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Richmond Bar Association (RBA) Lunch Meeting

Teresa A. Sullivan
Thursday, March 21, 2013; 12:30 PM

Good afternoon, everyone. Craig: Thank you for the kind introduction. To get started, I’m curious to see how many of you are UVa alumni, or parents of current or former UVa students — can we have a show of hands? 

Whether or not you’re a Wahoo or parent of a Wahoo, I appreciate all of you being here, and I’m delighted to spend this afternoon with the Richmond Bar Association.

Today I want to talk about the current and future prospects for higher education generally, and for UVa in particular.  I’ll talk a bit about the line between public and private universities, and how that line can sometimes get blurred. Here in Richmond, you have a front-row seat on the General Assembly, so I’ll also say a few words about the outcomes of this year’s session and what it means for UVa. Even if you’re not a UVa grad, as Virginians all of you have a stake in the welfare of your flagship university.

This is an interesting moment in American higher education.  While European and Asian countries race to imitate our research universities because they see us as models of excellence, the American media is full of criticisms of higher education in this country. The critics talk about universities’ low graduation rates, high student costs, inefficient operations, heavy debt loads, and so on. There is a one-size-fits-all mentality to these attacks, as if every college in the country were exactly the same, all of them riddled by the same problems and shortcomings.

In response to these blanket criticisms, I would ask you to consider what I call “Virginia exceptionalism” – that is, that Virginia’s flagship university stands as a stark counter-example to many of these criticisms being leveled at higher education.

It’s true that graduation rates are too low at many institutions, but not at UVa. Our six-year graduation rate of 94% is the highest for any public institution; we also have the best graduation rate for African American students (86%) and one of the best for low-income students (85% for Pell Grant recipients). 

It’s true that some universities are not efficient, but this is not true of UVa. US News ranks UVa second in quality among public institutions, but 53rd in expenditures per student – and that gap of 51 places is a good measure of efficiency.  In fact, US News punishes you for efficiency – that rank of 53 counts against us.  We are tied for second place with UCLA, and their rank for expenditures per student is 22nd.

A major newspaper recently criticized universities for taking on too much debt. But UVa, which is one of only two American public universities with a AAA bond rating from all three rating agencies, devotes less than 3% of its operating expenses to debt service.

Some universities are criticized for the amount of money spent on amenities such as dormitories. But at UVa, our most sought-after rooms — the rooms on the Lawn — have no bathrooms! 

The Princeton Review recently named UVa the #1 “Best Value” in the nation among public universities. When doing these rankings, The Princeton Review considers academic quality; costs; financial aid; the percentage of students who borrow from loan programs; and the average debt load that students carry at graduation. UVa’s excellence and efficiency in all these areas make us the exception among colleges and universities.

I am not saying that UVa does not have issues; of course we do.  Some of our most pressing issues are strategic.  For example, we have traditionally embraced a philosophy of close faculty-student interaction with a small student body; meanwhile, many of our competitors pursue a strategy of taking a larger market share, with as many as 65,000 students on a single campus.  Others are consciously developing a second-tier degree for on-line education only, hoping that they do not dilute their brand. 

We are undertaking a detailed strategic planning effort to examine these and other options. This is a planning process that involves multiple stake-holders in examining the issues; it will become part of a continuous process of feedback and further planning.  In this effort, we are working closely with the Board of Visitors’ Special Committee on Strategic Planning, which is co-chaired by former JMU president Linwood Rose and

Richmond attorney Frank Atkinson — I’m sure many of you know Frank.

We have formed seven working groups to examine, among other topics, institutional streamlining and synergies, student life, information technology, faculty recruitment and development, and what it means to be a public institution in the 21st century. One issue we know will be front and center is cohort succession, as one-third to one-half of our faculty is approaching retirement age. 

A strategic plan won’t work without a solid financial plan to back it up, so we are developing a 4-year comprehensive financial plan for fiscal year 2014-17. This financial plan will provide a road map for funding our priorities. The plan outlines assumptions on topics such as financial aid, fundraising, faculty support and retention, enrollment growth, and research growth. 

You might be aware that our faculty have gone without raises for several years. This has caused UVa to lose ground in faculty compensation relative to our peers, and this slippage has made us a target when other universities go looking to pick off faculty members.

We are taking steps to reverse this slide. At the February Board of Visitors’ meeting, the Board passed a resolution to commit to the goal of raising our average faculty salaries into the Top 20 of the AAU universities within a four-year period ending in June 2017; we are currently at #26 among the AAU schools. This is a step in the right direction, as we strive to remain competitive with our peer institutions around the country.

When we talk about competing with peers for top faculty and students, we’re not talking only about public universities. We are talking about the Ivy League schools and other elite privates, and also about the other “Public Ivies” like UNC-Chapel Hill, University of California, and William & Mary here in Virginia.

This competitive landscape raises two fundamental questions: What does it really mean to be a private university today? And what does it really mean to be a public university?

Are private universities actually private? Well, yes and no. They are private in the sense that they aren’t controlled or regulated by state governments. They are private in the sense that they aren’t required to have open meetings of their governing boards. They are private in the sense that they aren’t subject to FOIA requests from journalists and other inquiring minds.

But private universities also have some fairly obvious public characteristics. They receive public subsidies, mostly in the form of tax breaks and student loans and grants. Donors who make gifts to build the large endowments in private universities get a tax exemption for their gifts; this exemption has helped Harvard, for example, build its endowment to more than $30 billion. Private universities also get tax exemptions on their campus buildings. The Federal government provides need-based financial aid for students in private universities. Private research universities, just like public research universities, receive government grants and contracts that allow overhead to cover a portion of the research costs. These are public, taxpayer-based subsidies.

So private universities are getting a pretty sweet deal, if you think about it: they get all of the money from public subsidies, but none of the regulation that public universities like UVa deal with.

Of course, public universities have some private elements, too. Once again, money is at the heart of the matter. Because of the progressive collapse of state support for public colleges and universities in recent decades, private funds have become an increasingly essential revenue stream for the publics. One example from the University of Virginia: We raised $323 million in philanthropy in 2011, versus the $115 million we received in the state appropriation.

Some of the individual schools within public universities  operate much like private schools. At UVa, our professional schools — the Law School and the Darden School of Business — are self-sufficient. They receive no part of our state appropriation, and they support themselves through tuition and private gifts. They pay a portion of their tuition revenue back to the University as a “tax,” but they control the rest. This has allowed these schools to set their tuition at market rates and control their own destinies.

In recent decades, while state support for public universities has dropped dramatically, some public universities have tried to disentangle themselves from state regulation to gain more control over their own management and operations — in a sense, to operate more like privates without being fully private.

In Virginia, as many of you know, the General Assembly  passed restructuring legislation in 2005 that gave the state’s public colleges and universities more management flexibility. The legislation has given us the capacity to plan effectively and manage our operations more efficiently. 

In order to realize the benefits of restructuring, colleges and universities are required to meet a set of state goals. These include: creating six-year financial plans; setting financial and administrative performance standards; working with specified schools or districts to improve the achievement of K-12 students; stimulating economic development in distressed areas of the state; meeting enrollment demands; and making college affordable for all Virginia students while also enrolling more transfer students from our community colleges.  While UVa is still very much a public institution, restructuring has given us some of the autonomy that privates enjoy.

In the discussion of what it means to be public versus private, the talk often focuses on money. But being a public university is not only about where the dollars come from. It’s about mission and purpose. As I mentioned earlier, one of UVa’s strategic planning working groups is focusing on what it means to be a public institution in the 21st century.

Public universities have a public mandate.  Public universities are expected to have a strong public mission and to serve the needs in our home states. We take that mission seriously at UVa, and we will never lose sight of it — even as we contend with the serious challenges facing higher education today.

Of course UVa, like all public universities, is subject to control by its state government, so every year we watch the Governor’s budget proposal and the General Assembly Session with great interest from Charlottesville.

At this point, the General Assembly’s Joint Conference Committee has submitted its amendments to the Governor, and he has until March 25 to take action. April 3 is the Reconvened Session, when the General Assembly will consider any actions taken by the Governor.

Generally, we are very pleased with the outcomes from the Joint Conference Committee. The committee’s amendments include:

  • Support for enrollment growth at the state’s full share of base budget adequacy ($1,101,432)
  • Support for financial aid ($312,844)
  • A 3% salary increase for faculty; a 2% increase for Classified staff, along with $65/year of service for employees with 5 or more years of continuous service; and, flexibility to award salary increases for University Staff based on merit.
  • Authorization and funding for Rotunda renovation; we anticipate state funding of $25 million for the $46 million project, with the rest to be covered by private funds.
  • Pre-planning authority for another important renovation project (Gilmer Hall/Chemistry Building); we anticipate $1.8 million for programming and concept design for this project.
  • Support for UVa’s Economic Development Accelerator ($1 million)
  • Support for cancer research ($1 million)
  • Support for research through Higher Ed Equipment Trust Fund ($2,266,579)
  • Language to implement Medicaid Reform and Expansion.
  • Operating support ($863,280)
  • Total new funds: $7,175,547

We are hopeful that the Governor will support these amendments, because they are important to the continued success of the University.

Since I’m speaking to an audience of lawyers here today, I want to close by saying a few words about the value of the lawyers who serve in the General Counsel’s Office at UVa and the important roles they play in the University.

UVa is a remarkably complex operation, with revenues last year of $2.625 billion. To give you some context, that revenue level would put us at #797 in the 2012 Forbes 1000 ranking, above Tupperware Brand, The New York Times Company, and other major companies. Operating a university is every bit as complex as operating a major company, and the daily operations require a great deal of legal counsel.  In addition to heavy day-to-day activities, we occasionally face unexpected crises that require immediate and extended attention from our lawyers.

Because of the scope of UVa’s operation, its complexity, and its great demand for legal services, we have assembled a team of lawyers who have great legal minds and who are also capable of great dedication, work productivity, and ethics.  

In your various jobs in the City of Richmond and surrounding counties, you fill similar roles and meet similar demands with skill and dedication. While preparing for this event, I noted that the objectives of this Association are listed on your website, and they aptly describe the importance of your work: “to aid in maintaining the honor and dignity of the profession of law, [and] to promote legal science and the administration of justice …”

Those are important duties. I commend all of you for the valuable work you do each day, and I thank you for inviting me to be here today.