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State of the University Address, 2004

John T. Casteen, III
April 14, 2004

I have the pleasure as we begin this year's State of the University Address to welcome the Deputy Prime Minister and the Education Minister of Singapore and other members of the delegation from that nation who've come to study our evolving financial relationship with the state of Virginia about which we'll have occasion to talk in the course of this hour. Our guests are seated here. Thank you for coming and welcome. We're delighted that you've come to visit.

You should have a copy of a fact book that we prepare each year as an accompaniment to these remarks. The book looks like this. If you don't have it, there are copies outside the auditorium. I hope you will take one or more. I'm told that this book has actually become the largest distributed, the largest number distributed of any University publication, so I think it probably does have considerable value to persons who want to track our progress from year to year. Because of the materials in the fact book, we are attempting this year to abbreviate the address because a great deal of what would normally be covered in the speech is in fact covered in the book itself.

I would like to focus on a few large issues and particularly issues about which questions arise from students and their families, faculty members, staff members, alumni, others who care about the University. I should say, too, that we're trying to leave time for discussion or questions at the end of this hour. Mr. Sandridge, Mr. Block, Ms. Lampkin and others are here to assist in addressing questions that have to do with their areas of responsibility. I think it's obvious to all of us that public institutions, certainly in this state, but in many of the states, now seem to be in a kind of disequilibrium that would seem to reflect some kind of basic change in our culture, especially in the ways in which government relates to its basic institutions. We have in fact, because Virginia began this disequilibrium very early among the states, I had a good bit of time to learn how to live with a different relationship. We've come to see this as an occasion for creative change, adjustment and so on, but it remains, nonetheless, a matter that we have to address in this year especially. As recently as yesterday, the legislature once again could not find enough votes to pass a state budget. There is obviously a great deal of uncertainty that has to do with the relationship with the state, particularly as that relationship is reflected in what is, for us, and for all other public universities and colleges in this state, a continually dwindling source of state support for the work that we do.

The state, overextended because of tax relief that economists now say was probably ill advised back in the mid '90s, dealing with a number of mandates it created but has not funded, dealing with shortages in various parts of the state's total package of revenues, perhaps lacking the political will to do what is right in this particular Session, continues to avoid meeting basic obligations. We, along with all other publicly supported functions, have suffered, although I think we need always to begin by acknowledging that the pain or distress is substantially greater in institutions that have not had the success we've enjoyed with regard to affecting large economies, finding ways to do business less expensively and certainly raising non-state monies to sustain what the State no longer elects to sustain.

I won't go into much detail in discussing the actions reported out of the House yesterday except to say that the action with a margin of 52 votes to 46 represents probably the beginning of whatever break-up in the logjam may occur because this is the first time I can recall in this Session, and there have been many votes in this Session, but the first time I can recall when there was a majority in favor of doing anything about the problem, so I think it's important to acknowledge that we see some evidence of progress here.

There is a difference between the Senate and House that I guess I would summarize in this fashion. The Senate, because so many of its members sit on the committee that actually oversees the finances and operations of state entities, has had a long history of deeper engagement with and probably understanding of the state's obligations than perhaps the House has had because the House has separated the finance function, the tax study function from the appropriations function. Whatever one may say about partisan or sectional or other differences that occur this year, ultimately there are differences in the specific expertise of the two houses and I think we are watching play out in part a kind of drama that has to do with how the state's directions will be set in the future.

I think it's very important not simply to express exasperation as many people have been inclined to do, but at the same time to realize that in the town meetings that were requested by the House, in the belief that they would produce a massive outcry against adjusting the state's revenue system in order to meet the state's obligation. So far, the majority of those speaking in favor of dealing with the tax problem and moving on to meet the obligations is said by the newspapers to amount to something between 95 and 98 percent of those who've attended those sessions statewide. So I think the evidence of popular frustration, voter frustration, with the impasses that have characterized the legislature's actions for the last four or five years, that the evidence is increasingly clear to everyone. That, I think is a good thing.

Meantime, if no action is taken to complete a state budget and to address the need for revenue, the current budget expires on June 30th. Our Board begins a meeting tomorrow. The Finance Committee tomorrow will receive recommendations from us in which the Board must make financial decisions that affect individual students and their families and staff members and their families and, at this point, expects to do so tomorrow without an enacted state budget for the next two years, and this of course will be the second time in the last four years that the Board has had to address issues in this context.

We are planning for the eventualities that we can see. There is no clear statute law having to do with what to do if the legislature finally gives up at the end of the Session and does not enact a budget. Those of you who are students of public finance will perhaps find some small reassurance in knowing that the state's officials are studying the financial practices of Kentucky and Arkansas and Mississippi in the hope of finding models that can be used. Continuing resolutions are a possibility. Some form of delegated power to the executive branch from the legislature is a more distant possibility, but in any event, our planning for eventualities has had to do with what we can do within the limits of the University's own resources. We hope that we do not have to do that because even the small sums contributed by the state, the 8.1 percent, matter vitally with regard to salaries and especially the salaries paid to faculty members and to classified employees, but in any event, Mr. Sandridge, Ms. Sheehy, Ms. Reynolds and others have been working for the last several weeks on contingency plans that will go to the Board.

We will present tomorrow to the Board's Finance Committee a workable University budget that will include tuition increases. The tuition increases will be within the limits already announced. That is, we will keep faith with the students who are planning their own budgets and their family's budget on the basis of our expectations. We will also make the commitments necessary to provide student financial aid in terms of the policies that we've announced recently for improving assistance to the students from the families with the lowest incomes and also those who come from middle income families and have not been able to make ends meet under the current federal financial aid guidelines.

All that said, however, the numbers are sobering. You've heard these reports before, but I want to summarize once again what has happened as other states have adjusted their appropriations with regard to the state appropriation here per in-state student for the current academic year. At Chapel Hill, the state appropriation this year is $19,335. At the University of Michigan in Ann Arbor, it's $17,296. At the University of Maryland at College Park, $15,384. Here, it's $8,840 per FTE in-state student. With the budget impasse threatening a state shutdown, I guess I feel a first obligation to say to you who work for the University that the Board's intention and our firm intention is not to participate if that happens. That our planning is intended to carry the University forward regardless, but, at the same time, that if you care about community colleges or local police service or the local public schools or the transportation system or hospitals that receive state revenue or any other entity that depends in some way on the state to finance its operations, the threat of a shutdown at the end of June ought to be a major issue with all of us at this point, not so much because it directly affects the University—we will deal with this—but because much of Virginia simply cannot address the need to meet payroll if it does not have the direct state appropriations that sustain much of the payroll and the functions I just talked about.

I think those who care about services provided to citizens have obligations to be as vocal as many of you have been in recent months, and I want to commend you for that in the town meetings and letters to legislators, to newspapers, and so on. I think anyone in education probably needs to remember Victor Hugo's observation that one who opens the school door closes a prison and be aware that we are making fundamental choices in the state by the lack of action and that those choices have long-term implications that they have already manifested in much of the state. I've talked in prior versions of this address about the general economic situation in regions of the state away from Charlottesville, and away from northern Virginia. Net negative numbers for 14 years is an economic catastrophe, and that's the general picture of the face of Virginia except in northern Virginia and in this part of Virginia in the years since 1990.

That being the case, the largest issues having to do with investing state money in human capital, in seeing to it that towns like Martinsville and Danville and Roanoke and Bristol and so on do not see absolute collapses of their labor economies and many of those have reported exactly that, that the state's obligation to address that is fundamental, it's enduring, it does not go away. And those are the larger issues that are at stake in the controversy.

There's hope. I want to acknowledge that legislators have themselves begun to address this issue in ways that ought to give us encouragement. A Republican delegate from Spotsylvania whose name is Bobby Orrock, a very interesting man, who's thoughtful I think about both tax issues and the State's obligations, is quoted the other day as saying, “I don't like the sales tax because it's regressive.” He's saying it affects those with the least income the most. It does that. That being said, something's got to give. I'm willing to swallow the toad and take my lumps. That attitude is an important indicator of change. It's part of why we saw some action yesterday in the House.

We've done a number of things in the last three years to deal with budget reductions that came when the state got into trouble in about the year 2000. We have found ways to reduce inefficiencies that result from over-regulation on the part of state agencies. This is an old story for most of you. I want to go through it in detail, but the decentralization, the deregulation, while always a bumpy road, there are patches that seem to be pretty good and then something comes up that you have to deal with. Not always intentionally. Quite often the legislation or the bureaucratic actions that are the most troublesome will not reflect an intended consequence for us, and we get good cooperation when we go back and explain what the cost of a given proposed change or effected change actually is. A good example of that, by the way, is that last year the state inadvertently began to regulate the purchases of computers and other digital devices in the hospital, which is by law a codified autonomous entity, not subject to the state's regulations. This year we had no difficulty getting the error last year corrected. We had support from everybody involved in it. I want to acknowledge that that represents a form of good faith that one does not always see in bureaucracies.

This year, along with Virginia Tech and William & Mary, we requested a study and eventually legislation to award genuine charters to these three institutions, a charter that will acknowledge that they have considerable flexibility with regard to the tuitions charged, that they have already assumed major responsibility—in our case, all but total responsibility—for capital construction and building maintenance, that they can manage procurement systems and personnel systems, and other systems that often are made more costly and less effective by state intrusions on their own. At the moment, there is no organized opposition to this and there's a fairly simple reason. The legislation that we are requesting is essentially identical in its basic themes to the legislation that governs both Michigan State and the University of Michigan, the University of California system, the consolidated University of North Carolina, the University of Texas. To put it another way, no other state lets its bureaucracies meddle in the affairs of the boards of its flagship universities to the extent that Virginia has allowed to happen since about 1990.

The fact that we get assistance with regard to specific complaints is, I think, a favorable omen for the future. Legislators are concerned about this. They understand that it's not taxpayers' dollars that get consumed when we have to deal with excessive expenses, that it's students' dollars and donors' dollars and investment dollars and that we need to find ways to protect those non-state resources because they now pay the core of the cost of operating the enterprise.

The bills are introduced. They were carried forward until the next session to allow for a year of study. The stranded budget bill contains the authorization for the study and the chapter of the budget that has language in it—one more reason we would like to see the state have a budget. My guess is that the study will go forward regardless, but we need to go forward in company with the state agencies that should participate. The fact that we have consent to go forward with the study from the governor, from the major legislative leaders, is a good sign, but there is for both our side and any other side that may materialize, a great deal of work, a great deal of analysis to be done before we're finished with this particular initiative.

Second, we are more dependent on our endowment than ever. There are sundry ways to calculate endowment returns. What really matters is the amount of endowment return that is expected. The expenditure assumptions themselves in major endowments are in the range of 4 to 5 percent of the total value of the endowment. That has been our Board's practice for quite a long time. The total returns are very high relative to other endowments. The total returns are reported to be typically among the top three or the top five large endowment returns in the country.

The absolute dollars held by the University probably ought to be discussed for a moment at this time. We differ from all other public universities in this state and the vast majority in other states in that most of our endowment resources are held by the Board itself. It's the typical custom that entities such as the William & Mary Foundation or the Virginia Tech Foundation hold the endowment and the reason is the belief, never brought to anything like reality in this state, but the belief that in bad times, legislatures may attempt to raid endowments and accordingly, the endowments have been managed at arm's length from the universities. Our approach to the management of the endowment from the beginning has been different because from the beginning, the University's Board was a corporation with a 501C(3) certificate. It is different from boards that are created as simply agency boards to oversee a public function.

The Board at this point manages a little bit over $2 billion. That represents something like a five-fold increase in the sums held by the Board over the course of about 15 years and the Board also oversees by virtue of the relationships of the related foundations the general condition of another $767 million, which is held by these foundations. We will begin this year to report a consolidated endowment total because currently our reporting is out of parallel with everyone else's. That figure will look like something on the order of $2.7 or $2.8 billion with a footnote to explain the amount held by the Board and the amount held by related foundations.

The endowment obviously is a major factor in our capacity to deal with the issues that have arisen this year. The amount available for appropriation if the Board chose to appropriate everything that fell within the spending policy this year is about $157 million. The last time I looked, the state appropriate was about $115 million. The total amount spent from private sources, a good bit of what is generated from private sources goes into endowments or goes into capital construction projects. The total amount spent amounts to a little bit more than the total amount from all state sources. This is gift money, current gift money, endowment returns and so on, so the endowment has become in terms of absolute numbers, especially when combined with annual giving, a fairly dramatic piece of the total.

These numbers I think ought to be encouraging to us. They're thought to be impressive in the world generally, but there's another observation to be made and I make it with a sort of mixed message—71% of the endowment is currently restricted and about a fourth to half of the money that we raise in a typical capital fundraising effort is going to be committed to buildings. The growth of the endowment is largely a function of what the Board does, especially UVIMCO, about which I reported to you previously, but in any event, the Board's success in managing the endowment is a major reason for the good health the endowment enjoys. In prior years, I would've had to tell you that something like 80 percent of the endowment was restricted. What's beginning to happen now is that donors who have been part of the solution of the University's issues for about 15 years are at this point coming to understand in much more dramatic ways the importance of giving the Board discretionary authority to commit money to the areas of greatest need or greatest opportunity. You'd like to see more than 71 percent unrestricted, but frankly, we are not crippled by that. We are simply forced to discipline ourselves in the commitments that we make.

One major source of the budget defense fund that we've used throughout the last biennium to protect the libraries, to support individual faculty members in various initiatives, to provide money to support the Provost with regard to Virginia 2020 science initiatives and other things of that sort is the unrestricted endowment. The Board has been very judicious in the ways it has committed those dollars, and I think we need to recognize that as we move forward with this process of developing self-sufficiency the Board has developed extraordinary sophistication about how to make the University work. We owe the Board a debt of gratitude for that.

Then there's another point about finances that we need to mention and that is that our bond rating is now by all three of the bond assessments in the marketplace—Moody's and so on—AAA or the equivalent. As you know, the state is on Credit Watch. It has been cautioned that unless it addresses its revenue problems, it will be downgraded. The assumption used to be that the downgrade was simply to AA. If one reads the Credit Watch letter, it's fairly clear that they're looking at the whole state portfolio and that the state's practice of assigning debt to agencies is likely to become a problem as the state deals with the reality of not having a budget if that's the end result of this year's Session. Frankly, I think that considering the state's history, one reason to be confident that in the end they will find a solution is to go back to the people and say, “Virginia now has some junk bonds,” is going to be a very expensive political proposition.

To keep the budget balanced, we've cut expenditures. We continue to do that and we're beginning now to raise tuition. We know that raising the tuition levels puts pressure on families. I'll talk about that briefly in a moment, but you've seen what we've put into place with the Board's support in recent weeks to attempt to deal with that problem. We are concerned about students whose families have lower financial means. It's increasingly obvious that rising costs are especially detrimental to families living on limited incomes and that becomes a major issue as we become more tuition dependent.

Totally putting together both tuition increases and steps we've taken to raise money from other sources and what we've done to save money in the operation, what we've been able to address this year is about half of the total reduction from the level of support the state had committed to most recently in the Joint Committee's Report on Base Adequacy. If you go back to Appendix M days, those of you were here in the '80s, the deficiency is probably slightly more, but in any event, about half of the loss has been covered. That means that in some cases classes are somewhat larger. It means that I hear more students telling me they have more difficulty finding the programs they want, especially in the second year. It means that students have to be especially attentive to their obligation to meet the requirement for graduation and to do so in a timely and on track fashion. All of that I think has now become second nature to most students. It's certainly clear in the advising given by the various deans' offices and others who give counsel to students about how to graduate on time and on track.

I mentioned the steps we've taken with regard to financial aid for students. This is a program called Access UVA. I found the other day that there is a web page that describes it. If you go into the home page, type in access UVA I think the third entry down is the one you want to find. It's a fairly complete description of what we have now to publish about the program. This is a complete phase-in of a commitment made several years ago to provide 100 percent of the financial aid for which students qualify under the federal need formulas and to do so through judicious packaging of grants and loans and part-time work. It has several components. First, for families whose incomes are demonstrated on the federal forms to be 150 percent or less of the Federal Poverty Guideline relevant to that family, we will provide scholarship support without requiring that those students either borrow or take part-time work in order to graduate on time on track. With regard to all other students, when students qualify for need-based loans, we are capping them out what they'll be required to use from loan sources, at the calculated cost for an in-state student in the first of the four years in which those students enroll as undergraduates. We're working on simple ways to explain the point, but for a student entering in the fall, it means that the maximum loan obligation for four years would be about $16,000, and we're trying to create a level playing field for both in-state and out-of-state students from families with limited incomes and to do it in such a way as to let families know how to plan for the four-year cost of education.

There are other approaches in the marketplace. George Washington, Harvard, University of Maryland, and so on have followed the leads that UNC set first and we set second in our own calculations. We are providing an incremental appropriation for financial aid within the University's budget of $16 million to cover the calculated cost of this change. In effect, we want to be able to say, as I think we can now, that the cost of attendance is not a barrier to any student who can qualify for admission and qualify based on the federal model for some form of financial aid.

There's a phase-in. The part that has to do with the lowest income families commences this fall. We'll complete the other part next fall. At that point, we will have met the pledge that we made several years ago with regard to 100 percent financial aid and have done it without loading up students with loans. So I feel as though we have made considerable progress there.

I wanted to mention that sponsored research has grown substantially as a factor in the University's overall operation and budgeting. The total sponsored research is about $277 million of which about $204 million flowed directly to individual research programs within the University. That's over 27 percent of the University's total revenues for the year. Scientific research is going to grow as a factor in the budget. It's a fundamental part of Mr. Block's program for the development of the schools. I think in the future we'll have occasion in a speech of this sort to spend more time looking at how and where the research dollars flow and what they mean to various academic activities.

Fundraising also becomes a more important part of the picture, both because of the state financial situation and because of a two-part bit of analysis having to do with private donations. First, that the number of alumni has grown dramatically since the last capital campaign. It has doubled since we began planning the last capital campaign. That alumni participation in annual giving and in campaign giving is now at or near all-time highs for public institutions, both in the number who give and the dollar amounts they give and that the advice we get from alumni, from our own budget, from the various boards of our foundations, is that this is the time to push forward with a second major capital campaign. Most of you will have seen some information about this. The natural cycle for starting such campaigns in self-supporting institutions appears to be about once a decade. This is 2004. The last campaign was kicked off in 1995. This one will go to formal kick-off in 2005, so in what amounts to one generation, we have come to operate more as do the private institutions that use these mechanisms to find the support they need than as public institutions have in the past.

This next campaign is about double the scale of the last one. We are at this point somewhat above $400 million in the preliminary fundraising phase. The campaign target is set right now at about $3 billion. Those of you who've followed the last campaign will recall that we adjusted the target repeatedly, in one case, twice in one week, as we discovered that we had the capacity to raise money we hadn't spotted at the very beginning. That is likely to be the case this time. I can't promise you that the adjustment will always be upward as it was in the last campaign. We don't have a very deep history in understanding how the cycles work. I will tell you that everything we see says that $3 billion is a conservative number for this campaign and so we are very optimistic about it. Mr. Sweeney, your deans, others involved in planning are in I would say the first step of a three-step planning process for it. We're now at the stage of beginning to assess what the real needs are in each area and, frankly, also, we're attempting to find a way to see to it that the campaign does not become capital fund raising for buildings. We believe that about two-thirds of this campaign ought to result in improvements in endowment investments, that we have about a billion dollars' worth of capital needs to meet the South Lawn, the McIntyre School project and so on, but that we have about $2 billion worth of needs that have to do with investable money to support programs in the future. That, incidentally, reflects donor response to the early appeals that we're making for assistance.

In the last campaign, frankly, we were trying to dampen the effects of wide swings in state financial practices, especially the budgets of the Wilder years. The capital campaign in the last go-round did that. The billion and a half or so raised is the fundamental reason why we have the confidence we have now that we can deal with whatever happens with the General Assembly. Obviously deal more effectively with a budget but deal one way or another.

This campaign very frankly is intended to make philanthropic support a much more central part of the support for the University. I mentioned earlier that gift and endowment income now exceeds state support. This particular campaign has the purpose of enhancing work conditions for faculty, of enhancing financial aid programs for both undergraduate and graduate students, especially fellowship programs, of addressing the need for support for the College of Arts & Sciences and for other schools that were not large winners in the last capital campaign, and, frankly, of seeing to it that we move into the era after about 2010 or 2012 in a condition of stability that will allow the Board through its management practices to protect the University's core enterprises more or less for an indefinite time.

A word about enrollment. In 1958, which is the sort of terminal date of what sometimes is called the old University, our total enrollment was 4,500 and we had about 3,000 undergraduates. The ratio of undergraduate to graduate students was about 2 to 1. In 2003, we enrolled initially 19,197 students. Of those, 12,748 were undergraduates. The broad ratio between undergraduate and graduate students has remained fairly constant. That ratio, by the way, 2 to 1, appears to characterize the strongest tier of research-intensive universities nationwide. And the other hand, in that period, we've seen dramatic growth in first professional graduate enrollment. The Darden School; some growth in the Law School, not dramatic, but some; other programs of that kind, so the mix of graduate programs is changing somewhat, but in the end, the growth appears to follow the plans the Board adopted when it first started the growth in the late '50s and early '60s.

Our undergraduate enrollment is growing by about 100 students a year. We expect to have 13,070, for example, in the year 2007. That's about 322 more students than we expect to enroll this year. Two weeks ago, Mr. Blackburn and his staff sent out 4,724 letters of admission. They chose the students to receive those from 15,095 applicants, a slight increase from the previous year. African American applicants this year totalled 629; last year, 512. We are seeing some comeback as the combination of the settlement of the Michigan litigation and Mr. Blackburn's very consistent recruiting efforts is beginning now. Those two are beginning to show effects. Hispanic applications—1,018 this year; 912 last year. Other things are changing: 65 percent of this year's applicants applied online. Those students learned their admission status at 5:00 p.m. online on the day when the letter went out, so the old days of the fat envelopes and the thin envelopes are less pressing now for most families because one can check e-mail or check a web site and learn what's happened.

The median SAT score of those offered admission this year is 1390. The mean GPA allowing weighting for advanced placement courses, which remain the single strongest factor in the qualification of our incoming students, 4.07. I want to make another observation about our students. There will be a few more as I proceed through these remarks. The growth of undergraduate directed research is one of the most dramatic changes reported in any major research university in the last decade or so. We believe at this point that about 50 percent of our students—that's about 6,000 altogether—are conducting independent research under faculty guidance at this time. One hundred forty research teams—these are student/faculty teams—applied for this year's Harrison Undergraduate Research Awards. Forty-three projects among those were granted Harrison Awards. That is $3,000 to a student or a pair of students; $1,000 to the faculty member for the purpose of supporting collaborative research. Over some four years, we've awarded 150 of these awards. We're looking now to increase the number, obviously.

In addition, there are other evidences of the importance of undergraduate research here and elsewhere. Five of our students, for example, received Kennan Awards this year for summer research and the Kennan Awards are focused on research having to do with Jefferson's original central Lawn, central Grounds development.

Next summer, Mr. Block and his colleagues will be hosts to a global meeting convened by the U21 universities of which we are one, for the purpose of comparing approaches to research conducted by undergraduate students and attempting to build broader experiences for undergraduate research in the curricula nationwide and globally. That meeting we believe is an important chance both to highlight what faculty and students have accomplished here to bring it to the attention of a global audience and to learn. Our colleagues in Singapore and Australia and New Zealand and the U.K. and so on have extraordinary experience of their own, and we learn a good bit by each of the contacts that we have with them now that U21 is a going concern.

One last note about undergraduate research is that unlike other major research universities, we find that a substantial number of our undergraduate researchers are doing their research in the humanities and the social sciences. A more general pattern is that undergraduate research is a function of instruction in the sciences. In fact, we looked back over the total listing of Harrison Awards since they began and it appears that we have actually given more for what you would call humanities projects broadly than for purely scientific projects. I think the balance speaks well for the curriculum that the College and the other schools have developed and have used as a way of teaching our students.

This has been a banner year for faculty accomplishments. You have, I believe, in this book a listing. I won't try to repeat it, but I do want to mention some of the highlights. Louis Nelson, an assistant professor in the School of Architecture, is the recipient of a Mellon Postdoctoral Fellowship that he's using at the Newberry Library. His work has to do with early American architecture.

Ed Ayers, the Dean of the College, was named Professor of the Year for Doctoral and Research Institutions by CASE, the Council for Advancement and Support of Education. I should say as a footnote that I've never heard of a dean or an administrator receiving that award before and I've tracked it for a number of years. I think Ed deserves special commendation for what he accomplishes in bringing together the two sides of his own commitment with such high excellence. In March, he won the Bancroft Prize for In the Presence of Mine Enemies, War in the Heart of America, 1859 to 1863.

Jerome McGann, the John Stewart Bryan University Professor and the developer of the web-based Rossetti archive, won the first Richard W. Lyman Award. This is a prize that's related to earlier support that Jerry received intended to sustain his work with regard to digital editing, one of the most extraordinary total packages of support I've ever seen afforded someone in the humanities.

Jose Fuentes, associate professor of environmental sciences, won the World Meteorological Organization's Norbert Gerbier International Award. Sidney Hecht, the John W. Mallet Professor of Chemistry, was elected a Fellow of the American Association for the Advancement of Science. Nicholas J. Garber, professor of civil engineering, was elected to the National Academy of Engineering, was given the Edmond L. Ricker Transportation Safety Award by the Institute of Transportation Engineers for his larger contribution to transportation engineering.

Brian Smith, an assistant professor of civil engineering, recognized by the Council of University Transportation Centers as the Outstanding New Faculty Member in the country in transportation in the year 2003. Randy Bell, an assistant professor of education, and his former doctoral student, Karen Irvin, won the national Technology Leadership Award for a paper on using technology in student undergraduate teaching.

Peter Sheras, a professor of education, was elected to the American Psychological Association's Council of Representatives. He's president-elect of the American Psychological Association's Division of Media Psychology. Richard J. Bonnie, the John S. Battle Professor of Law, director of the Institute of Law, Psychiatry and Public Policy, has been awarded the American Psychiatric Association's Special Presidential Commendation in recognition of his contribution to the APA's programs for more than two decades and especially the programs of its Council on Psychiatry and the Law.

Bob Harris, the dean of the Darden School and the Charles C. Abbott Professor of Business Administration and also the C. Stewart Shepherd Professor of Business Administration, is serving on the Council of Deans of the Leadership Education Development Program called LEAD. This program encourages minority high school students to pursue business education and careers.

And Rob Vaughan, a lecturer in business administration, president of the Virginia Foundation for the Humanities and Public Policy, was elected president of the National Humanities Alliance. Fred Broome, Jr., who's the Frank S. Kaulbach Professor in Commerce was appointed to the Virginia Board of Accountancy. David Glenn Mick, the Robert Hill Carter Professor of Marketing, was elected President of the Association for Consumer Research.

In medicine, Tim Garson, the vice president and dean, was appointed to the National Advisory Council for Health Care Research and Quality of the Agency for Healthcare Research and Quality. Dick Guerrant, the professor of international medicine and director of the Center for Global Health, has been elected to the Institute of Medicine of the National Academy of Sciences. Paul Mintz, professor of psychology and pathology in internal medicine, also director of the Clinical Laboratories and Blood Bank in the Medical Center, has been named president-elect of the American Association of Blood Banks.

Vamik Volkan, professor emeritus, founder of the Center for Mind and Human Interaction, won the 2004 Sigmund Freud Award given by the City of Vienna in collaboration with the World Council of Psychotherapy.

In nursing, our Dean Jeanette Lancaster received, first of all, the American Association of Colleges of Nursing Government Affairs 2003 Grassroots Star Award, in recognition of her work in advancing nursing education and research through public advocacy. Jeanette is also now president-elect of the American Association of Colleges of Nursing.

Courtney Lyder, who is the University of Virginia Medical Center Professor of Nursing, that's a professorship created by our physicians for our nursing school, and professor of internal medicine and geriatrics, is the first nurse to give the [Bernard Hornberg] Memorial Lecture on Chronic Wound Care at the University of Pennsylvania School of Medicine. He also was the Visiting Minority Scholar for 2004 at UNC-Chapel Hill in the School of Nursing.

That's simply a sample. The list ran to something like 20 pages when I looked at the entire listing. If one wants to award applause this year, one place to award it is for the University's faculty. This has been a spectacular year in terms of faculty accomplishment. I'm deeply grateful for that. I need to say to you, also, that your successes are a major reason for your institution's successes. This place is built on the demonstrated excellence of the student body, of the faculty, of those who support it financially and in other ways recognize that in their own gestures. I hope you feel both proud and, I guess, in a sense, privileged, first of all, to do the work you're doing and, second, to work next to those who have achieved such extraordinary honors.

We are continuing to build as we attempt to meet the University's larger needs. Since 1990, the State has provided about 14 percent of the total cost of construction undertaken here. That's a kind of record among public universities. It's not necessarily a record you want, but the fact that self-financing and, particularly, donor financing, has allowed for such an extraordinary period of growth and development and also supported building maintenance which is a core obligation the State has not accepted in current times. Those facts together I think make the news particularly good news.

In September, the School of Engineering and Applied Science broke ground for Wilsdorf Hall. Many of you remember Heinz and know Doris. The building named for them will bring researchers in material science, chemical engineering and nanoscale technology together to work under one roof. It's essential to the completion of the Virginia 2020 goal to develop excellence in nanotechnology.

Then a host of other new building projects. In the course of the next several months, we will open the Harrison Institute for American History, Literature and Culture and also the Albert and Shirley Small Special Collections Library, which is the underground component of the new structure in front of the library. In about two years, we will open the John Paul Jones Arena, which when I walked over there yesterday appeared to be at about the third level in the structural work. I'm told that the steel framing will appear suddenly in the next several weeks and we'll begin to be able to see the overall structure of the building.

The addition to the Aquatics and Fitness Center is on time, on track. The hospital expansion project, which has to do with the need for additional operating suites—on time on track, self-financed. We will be, in the course of the next seven or eight years, making an unprecedented set of investments in the University infrastructure. We're looking over the next three years to invest about $500 million in upgrades of basic structures. The South Lawn project, the McIntyre School's move back to the Lawn, and other similar projects. These are vast undertakings. They're undertakings by and large that depend on private donors to pay the cost of the work done. They've obviously been major commitments for Dean Ayers and for Dean Zeithaml. They represent very frankly the future that we have to seek.

I should say also that the progress on the Arts Precinct is about to become visible. Some time in the next several weeks you should see the first signs of activity with regard to the Studio Art Building. I'm told that the euphemistically named temporary building between Fayerweather Hall and Carr's Hill will come out in the course of the next several months. Temporary buildings seem to last about three generations, and that the gutting and renovating of that structure, Fayerweather, to house art history will move forward, so projects of that kind will become visible.

David Neuman, who is the University's Architect and has general responsibility for physical planning, has incidentally been working very closely with Dean Ayers and with others responsible for the academic component of planning several of these structures and I want simply to say by way of introduction of David Neuman that we are moving into a very different approach to planning. In order to address the need to get the maximum value out of the kind of dollars we have to raise in order to build, we will implement over the course of the next year or so a system that the Board will be discussing this weekend that has to do with the need for an organic plan describing work to be accomplished, change to be achieved, improvement or excellence to be attained within programs as a first step toward the development of building proposals. We have for a number of years had to arbitrate between an external vision of what a building ought to be and internal needs that were attempted to be met within the building. Some of our most difficult settlement problems, and the one I would use because it's probably going to be less inflammatory than some of the others is Wilson Hall—wonderful exterior, frequently rehashed interior. We will begin planning buildings from the inside out, once the Board defines the policies for that, and discover the appropriate larger architectural considerations as we discover the programmatic needs that drive the building. We believe that will both affect economies and make for better buildings, so I hope you will assist us as we move in that direction.

Relations with neighbors have always been important. They obviously remain so, especially with this amount of construction coming. We have tried to strengthen the Office for Community Affairs as way of providing better services to the neighbors. Very frankly, neighbors' opinions are critically important to us and we acknowledge that from time to time we have failed. The most dramatic failure I can think of was in the discussions that led up to the Newcomb Hall Garage. We've seen more recent controversies, but frankly they were not as fundamental with regard to our processes as some of the earlier ones, so while I don't enjoy the controversies, I think we are making some progress and I commend Mr. Sandridge and others who have worked on those things for what they've done.

I want to talk for a moment about student housing. This is not a customary topic in speeches of this kind, but some issues are beginning now to seem to be very important. The Cavalier Daily reported a bit on some of them this morning. We house about 6,600 students on the Grounds. That means that about 12,000 to 13,000—in a typical year, about 13,000 tenants—in the surrounding rental marketplace, city and county, are University students or post-docs or something of that sort. In the next year, we will raise our housing stock to about 6,900 by completing renovations and adding a bit of capacity. We house 100 percent of our first year students; about 50 percent of all undergraduates; about a third of all students. There are issues. We need to address what to do about the antiquation of the Alderman Road dormitories. Those dorms are ones above Scott Stadium. Harry Porter used to say that they're the ones that look like a train wreck. They were built to structural standards, the state standards, of the late '60s. They had a predicted lifespan, believe it or not, of 20 years. They have exceeded the predicted lifespan and the state's engineering standards. They need either massive renovation or replacement. I believe that the general view on the Board at this point is that replacement is the better approach.

There are issues having to do with siting—is that the highest and best use of that space? With competing future uses of the space such as expanded laboratory facilities for the sciences, with the need to look at adjacent spaces such as the space formerly occupied by the State Transportation Research Centers. All of those spaces are currently under consideration as Leonard and others move through the process of determining how to do the building. The master plan currently calls for building residence halls on Ivy Road, on Emmet Street. We're looking to build traditional upper class housing in the vicinity of the new parking garage at Emmet and Ivy. We have other locations in which we believe we may be able to develop a concept for mixed use housing. Our family housing stock at this point is badly deteriorated. It needs probably replacement, but at the very least, substantial reinvestment and there are other issues having to do with that kind of housing.

The CD story this morning, which I hope you will read, has to do with something else and that is that I'm becoming increasingly concerned about the safety and well-being of students who live in rental properties. Not all rental properties bother me. Frankly, there's a great deal of excellent rental property on the market and not all issues in rental housing are caused by the landlords or the managers. Tenants cause quite a number of issues that exist in any rental property. Tenants can, for example, remove batteries from smoke alarms. Tenants can create unsafe conditions in hallways by pilling up trash or luggage or whatever to make it difficult to leave the building. Tenants can disable locks. Tenants can park where they don't belong and create hazards or other kinds of problems. All of that said, however, with such a massive impact on the local rental market, we operate in a climate in which there is no governmentally provided tenant's advocate. There's nothing like an ombudsman employed by the city or the county to ameliorate controversy between tenants and landlords and frankly, the balance of power in that relationship belongs to the landlord.

Landlords in this town can change leases by posting notices on their web sites and they claim that's sufficient notice to involve a change in the lease. Landlords can contract with towing companies to remove tenants' cars when they oversell the spaces in their parking lots and tenants park on grass or on driveway sides or whatever and the conditions of the contract are such that the student tenant has no leverage, even with regard to the amount charged for the towing service.

It is time for a balance to be re-established. This doesn't have just to do with tenants' right issues. It has to do with fire and what happens when fire occurs. It has had to do, as those of you who read the local newspapers will recall in the course of the last three to five years, with rates. It's had to do with whether or not student properties were adequately safe and issues of that kind simply won't wait.

I want to go one step further and make the observation that I wrote rather casually in one of my little columns in Alumni News about a year ago, that I have some concerns about the predatory nature of the local rental market. Students are persuaded as 18-year-old first year students that unless they enter into contracts for housing leases in September or October of the first year away from home, they will have no place to live in the fall. That's a practice that I can't identify in any other rental market. In most rental markets, as you know, rental properties are available in the month in which you sign the lease. That seems to be a characteristic of the local market. Students have to make their commitments at a time when they don't know how to shop. They have no history of signing leases. They don't know precisely what leases mean. That's predatory.

We will begin now to provide a substantial part of the University's housing stock on terms that will make that housing available through commitments students can make, if they wish to do so, as soon as they enroll in the fall. We intend to guarantee that any student who has housing as a first year student and wants to remain in student housing can do that. We intend to see to it that students in student housing in any given year can arrange to stay in the same room if they wish to do so in the following year. That is to say, we're going to try to rationalize the marketplace at this point by seeing to it that students have some way to realize that they are not in fact victims of what goes on in the marketplace.

But I want to make clear that I see this as an issue for the whole University. It's not just a student issue. It's a matter of balance and fairness in the marketplace and frankly, it has to do with the well-being of the student body. It seems to me it's an issue for every faculty member who has any dealings with students, for every staff member. We have created an Off-Grounds Housing Office, bringing back a function that existed years ago. We will become more activistic. Leonard and I are working now on a statement that I will publish before the end of the school year to describe what we see as good practice in the rental market. It seems to me that we need to begin to say what we stand for as a community of adults with responsibility for young people and make sure that local officials both enforce their laws as they exist and discover innovations when they're available to improve the quality of the housing stock.

Finally, I want to acknowledge that this has been a year in which there's been substantial debate within the University about topics that I think are important. We had in the course of the year since the last of these addresses, an attorney general's opinion makes clear that neither the University nor a city or town has the capacity to stipulate wages as part of a contract with a vendor. That has to do with the living wage campaign. It's a campaign that, as I think you know, I favor. I think its larger purposes are sound and right. The basic problem is that it continues to be pursued here as though it were a local issue when by the attorney general's opinion it is a matter of state law that says that General Assembly has to take the action to remedy the situation.

We've seen a number of issues having to do with what are sometimes too loosely called “benefits” raised by gay, lesbian, bi-sexual students and faculty members and outside persons who take an interest in their well-being. I think it's hard not to be sympathetic in some sense with the issues that are raised, but I want to point out a couple of things about the controversy. One is that we came very close to seeing legislative action that would have allowed the extension of health insurance benefits to partners. I think most of you recall that the bill passed the House and then failed in the Senate. The fundamental issue there obviously is the national debate about the definition of marriage and the fact that Virginia law, like the law in 38 states all together, specifically defines marriage as the lawful union of a man and a woman. There's a bit more to it, and I think that in future discussions with the General Assembly, those who represent the affected persons will have a good chance to make larger arguments. For one thing, there are large numbers of families whose children are cut off from health insurance because of the restriction in the state code. That issue seems to me to be a compelling issue. We need, in general, health insurance reform in the nation and in this state, but to have an excluded population of children who are in no sense responsible in any way for their condition with regard to the availability statutes makes no sense [end of recording, side a]

... with a student group called Sustained Dialogue, a group that has worked this year to create discussions among student groups on issues having to do with group relations and interpersonal relations. What I will say about the group is that it is one of the most broadly representative student groups I've ever seen and that its dialogue shows every sign of having been both sophisticated and constructive and from what I can tell, it is a student-run initiative. I felt after an evening with these students that they had accomplished something very important for themselves and for us by discovering within the context of a place committed to free speech a particular exercise of it that actually improves the quality of their education and their lives, so I commend them.

Second, if you've followed the newspapers in the last week or so, you are aware that a student group has convened a conversation with the Charlottesville chief of police about investigative tactics that are being used as the police look for a suspect in the so-called serial rapist case. That the dialogue has occurred at all seems to me to be an important sign of progress, but I want to commend both the students and the police officials for being willing to have a public reported dialogue on an important issue of that kind within the University. I don't claim to be an authority on tactics of investigation. I think everyone feels the kind of uneasiness with what's been reported that the students who convened the discussion feel, but I don't know of a chief of police, certainly not in my years at Berkeley, who was willing to sit with students and discuss issues that were issues of that gravity, so I commend both parties for convening that discussion and for carrying it forward.

A very, very brief conclusion to these remarks—troubled times I think provide excellent motives for progress and for change. We have lived with a certain amount of trouble for almost a decade and a half now having to do with the ways in which the state has sought to reduce its commitments to education. We found ways to deal with those things. I've had occasions in these remarks to mention our students, staff members of many kinds, faculty members, certainly our Board, and I've also had occasion to refer to individual deans, to individual vice presidents. In the course of putting together remarks such as these each year, frankly, the most memorable experience that occurs to me and I think to those who work with me on the assemblage of facts and so on is simply the extraordinary character of those who contribute to this place.

We are well beyond the point of merely surviving. We have found a way to become, albeit in a popular ranking, the nation's strongest public institution. To slip away and come back to that, we are discovering ways to articulate our purposes that have to do with human morality, with free discussion, with the absolute necessity that every viewpoint be heard, understood, pursued to the point of whatever logical conclusion it has. Those I think are signs of good health.

Mr. Jefferson—you can't end a speech here without quoting him—as you may recall, was not able to persuade the state of Virginia to pay its bills in 1819. That notwithstanding efforts of at least one of our recent governors to find some way the state had, but he said this: “The tax which will be paid for the purpose of education is not more than the thousandth part of what will be paid to priests, kings, priests and nobles who will rise up among us if we leave the people in ignorance.”,

When I commend students for sustained dialogue or for opening conversations with the police, when I seek your participation and effort to improve the safety controls that exist within the student housing market, when I commend our deans or our faculty for the work they have done, in a way I guess I'm expressing confidence in the larger purposes of the University. No institution is perfect. No institution lives its life without making mistakes, without rediscovering directions and so on, but this has been a time of vibrancy and vitality in this place and it has been that because of individual efforts, including yours, so thank you for those.