October 7, 2003

By Lee Graves

U.Va. treasurer Alice Handy presented a report on the University endowment Friday that was both swan song and tour de force.

Handy, who is leaving her post of 29 years at the University to pursue personal business interests, has guide the endowment to elite status, and for that she received a long and loud ovation from the Board of Visitors’ Finance Committee.

The University’s endowment stands at more than $1.8 billion — $2.1 billion for pooled funds.

The one-year return of 9.2 percent for pooled funds stands second only to Harvard among the nation’s universities and far outpaces the average of 2.9 reported among 122 educational institutions last year.

William H. Goodwin Jr., chairman of the board’s Finance Committee, thanked Handy for her years of service and said both her performance and that of the endowment have been "outstanding by any measurement."

Handy said that decisions made by the board in the 1970s to allow more diversification in investments have paid off handsomely. In looking at the cumulative endowment performance, $1 million invested in 1974 is worth $38.1 million this year. In distribution per share, the endowment went from less than $10 per share in 1974 to about $115 per share, far more than the $45 per share if the University had stuck with more conservative investment practices.

Over time, the University Investment Management Co. has shifted a greater percentage of its asset allocation from domestic equity to hedge funds, which account for about 60 percent of the current allocation.

"Because we were able to invest more aggressively, with the board’s approval, you now have $115 [per share] to spend," Handy said.

The endowment gains have helped offset decreases in state funding in recent years, and the current operating budget shows revenue from the endowment exceeding the percentage of state support for the first time in the University’s history.

Preliminary tuition discussion

In another money matter, the board began preliminary discussions about the tuition picture for the 2004-05 academic year. There are many variables, including the level of funding from the state, but Colette Sheehy, vice president for management and budget, laid out the basic pricing policy in considering tuition.

First, the University wants a tuition structure that will help it reach its goals for salaries and for base budget adequacy over the next four years. Second, the policy should take into account both in-state and out-of-state market factors while recognizing the public nature of the University. Finally, beginning next year U.Va. will offer 100 percent of demonstrated need for financial aid to all undergraduates.

The board will not act on tuition until April, and the topic is expected to be on the agenda again at its February meeting. As a means of framing the discussion, Sheey presented a range of possibilities. The best-case scenario, which depends on adequate state funding, would be for undergraduate tuition to increase a total of $510 per student, which amounts to 11 percent for in-state students and 2.5 percent for out-of-state. The worst case, Sheehy indicated, would be an increase of $1,035 per student, a 22.5 percent hike for in-state undergrads and 5 percent for out-of-state undergrads.

Board member John O. Wynne stressed that is important that the board try to avoid setting double-digit tuition increases for in-state students.

L.F. Payne, also on the board, agreed. "This year is particularly important to moderate in-state increases," he said.

While specific figures for graduate students were not presented, board members discussed continuing to put a priority on competing effectively for the best graduate students by setting and maintaining a differential between in-state and out-of-state students.

Both the Law School and the Darden Graduate School of Business Administration have achieved self-sufficiency — "A red-letter day as far as I’m concerned," noted rector Gordon F. Rainey Jr. They expect to set out-of-state tuition to meet the market rate of peers and build in a $5,000 discount for in-state students.

While self-sufficiency might be a goal for the Medical Center, attaining it is "a long way away" because of the cost of educating a medical student, said Leonard W. Sandridge, U.Va.’s executive vice president and chief operating officer.

In-state surcharges are expected to continue, with first- and second-year in-state medical students paying a $2,500 surcharge, and third-years paying $1,000. A set difference between in-state and out-of-state tuition will be considered.

In other Finance Committee matters, board members did the following:

• Voted to authorize Sandridge to ratify a programming agreement with WVTF-FM and to take steps to transfer the license and other pertinent assets of WISE-FM to WVTF-FM;

• Approved the appointment of Peter F. Dolan, a 1988 Darden alum who also is director of private equity of the Harvard Management Corp., to a four-year term on the board of UVIMCO;

• Approved two-year operating budget requests to the state for review before Gov. Mark Warner submits his budget proposal to the General Assembly;

• Amended its policy concerning leasing property so the University can come in line with autonomy already granted by the General Assembly.