, there are reductions in maintenance and equipment money.

“It’s bad enough that we have a $25 million [operating] cut, but when you add up the other things, they become real money, too,” Sheehy said.

Maintenance funds are divided between funds to operate new buildings and reserve money to maintain other structures. New building maintenance money for U.Va. was reduced by nearly $1 million, to $2.4 million, meaning that there may not be any state funds to maintain new buildings at the Darden and Law schools. Sheehy noted that the schools of Medicine and Engineering and Applied Science are already paying some money toward the maintenance of MR5, a recently opened medical research building.

The maintenance reserve fund for U.Va. has been more than halved, from $13.4 million for the current biennium to $6.2 million for 2002-04.

“We will do the highest-priority projects first,” said Sheehy, noting that the University currently has a $110 million backlog in maintenance projects. “We have to maintain the buildings. We will have to find the money somewhere else.”
Among the projects deferred is refurbishing two corners of the deck around the Rotunda. Sheehy said that two corners have already been done.

“If the economy improves, I hope this is one place that they add money,” Sheehy said.

Support for the University’s equipment fund has been reduced from $15.2 million in the current biennium to $10.9 million in the next biennium.

The state has also changed its approach to interest income. The state has been returning interest income from fees paid in advance, such as dorm deposits. Under the new plan, the state would keep the interest money from the last quarter of the current fiscal year and the first year of the new biennium, returning the money the following fiscal year if state revenues permit.

For the first time, the Medical Center will be allowed to keep its interest income. For the next two years, however, it has to turn over to the state $2.5 million or its actual interest income, whichever is less.

The Medical Center also received a $1.2 million cut in indigent care aid in the second year of the biennium. During the first year, there is a general reduction in Medicaid allocations, with no indication yet on how this will affect the Medical Center. In the last fiscal year, the Medical Center received $35 million in indigent care aid from the state.

The state legislature also approved a bill authorizing the state to issue bonds to pay for capital projects, including $68 million in state funds for construction projects at U.Va. If Warner approves, it will go to a statewide referendum in November. Among the U.Va. projects are MR6, a Materials Science and Nanotechnology building, an upgrade to the Cavalier electrical substation, the South Lawn Project, renovations to Fayerweather Hall and Gilmer Hall teaching labs, and new chiller plants.

The state also increased student financial aid by $133,892.


Q&AQ. Why can’t faculty members whose salaries are funded entirely by private funds receive pay increases?

A. Colette Sheehy, vice president for management and budget, responds: It has been the University’s policy to treat all employees, faculty or classified staff, in the same manner in areas of compensation, regardless of what source pays their salary. Since in many cases an employee doesn’t choose from which fund source he or she gets paid, it seems inappropriate in hard economic times to penalize those who are paid from state funds while granting pay raises to those who are fortunate enough to be paid from private money. In the end we are all state employees.

Members of the University community are invited to send questions about the impact cuts in state money will have on U.Va. to Inside UVA at



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