February 8, 2005

By Dan Heuchert, Anne Bromley and Fariss Samarrai

In forecasting tuition for the next five years, U.Va.’s Board of Visitors — meeting Feb. 3 and 4 in the Rotunda — faced a choice between charging what the market will bear and paying for what is needed.

No vote will be taken until their March 24 meeting, but board members appeared to favor the more conservative pricing plan — which ties tuition not to market value but to the total cost of education. Such a plan could raise tuition by 9.95 percent in each of the next five years — or more, should the state fail to meet its funding commitments.

By the 2009-2010 academic year, Virginians would pay $8,389 in tuition and fees, and out-of-state students would pay $28,899. The total “sticker price” — including room and board and other fees — would rise at a slower clip, between 7.8 percent and 8 percent annually for in-state students and 6.3 percent annually for out-of-state students, under the model discussed.

The tuition discussion highlighted a two-day session that also included talk of how to address the University’s deferred maintenance backlog, a progress report on the search for a new chief diversity officer and a celebration of politics professor Larry J. Sabato’s million-dollar gift to U.Va.

The five-year tuition look-ahead was made possible by the Virginia General Assembly’s anticipated passage of a plan to reform the relationship between the state and its public colleges and universities. One of the measures included in the plan would affirm boards of visitors’ ability to set tuition rates; another mandates creating six-year financial plans.

“This is an extraordinary advance,” said board member Thomas A. Saunders III.
The tuition proposal discussed by the board would help fund the $137 million that University officials forecast will be needed to meet the cost of education, including funding the AccessUVa financial-aid program, boosting faculty salaries, providing for a 3 percent annual salary increase for administrative and professional faculty and classified staff, and increasing graduate student support. The proposal would provide about $88 million toward that goal.

The state would provide an additional $47.4 million if it meets its agreement to bankroll 67 percent of the cost of attendance for each in-state student enrolled. It currently meets about 34 percent of that cost, said Colette Sheehy, vice president for management and budget.

If the state fails to meet its goal, tuition could go even higher, said Leonard W. Sandridge, executive vice president and chief operating officer.

Tuition and state money would be supplemented with private funding, which provides the University’s “margin of excellence,” Sandridge said.

The board also discussed a more market-based approach. There are indications that suggest students could afford to pay more. A survey of applicants who were accepted to U.Va. but chose to go elsewhere found that 78 percent of in-state students and 84 percent of out-of-state students who made such a decision opted to attend more expensive schools. Meanwhile, only 25 percent of current students qualify for financial aid, said Melody Bianchetto, director of the budget.

There seemed to be little enthusiasm among board members for a market-based pricing approach, however. One model that was discussed — but not recommended by University staff — would have differentiated tuition prices based upon one or more factors, including student demand for classes or programs, future earning potential, the instructional cost of disciplines or programs, and the student’s year in school.

Board members were more concerned about graduate student support — particularly a survey that reports that 40 percent of graduate students reject U.Va. admission offers for financial reasons.

The tuition model proposed would increase in-state graduate student tuition by 6.3 percent in each of the next two years and hold out-of-state increases nearly steady, with the ultimate goal of creating a $10,000 annual differential between in- and out-of-state tuition. In 2006-2007, Virginians would pay $8,861 annually, while out-of-state students would pay $18,861.

In-state Medical School students would see tuition and fees rise between 5.3 percent and 8 percent during the next five years, to $32,695 annually. Out-of-state students would pay $10,000 more.

In-state Law School students would see increases of 6.3 percent to 6.5 percent, to $35,600, with out-of-staters paying $5,000 more.

In-state Darden School students would see increases of 6.2 percent to 6.5 percent, to $41,000, with out-of-staters paying $5,000 more.

Diversity chief search proceeding

The Special Committee on Diversity heard a progress report on the search for a chief officer of diversity and discussed the challenge of trying to increase procurement from small, minority- and women-owned businesses.

Yoke San Reynolds, vice president for finance, who heads the 12-member search committee, said there has been “tremendous interest” in the position. The committee is screening almost 75 potential candidates.

The search committee plans to interview top applicants in late March and have a new administrator in place July 1, after University President John T. Casteen III makes a final selection in May.

Warren M. Thompson, chairman of the board’s diversity committee, urged timeliness in the effort, but agreed with Saunders, who said the University needs to get “the absolutely best person” for the job.

Casteen briefed the board on the implementation of other recommendations from the commission’s final report, many of which are scheduled to begin this fall. They include developing a system for reporting racial incidents; creating small, first-year discussion groups on diversity and other issues; providing faculty funding to incorporate community involvement in courses; restructuring and enhancing graduate student funding with an eye toward attracting more minority students; and encouraging students to participate in community-based research on diversity and equity.

Sheehy also described the University’s efforts to comply with requirements Gov. Mark Warner issued in July for improving the state’s purchasing from businesses owned by women and minorities, as well as small businesses.

Warner’s executive order establishes a framework for small and women- and minority-owned businesses to participate in the state’s purchasing programs. It charges each Virginia employee who purchases goods and services with making the objective of supplier diversity a reality, Sheehy said.

The order came after a study found the commonwealth to have one of the lowest percentages of purchasing from minority businesses the survey firm had seen — a little more than 1 percent of spending with women-owned businesses, and less than a half of 1 percent with minority-owned firms.

U.Va.’s comparable procurement spending for the last fiscal year was slightly higher than the state’s: almost 2 percent with women-owned businesses and 0.7 percent with minority-owned firms.

Women and minorities own 5 percent of companies in Virginia.

The University has had a division dedicated to minority procurement for about 10 years, and revised its services this fall to comply with the governor’s order.

Directed by Donald W. Jones, the Office of Diversity Procurement Programs has developed several outreach efforts, including hosting an annual minority vendor fair, soliciting price quotes from firms and providing educational programs on how to do business with the University.

Sheehy also described new strategies, such as requiring U.Va.’s prime construction contractors to provide a plan for how they intend to use small, women- and minority-owned subcontractors on the job and awarding multiple contracts with such firms for a single product or service from which U.Va. departments can choose.

Thompson urged Sheehy and procurement administrators to increase efforts to let vendors know of the importance of this effort. Board member Susan “Syd” Dorsey said she is helping to identify what barriers qualifying firms may face when trying to work with U.Va.

“This board is determined to improve diversity efforts, so be sure to keep the pedal to the metal,” Rector Gordon F. Rainey Jr. concluded.

Paying the piper on deferred maintenance

Alarmed by a growing maintenance backlog (“A Building Crisis,” Jan. 28 issue, www.virginia.edu/insideuva/building_crisis.html), board members discussed financing options for chipping away at it.

University officials estimated that it will take at least $125 million — and perhaps as much as $200 million, Sandridge said — during the next 10 years to elevate the condition of the University’s building inventory from a “poor” to “good” rating.

Keeping it there will likely require an additional $15.2 million annually by 2015.

The backlog worsened four years ago, when the state slashed maintenance funding during a budget crisis.

Board members quickly concluded that the commonwealth — beset by similar difficulties in public buildings statewide — would be unlikely to play a significant role in the recovery.

They appeared to favor dividing the task of financing repairs into two parts: reducing the backlog, and identifying funds for ongoing maintenance needs.
Funding for the first part would likely have to come from a mix of sources, the board concluded.

It should be possible to raise private funds to maintain the University’s most historic buildings, Sandridge said. Board members suggested issuing general obligation bonds and liquidating unneeded assets, but appeared to rule out dipping into the University’s unrestricted endowment and disagreed over allocating tuition revenue.

“I have a philosophical problem with tagging students for our inability to keep up with maintenance over the past 15 years,” said vice rector Thomas F. Farrell II, who suggested that tuition be placed “further down the list” of possible funding sources. But other board members noted that current students benefit from buildings built in the past and could shoulder some of the burden.

To finance ongoing budgets, board members William G. Crutchfield Jr. and Mark J. Kington advocated adding maintenance support to the total cost of new construction, even if it slows the pace of construction. “If it’s harder, it’s harder. That’s the reality,” Kingston said.

Addressing ongoing maintenance issues should be part of a process of long-term financial planning, said John O. Wynne, who suggested the board form a committee for that purpose.

University officials will come back to the board with a funding proposal.

“The important part is to draw a line in the sand, that as of 2005, this problem is not going to get any worse,” Farrell said.

Medical Center in Good Health

The Medical Center’s financial health remains strong with a high volume of patients, R. Edward Howell, vice president and chief executive officer, told members of the Medical Center Operating Board. The hospital is increasing its number of beds for a growing number of inpatients, and there is an increased flow of operating room patients.

Larry L. Fitzgerald, the center’s chief financial officer, reported that during the first five months of the 2004-2005 fiscal year, the hospital had an operating margin of 5.8 percent, above the goal of 4.6 percent.

The board passed a resolution incorporating the Virginia Ambulatory Surgery Inc. into the U.Va. Health System.

U.Va. acquired VASI in July from the U.Va. Health Services Foundation. It was retained as a separate entity under the interim management of the Health Services Foundation in order to provide for a smooth transition of the surgery operations and management to the Medical Center.

Because the Medical Center wants to fully integrate the surgery center into its operations and seek “provider-based” status under Medicare laws and regulations, VASI could not continue as a separate corporation, Howell said.

Medical school Dean Dr. Arthur “Tim” Garson Jr. introduced Dr. Michael D. Dake, the new chairman of radiology who recently arrived from Stanford University. Garson said Dake will lead the department into “a new era of molecular medicine.”

Dake noted that the field of radiology is “exploding” with new nonsurgical techniques that are making high-quality medicine less invasive.

‘Quiet’ campaign marches on

The University’s $3 billion campaign officially remains in its “quiet phase,” but has already raised $563 million through December, Robert D. Sweeney, senior vice president for development and public affairs, told the Board of Visitors. Major projects attracting support include the John Paul Jones Arena, the South Lawn Project and the cancer center.

The cash flow is 15 percent ahead of last fiscal year’s pace, he said. Gifts in December totaled almost $56 million, more than doubling the total raised in the previous five months of the fiscal year. With six months to go, the fiscal-year-to-date total as of Dec. 31 was $111 million.

Expanding conduct standards

The board approved changes in the Standards of Conduct that extended the student-run University Judiciary Committee’s jurisdiction to all of Charlottesville and Albemarle County for several offenses.

Under the changes to standards two and nine, the UJC will be better able to adjudicate cases involving “conduct that intentionally or recklessly threatens the health or safety of any person” — most often, driving under the influence — or causing “substantial damage … to property” that occurs anywhere within the city and county.

No honor referendum

After months of discussion, the Honor Committee has voted not to seek changes to the University’s single sanction for those convicted of lying, cheating or stealing: permanent expulsion.

The committee voted down a proposal to put a suspension option to a referendum on Jan. 30, said chairwoman Meghan Sullivan, and a petition effort to place an alternative to the single sanction on the ballot was unlikely, she said.

Sullivan said she met with student leaders who were seeking changes, and “the sense I got from them was that they were not going to put it on the ballot,” except perhaps as a nonbinding advisory question.

Honorable mentions

• Tom Leback, U.Va.’s capital budget manager, received the Samuel Crockett Award, given by the University’s College at Wise in recognition of his efforts to strengthen the relationship between the college and its parent institution.
Interim chancellor Ernie H. Ern cited Leback’s work on the college’s capital plan, noting that Leback has had a role in constructing more than 50 percent of the school’s current educational and general space.

• The board recognized members Terrence P. Ross and William G. Crutchfield Jr., who were attending their final meetings as board members. Ross, a Washington lawyer, and Crutchfield, owner of a catalog electronics business, have each served two terms and are not eligible for reappointment.

• The board also recognized fourth-year student Meghan Sullivan and 2004 graduate Justin Mutter, who recently were named Rhodes Scholars, and Markus Weisner, who won a George Mitchell Scholarship.