Tight $1.88 billion budget wins Finance Commitee backing
|At its May 25 meeting, the Board of Visitors’ Finance Committee took preliminary steps toward issuing bonds to fund construction projects authorized by the General Assembly in its 2005 session. Among them is a $37 million bond toward building a new clinical cancer center, shown in this conceptual drawing provided by the Office of the University Architect. The cancer center will be located at the corner of Jefferson Park Avenue and Lee Street, on the site of an existing 330-car garage, which will be demolished to make way for the center. To compensate for the loss of these parking spaces, the Finance Committee also plans to issue a $28 million bond to erect a 1,200-car garage on the site of a nearby surface parking lot.
By Dan Heuchert
The U.Va. Board of Visitors’ Finance Committee unanimously endorsed a $1.88 billion budget for the 2005-2006 fiscal year on May 25, an 8 percent increase over this year’s spending plan.
The full board is expected to give final approval at its June 9-11 meeting.
The budget includes $1.04 billion for the academic division — a 6.1 percent increase — marking the first time it has eclipsed $1 billion in spending. The plan also calls for $812.6 million for the Medical Center, 10.5 percent more than the current year, and $26.6 million for U.Va.’s College at Wise, a 6.4 percent rise.
“This budget in large part reflects precisely the priorities that our board, over the last 24 months, has set for us,” said Leonard W. Sandridge, executive vice president and chief operating officer. However, several other new commitments initiated by the Virginia General Assembly and other unavoidable expenses mean that “there is not a lot of discretionary money left,” Sandridge said.
The measures initiated by the Board of Visitors and funded in the budget include:
- an additional $2.1 million for the AccessUVa financial aid plan, bringing the annual budget to $13.3 million;
- nearly $3 million more for faculty salary supplements, part of a five-year plan to advance U.Va. salaries in the ranking of its American Association of Universities peer group, for an annual total of $7.7 million;
- $1.5 million for the first of a 10-year plan to reduce the University’s deferred maintenance backlog;
- a $674,000 boost in spending to implement recommendations made by the President’s Commission on Diversity and Equity, including at least three positions reporting to the soon-to-be-hired chief diversity officer;
- $3 million to make the first of 10 planned hires of National Academy-level researchers over the next several years;
- nearly $3.4 million to enhance alumni engagement in advance of the launch of the next capital campaign;
- continued support for the Health System’s Decade Plan;
- and a 4.8 percent margin of revenues over expenses in the Medical Center.
Additionally, the General Assembly increased the University’s base budget allocation by more than $3.5 million, with those funds assigned to the College of Arts & Sciences ($2.3 million), Alderman Library ($750,000), expanding enrollment at the Nursing School ($283,000), expanding teacher education at the Curry School ($83,000), supporting study-abroad opportunities ($68,000), and additional architecture faculty ($67,000).
“Unavoidable increases” — mostly state-mandated pay and benefit increases ($14.3 million), but also including utility costs, operation and maintenance of new facilities and rent increases for leased space — total $16.1 million.
Colette Sheehy, vice president for management and budget, enumerated 11 items with a combined price tag of $5.1 million that were left unfunded. “In the 23 years that I have worked on the University budget, I can’t recall having so many important initiatives that we cannot fund,” she said.
Finance Committee chairman Thomas F. Farrell II urged Sheehy and Sandridge to prioritize the list, and suggested the board would give Sandridge the authority to fulfill the requests in order, should funds become available.
“I would hope over the course of the year that we could find some efficiencies and see some delays in costs that would allow us to go to this list,” Sandridge said.
State funding, amounting to $152 million, accounts for 8.1 percent of overall revenue, a proportion that has held steady in recent years.
Patient care at the Medical Center brings in the largest share ($812.6 million, or 43 percent of the total revenue), followed by grants and contracts ($301.2 million, 16 percent), tuition and fees ($281.6 million, 15 percent), income from auxiliary enterprises ($166.3 million, 8.8 percent), and private support ($133.6 million, 7.1 percent).
Overall employment — including faculty and staff in the academic division, Medical Center and College at Wise — is expected to rise by 342 positions, to 14,337.
The Medical Center projects revenues of $853.2 million in 2005-2006, giving it a net of $40.6 million of income over expenses. The 4.8 percent margin is slightly less than the 5.5 percent projected for the current year.
Board member John O. “Dubby” Wynne questioned a 22 percent increase in the share of the costs that the University pays for its self-insured employee health plan. Sandridge said that a consultant hired by the University to compare the fund to similar self-insurance programs found U.Va.’s increase to be “in the upper range, but not out of the range,” adding that U.Va.’s program will receive its next annual review in October.
In response to another question, Sandridge said that the legislature’s passage of the Higher Education Restructuring Act had little bearing on the preparation of the 2005-2006 budget, as most effects will not be felt until institutional operating agreements are negotiated and implemented, most likely in July 2006.
“The real effect will be in the next budget we present to you and the following one,” Sandridge said.
Retirement plan changes
The Finance Committee also approved a fine-tuning of the University’s defined contribution retirement plans, as recommended by a consulting firm, Palmer & Cay.
Future participants in defined-contribution retirement plans who do not specify a fund to participate in — approximately 5 percent of participants, according to Linda Way-Smith, the University’s benefits director — will be assigned to a new default fund, Fidelity Investment’s Freedom Fund. Currently, the default fund is the TIAA/CREF Money Market Fund. he Freedom Fund better serves employee investors by changing the mix of investments to more conservative choices as they near retirement, Sandridge explained.
Bond issues on the horizon
The committee took preliminary steps toward issuing bonds to fund several construction projects authorized by the General Assembly in its 2005 session. It approved an “intent to issue” $133.6 million in bonds later this year — a legal move that is preliminary to the actual issuance of the bonds, which requires separate approval.
The projects included in the issue include the Advanced Research and Technology Building ($38.9 million), the Arts Center ($12 million), the Arts Grounds parking garage ($10.6 million), the Health System’s northern parking garage ($28 million) and the clinical cancer center ($37 million). Also included is a new residence hall at the College at Wise ($7.2 million).