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Financing Academic Excellence
FY14–FY17
To the Readers of This Report
The assumptions in this four-year financial plan—including increases in
tuition, tuition differential, and changes in endowment management—are
subject to discussion and review by the Board of Visitors no later than its
May meeting. This draft should be considered in this context. This report will
be finalized and an executive summary written after that meeting.
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2
Contents
I
Executive Summary .
II
Operational Excellence .
III
Academic Division Operating Sources Of Funds .
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19
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27
4Sponsored Research. .
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6Philanthropy. .
33
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39
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43
5 Facilities and Administrative Cost Recoveries. .
7 Endowment Distribution. .
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8 Athletics, Residence Halls, and Other Auxiliary Enterprises. .
Academic Division Operating Uses of Funds .
1 Faculty Advancement. .
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49
55
63
65
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69
3 AccessUVa/Financial Aid. .
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75
4 Information Technology. .
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79
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85
2 Staff Compensation and Faculty/Staff Benefits. .
5 University Library. .
v
Treasury Management .
VI
Strategic Investment Fund .
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VII Schedule of Operating Sources and Uses of funds .
VIII Schedule of Capital Sources and Uses of Funds .
89
97
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101
. . . . . .
109
Unless otherwise noted, all statistical information contained in this plan is based on institutional data generated by the
University or data from the Integrated Postsecondary Education Data System.
Financing Academic Excellence FY14–FY17
9
21
2Enrollment . .
IV
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5
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1 State Appropriations . .
3Tuition . .
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I
EXECUTIVE SUMMARY
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7
Executive Summary
To be completed after discussion with the Board of Visitors.
Financing Academic Excellence FY14–FY17
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9
II
Operational Excellence
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II Operational Excellence
11
Targeted pan-institutional, unit-level, and collaborative initiatives have helped the University of Virginia deliver a superior
educational experience with far fewer resources than its peers. In FY13, the University projects cost savings from efficiency
efforts of $7.4 million. To help provide the resources that will enable it to meet the challenges it faces in such areas as faculty
support and financial aid, the University will continue taking comprehensive steps to achieve productivity savings of at least
1.0 percent annually. These savings will help fund a strategic pool devoted to addressing the President’s and Provost’s highest
priorities. The University expects to generate savings approaching $45 million for the five years ending in FY17.
Historical Perspective: Balancing
Efficiency and the Academic Mission
O
ver the past 11 years, the Commonwealth
enacted several rounds of budget cuts. From
FY02–FY04, the University absorbed $51.6 million
in state appropriations cuts in its annual operating
budget. From FY08–FY12, it absorbed an additional
$51.5 million.
The University has in place a multipart strategy to
address such budget cuts as well as to identify and
capture operational efficiencies that enable it to
support its academic mission more effectively. The
linchpin of this strategy is Process Simplification
(PS), a formal pan-institutional initiative that
seeks to enhance the quality, effectiveness, and
efficiency of processes and services while cultivating
organizational capacity for continuous improvement.
PS was created in FY94 specifically to implement
the state’s decentralization program, which provided
greater administrative autonomy for the University.
It has subsequently developed into a comprehensive
improvement program.
Financing Academic Excellence FY14–FY17
PS consists of a steering committee, an owner’s
group, cross-functional project teams, and PS staff.
It employs a modified version of business process
redesign as defined by the National Association of
College and University Business Officers.
PS initiatives have been launched in such diverse areas
as human resources, finance, procurement, research
administration, academic administrative support, student
services, and compliance. Among peer institutions
with similar improvement and quality initiatives, the
University’s PS program is viewed as a leader. The
University is routinely contacted by other institutions
for assistance and is active in the National Consortium
for Continuous Improvement in Higher Education.
Unit Initiatives
Schools and units have the ability to make decisions
about allocating their resources and have been
instrumental in introducing efficiencies. They report
their actions to reduce costs or reallocate resources
through the annual budget process. Efficiencies in
administrative areas yield savings and new revenue
streams that can be reallocated to institutional
Operational Excellence
1. Operational Excellence
Financing Academic Excellence FY14–FY17
12
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priorities. Consider these examples:
Since FY08, Procurement & Supplier Diversity
Services (PSDS) has eliminated 11 full-time
positions and decreased the departmental annual
budget by 15 percent. In FY12, PSDS generated
$1.6 million in revenue through rebates, earlypayment cash discounts, and other forms of
e-commerce.
academic libraries within the Commonwealth of
Virginia. Through VIVA, members’ students and
faculty have access to digital and print journals, books,
reference sources, and databases that are essential for
educational study. This service eliminates duplication,
leverages resources, and has consistently produced
five dollars in savings for every dollar spent.
II Operational Excellence
55
50
45
40
35
Partnering with the State
13
Institutional Expenditures vs. Reputation (Peer/Counselor Assessment)
U.Va.
30
n
Facilities Management’s Delta Force initiative
targets the retro-commissioning of inefficient,
high-energy-consuming buildings. In FY12, work
on 15 buildings avoided costs of approximately
$3.6 million.
Outsourcing and Public-Private Partnerships
Outsourcing and public-private partnerships are
other means through which the University optimizes
its resources. The University contracts with more
than 650 vendors for services, basing the decision to
enlist the services of an outside firm on a number of
criteria, one of which is cost. Other factors include
the availability of sufficient staff to perform the
function, the past performance of on-Grounds service
providers, and the relationship between the activity
and the institution’s core functions. Examples of
outsourcing in the Academic Division include dining
operations, vehicle rental, mail services on Grounds,
and surplus property.
The University’s Management Agreement, as part
of the Restructured Higher Education Financial
and Administrative Operations Act, provides the
University with additional autonomy and flexibility,
coupled with post-audit accountability, to manage its
operations in six core functional areas: finance and
accounting, capital construction, leasing, information
technology, procurement, and human resources.
As a result, the University has captured significant
savings and efficiencies through the reduction of state
regulatory oversight and prior approvals. This has
allowed for enhanced purchasing power, expedited
construction, a more flexible human resource system,
and improved treasury management.
In addition, the University has pursued streamlining
post-audit reporting to the state. The University, along
with peer institutions, has successfully negotiated the
elimination of some non-value-added reports and
redesigned more efficient means of transmitting data to
the state. This is an ongoing effort.
Collaborations with Other Universities
In some cases, the University achieves efficiencies by
joining forces with other institutions. During FY12,
the University established a consortium, known as
4-VA, consisting of George Mason University, James
Madison University, and Virginia Tech to deploy
advanced CISCO TelePresence technology at the
member campuses. The pilot initiative took place
during the spring semester of 2012.
The University is a partner in the Virtual Library
of Virginia (VIVA), a consortium of the nonprofit
Current Situation: Productivity and
Efficiency in the Spotlight
The University’s ability to deliver high-quality
educational programs efficiently has been widely
recognized. Year after year, the Princeton Review places
the University at or near the top of its annual Best
Value Colleges report, as does Kiplinger’s Personal
Finance in its 100 Best Values in Public Colleges
survey. In 2010, the National Center for Higher
Education Management Systems highlighted the
II Operational Excellence
Berkeley
25
Michigan
20
15
Cornell
10
UNC
5
UCLA
Duke
0
Penn
Vanderbilt
-5
-10
-15
FY99 FY00 FY01FY02 FY03 FY04FY05FY06 FY07FY08 FY09FY10 FY11FY12 FY13
University’s unique combination of high graduation
rates with low educational and related expenditures
per full-time-equivalent (FTE) student.
The University reports to the Board of Visitors on a
set of executive-level performance measures, one of
which is Institutional Expenditures vs. Reputation,
that compare U.Va.’s use of resources to that of its
peers. The extent to which an institution with a low
expenditure ranking can attain a high reputational
ranking is a proxy for achieving the right balance
between efficiency and academic effectiveness.
During the past 15 years, U.Va. has performed well
above its peers in this measure. In FY12, U.Va.’s
expenditure ranking was 53 while its reputational
ranking was 18. The difference is 35. No other
institution in the top 25 has an expenditure ranking
above 37, and only three rank above 30.
Financing Academic Excellence FY14–FY17
Future Directions: Taking a
Comprehensive Approach
In recent years, the Virginia General Assembly has
enacted a number of laws to encourage productivity
and efficiency at institutions of higher education.
Among the explicit objectives of the Virginia Higher
Education Opportunity Act of 2011 is “optimal yearround utilization of resources and other efficiency
reforms.” In 2012, the General Assembly passed a
bill directing the Joint Legislative Audit and Review
Commission (JLARC) to study the cost efficiency of
the Commonwealth’s institutions of higher education
and to identify opportunities to reduce the cost of
public higher education. In conducting its study, the
JLARC is considering such issues as the following:
Design and utilization of facilities
n Operation of enterprise activities
n
Operational Excellence
Operational Excellence
n
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Financing Academic Excellence FY14–FY17
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U.Va. Administrative Spending per FTE Student
human resources, financial accounting, procurement,
(in Thousands)
T
executive management, legal services, fundraising and
II Operational Excellence
15
SCHEV Peers Administrative Spending per FTE Student FY11
(in Thousands)
Operational Excellence
$20
$10
alumni engagement, information technology, and security.
8
15
the need for more sophisticated technology to manage
Wisconsin
Colorado
Illinois
Illinois
Vanderbilt
Colorado
Nebraska
Florida
Maryland
U Washington
North Carolina
Iowa
Rutgers
Virginia
Michigan
Berkeley
UCLA
0
Wisconsin
FY12
Arizona
FY11
Nebraska
FY10
Colorado
FY09
Illinois
FY08
Vanderbilt
FY07
UCLA
FY06
Maryland
FY05
Arizona
FY04
Wash St. Louis
FY03
administrative spending grew from $2,214 in FY03 to
SUNY Buffalo
0
Pittsburgh
expenses in context. On a per-FTE-student basis,
Texas
There are a number of ways to put administrative
Tulane
5
2
Penn
prepare for the $3 billion capital campaign.
Emory
invested in fundraising and alumni engagement to
10
4
Southern Cal
Additionally, during the last 10-year period, the University
6
Wash St. Louis
instance in research, often drive administrative spending.
Cornell
business processes, and expanded volume of activity, for
Duke
Factors such as regulatory and compliance requirements,
$3,340 in FY12, or 51 percent. On an inflation-adjusted
basis, the increase in administrative expenses is only
U.Va. Administrative Spending as a
Percentage of Education-Related Expenses
15 percent, or 1.5 percent annually. This increase
reflects modest enrollment growth during a period of
increasing education-related and operational demands
SCHEV Peers Administrative Spending as a
Percentage of Education-Related Expenses FY11
20%
10%
on administrative services. In this metric and in the
others that follow, the University’s ability to lower its ratio
8
15
is constrained by its size. Because of its relatively low
6
can not achieve the economies of scale to spread the
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
North Carolina
U Washington
Florida
Nebraska
Penn
Michigan
Pittsburgh
Maryland
Arizona
Iowa
Berkeley
Virginia
0
0
academic administration, student services, research, public
Rutgers
closely tracked increases in education-related expenses.
These include instruction, academic technology, libraries,
Emory
5
Duke
2
Texas
Administrative spending growth at the Univeristy has
Southern Cal
4
Tulane
10
fixed costs of central administration.
SUNY Buffalo
enrollment compared to its public peers, the University
Cornell
FY12
service, institutional support, operations, and maintenance of
plant. Administrative spending represented approximately
8.4 percent of educational expenses in FY12.
While constraining the growth of administrative spending
over the last decade, the University has continued to
Academic Expenses per FTE Student
SCHEV Peers Academic Spending per FTE Student FY11
(in Thousands)
(in Thousands)
$120
$25
fund academic expenses at a steady level. This category
includes faculty instruction, academic technology,
100
20
libraries, and academic administration.
80
15
On a nominal basis, academic expenses have increased
60
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
II Operational Excellence
Financing Academic Excellence FY14–FY17
SUNY Buffalo
Texas
Wisconsin
Florida
Iowa
Virginia
Pittsburgh
Tulane
Berkeley
Rutgers
Michigan
0
Cornell
0
U Washington
in FY03 to $18,202 in FY12.
North Carolina
20
l In Current Dollars l In CPI 2012 Dollars
Emory
5
per FTE student have increased only slightly from $16,786
Southern Cal
Index is used to adjust for inflation, academic expenses
UCLA
40
FTE student in FY12. However, when the Consumer Price
Duke
10
Penn
from $13,433 per FTE student in FY03 to $18,202 per
Vanderbilt
Operational Excellence
he University’s administrative expenses include
Wash St. Louis
14
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Financing Academic Excellence FY14–FY17
16
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n
Among other initiatives, the University is responding
by making streamlining an essential element of the
FY13 strategic planning effort. The Streamlining
Workgroup of the strategic planning initiative is
considering opportunities to deploy more-efficient
business practices and to create policies that would
ensure the University follows best practices.
To complement and augment this strategic planning
initiative, the Chief Operating Officer has launched
a University-wide targeted solicitation of cost-saving
ideas, a tactic that has proven successful in the past to
identify opportunities. These ideas will be examined,
and those with the highest savings and impact
potential will be implemented immediately.
The New Internal Financial Model will also
incentivize schools and units to deploy resources
more efficiently. The new model will better align
resource allocation with academic decision making,
create greater accountability, and encourage
entrepreneurship.
The University is currently focusing on achieving
additional gains in productivity and efficiency by
adopting a more holistic approach in a number of key
areas, such as those described below.
Optimal Space Utilization
With the number of University buildings growing,
space management has become more complex. In
response, the University has developed institutional
office and research space allocation guidelines and
standardized space and leasing processes to improve
space efficiency. A new space management software
system is being used to centralize space data, and
space portfolios have been created for all academic
schools and major units to inform space decisions.
Despite these efforts, many space decisions remain
local and, therefore, may only consider the impact
for a subset of the University community, rather than
the University at large. In the New Internal Financial
Model, schools and units will be expected to fund
their operating costs, which will include space. As the
model is implemented, it will be important for the
governing policies to address balancing individual
school and unit space usage with centrally managed
space assignments to ensure that the overall needs of
the institution are met.
Closer Relationships between the University
and University-Related Foundations
In 2007, a committee of the Board of Visitors
examined the potential gains of efficiency from
closer collaboration among the University and its
related foundations. As a result of the committee’s
recommendations, foundation governance, financial
control, policy, and strategy have been strengthened,
and several efficiencies achieved. There are several
issues that would benefit from reexamination, including
shared administration, support staff, and space.
development, and marketing and communications
departments. Similarly, administrative units have
duplicate purchasing, accounting, and human
resource functions. Shared services and consolidation
of similar functions to capitalize on economies of scale
and to minimize redundancies is a strategy that could
be more widely adopted.
service and more prudent use of resources. The
University expects operational efficiencies in the future
and will continue to develop aggressive near-term
and long-term strategies around shared services to
drive significant savings in the University’s operations,
including exploring further ventures with other public
institutions in the state.
The University has begun to make progress in
this area. The University’s Facilities Management
organization now supports the Academic Division,
the Medical Center, and many other units around
the University. Recently, the Housing Division
facilities maintenance and Newcomb Hall facilities
management consolidated with the University
Facilities Management, resulting in higher-quality
Saving for Strategic Goals
These are just a sampling of the steps the University
will take as it secures productivity and efficiency
savings of at least 1.0 percent annually. These savings
will help fund a strategic pool devoted to addressing
the President’s and the Provost’s highest priorities.
Projected Productivity and Efficiency Savings (in Millions)
FY13
Projected Savings
As a % of FY13 Non-sponsored research operating expenses
Currently, there is some notable collaboration
among the foundations. Several University-related
foundations participate in a shared service model with
the University of Virginia Foundation, which provides
financial management services and administers gift
annuities and real estate transactions on their behalf.
Although this is a fee-for-service model, cost savings
are still realized. Additional collaborations between
the University and its related foundations will
produce additional savings.
A Shared-Services Strategy
Currently, most units, regardless of size or complexity,
have their own support staff for financial and
administrative transactions. In academic units,
these areas include student affairs, career services,
II Operational Excellence
II Operational Excellence
Financing Academic Excellence FY14–FY17
$7.4
0.8%
FY14
$9.0
1.0%
FY15
$9.0
1.0%
FY16
$9.0
1.0%
FY17
Total
$10.0
$44.4
1.1%
4.9%
17
Operational Excellence
Operational Excellence
Faculty workload and productivity
The use of technology for academic programs and
administrative functions
n Administrative staffing and costs
n The use of outsourcing and public-private
partnerships
n The use of cooperative procurement
n
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III Academic Division Operating Sources of Funds
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III Academic Division Operating Sources of Funds
21
1. State Appropriations
The last two decades have seen a significant decline in state appropriations for higher education in Virginia. Operating with
51 percent less state funding on an inflation-adjusted basis than it received in FY90, the University has maintained its
excellence by pursuing other sources of revenue, including those related to philanthropy, research support, enrollment growth,
new degree and nondegree programs, and tuition rates. The state remains an important financial partner as the University
addresses increases in undergraduate enrollment and brings compensation for faculty and staff to competitive market rates.
Context: An Era of Declining State
Support for Higher Education Across
Virginia
S
tate funding per in-state, undergraduate fulltime equivalent student at all Virginia public
colleges and universities decreased 18.2 percent
in constant dollars from FY93 to FY10. Between
FY06 and FY11, Virginia’s appropriations for higher
education significantly lagged both North Carolina
and Maryland. As a result, the Commonwealth ranked
35th in state and local appropriations per student;
North Carolina and Maryland ranked fifth and
thirteenth, respectively.
Performed on a per-in-state-student basis, this
calculation yields similar results. In 2012 dollars,
the University’s state appropriation was $17,132 in
FY90. In FY13, that appropriation stood at $8,346
per in-state student. When compared with peer public
institutions (whose most recent available data is from
FY12), the University falls far short:
University of North Carolina
$22,105
University of Maryland
$17,494
University of Michigan
$13,024
University of Virginia
$ 8,346
In FY13, state support principally rose due to a stateauthorized one-time bonus for all salaried employees.
Current Situation: The University’s
General Fund Appropriations Fall
The University’s state appropriation directly reflects
competing demands on constrained state resources.
In FY90, when repeated cycles of budget reductions
began, the University’s Educational and General
(E&G) legislative appropriation was $119.3 million.
In FY12, it was $114.7 million.
Financing Academic Excellence FY14–FY17
Future Directions: State Continues to
Invest in Employees and Students
The University anticipates a modest annual increase
in state support over the next four years, totaling
$12.6 million in cumulative incremental funds by
FY17. The University assumes that the state will meet
Financing Academic Excellence FY14–FY17
22
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III Academic Division Operating Sources of Funds
23
Historic Budgeted General Fund Appropriations (in Thousands)
State Appropriations
FY09
Educational & General (E&G) Appropriation
Restricted Appropriations
Operating Budget Contribution
FY10
FY11
FY12
FY13
$128,427
$118,826
$126,309
$114,656
$120,522
14,958
18,731
20,633
16,836
18,944
$143,385
$137,557
$146,942
$131,492
$139,466
$ Change from Prior Year
$(5,828)
$9,385
$(15,450)
$7,974
% Change from Prior Year
-4.1%
6.8%
-10.5%
6.1%
its commitment to fund the enrollment growth of
in-state undergraduates and will authorize a 2 percent
salary increase each year, providing its proportionate
share of the cost of salary and fringe benefits
increases.
The Commonwealth will continue to face economic
challenges and increased demand for constrained
resources. The University has anticipated level
funding of the base E&G appropriation, while also
planning for slight increases associated with stateauthorized salary increases and enrollment growth.
The University supports the Governor’s and General
Assembly’s efforts to reinvest in higher education
through the Higher Education Opportunity Act of
2011; however, to be conservative, it assumed no
incremental funds for this initiative.
I
n 1990, the Board of Visitors approved a phased
enrollment growth plan for the ensuing 15 years,
culminating in actual on-Grounds enrollment
in FY05 of 20,399. This comprised 13,401
undergraduate students, 4,699 graduate students,
1,694 first-professional students (law and medicine),
and 605 on-Grounds continuing education students.
FY14
FY15
FY16
FY17
$116,732
$116,282
$116,282
$116,282
Funding for Salary and Fringe Benefits Increases
2,771
6,877
10,640
14,971
Funding for Enrollment Growth
1,374
2,854
4,475
6,067
18,848
15,015
15,015
15,015
$139,725
$141,028
$146,412
$152,335
$ Change from Prior Year
$259
$1,303
$5,384
$5,923
% Change from Prior Year
0.2%
0.9%
3.8%
4.0%
Restricted Appropriations
Operating Budget Contribution
The University amends its enrollment projections periodically to accommodate enrollment changes and to assist the State
Council of Higher Education for Virginia in overall enrollment planning for the state. The University is on track to meet
its goal of accepting 1,673 new undergraduate students by FY19, allowing the University to meet its commitments to the
Commonwealth of Virginia as part of the Higher Education Opportunity Act of 2011.
Context:Phased Enrollment Growth
Projected General Fund Appropriations (in Thousands)
Educational & General (E&G) Appropriation
2. Enrollment
III Academic Division Operating Sources of Funds
During the study and planning for the restructuring
legislation in 2005, the University determined that it
could accommodate 1,500 additional students—1,100
undergraduate students and 400 graduate students—
over the ensuing 10 years and updated its enrollment
projections accordingly. The Board of Visitors
reaffirmed this projection in 2007 and again in 2009.
Financing Academic Excellence FY14–FY17
Current Situation:Higher Education
Opportunity Act Leads to
Additional Enrollment
In response to the enactment of the Higher
Education Opportunity Act of 2011 (HEOA),
the Board of Visitors approved the addition of
1,673 new undergraduate students through FY19.
This includes 1,400 new students in addition to
273 approved under the 2005 plan. By raising
enrollment, the University is able to respond
to legislative requests to add more places for
Virginians while preserving its current ratio of
approximately 70 percent in-state and 30 percent
out-of-state students.
In formulating its plans for the new undergraduate
enrollment growth, the University considered a
number of factors, including the need for additional
faculty to maintain a 16:1 faculty-student ratio (used
by U.S. News & World Report as a quality metric),
the average costs of new faculty compensation and
start-up packages, and the need to provide additional
funding to AccessUVa, the University’s financial aid
program to support new enrollment growth. Other
factors considered included the following:
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Financing Academic Excellence FY14–FY17
Historic Enrollment Growth (Fall Census Headcount)
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
#
%
12,907
13,140
13,401
13,353
13,636
13,762
13,928
14,015
14,256
14,366
1,459
11.3%
3,101
3,096
3,112
3,091
3,248
3,256
3,246
3,243
3,434
3,397
296
9.5%
493
529
532
503
552
534
566
573
542
536
43
8.7%
Graduate
4,616
4,632
4,699
4,791
4,830
4,904
4,835
4,831
4,759
4,689
73
1.6%
First-Professional
1,631
1,650
1,694
1,699
1,724
1,725
1,695
1,694
1,702
1,699
68
4.2%
489
596
605
554
644
666
437
509
389
341
(148)
-30.3%
19,643
20,018
20,399
20,397
20,834
21,057
20,895
21,049
21,106
21,095
1,452
7.4%
3,434
3,323
3,366
3,671
3,423
3,484
3,460
3,342
3,191
2,812
(622)
-18.1%
Total Undergraduate
First-Year
New Transfers (full-time)
School of Continuing &
Professional Studies
On-Grounds Total
Off-Grounds
Growth over FY03
Notes: The First-Year and New Transfer counts are included in the Undergraduate totals.
The term “First-Professional” is used by the State Council of Higher Education for Virginia to refer to JD and MD programs.
No School of Continuing & Professional Studies (SCPS) students , including Post-Baccalaureate Pre-Med students, are included in the Undergraduate or Graduate totals.
Off-Grounds enrollments have declined since FY08 primarily due to economic conditions. They include these areas:
1) SCPS courses taught in centers outside Charlottesville, including the Bachelor of Interdisciplinary Studies programs
2) Graduate Education courses taught in centers outside Charlottesville
3) Courses taught at the FBI Center in Quantico
4) Semester at Sea courses
FY13
After examining each of these factors, the University
determined it could accommodate the new enrollment
growth, provided that it receives additional funding
for enrollment consistent with the HEOA.
Future Directions: ON TRACK TO MEET
ENROLLMENT TARGETS
In FY12, first-year enrollment was slightly higher
than expected. As a result, the University is well
on track to meet its goal of accepting 1,673 new
undergraduate students by FY19, allowing it to meet
its commitments to the Commonwealth of Virginia as
part of the HEOA.
Total Undergraduate
First-Year
FY15
FY16
FY17
FY18
FY19
FY20
Growth over FY13
New Transfers (full-time)
%
14,599
14,850
15,125
15,395
15,590
15,688
15,695
15,695
1,096
7.5%
3,465
3,570
3,675
3,675
3,675
3,675
3,675
3,675
210
6.1%
558
564
570
570
570
570
570
570
12
2.2%
Graduate
4,736
4,803
4,913
4,999
5,052
5,099
5,138
5,158
422
8.9%
First-Professional
1,702
1,700
1,694
1,688
1,683
1,678
1,678
1,678
(24)
-1.4%
346
351
356
361
366
371
371
371
25
7.2%
21,383
21,704
22,088
22,443
22,691
22,836
22,882
22,902
1,519
7.1%
2,576
2,606
2,646
2,687
2,730
2,765
2,801
2,839
263
10.2%
SCPS
Notes: The First-Year and New Transfer counts are included in the Undergraduate totals.
The term “First-Professional” is used by the State Council of Higher Education for Virginia to refer to JD and MD programs.
No School of Continuing and Professional Studies (SCPS) students, including Post-Baccalaureate Pre-Med students, are included in the Undergraduate or
Graduate totals.
Off-Grounds enrollments have declined since FY08 primarily due to economic conditions. They include these areas:
1) SCPS courses taught in centers outside Charlottesville, including the Bachelor of Interdisciplinary Studies programs
2) Graduate Education courses taught in centers outside Charlottesville
3) Semester at Sea courses
In addition to the undergraduate growth, the
proposed plan calls for moderate growth in graduate
enrollments—a total of 8.9 percent growth over
the eight-year period. First-professional (Law and
Medicine) enrollments will decline very slightly
due to fewer law students. Since the beginning of
the downturn in the economy, the University has
experienced a 20 percent decline in its off-Grounds
credit enrollments. It expects that decline bottomed
out in 2012. The apparent decline in 2013 reflects
the University’s decision not to count FBI Academy
students in its census figures. The University’s
projections reflect moderate growth of 10.2 percent
over the eight-year period for off-Grounds students.
III Academic Division Operating Sources of Funds
FY14
#
On-Grounds Total
Amount of tuition revenue generated by the new
enrollment
n Amount of general fund revenue received for each
new in-state student
n Average cost of instruction of these new students
n Availability of adequate instructional and research
space
n Program support beyond regular faculty expansion,
such as librarians and information technology
professionals, adjunct replacements to cover
standard leaves for new faculty, graduate support
packages for additional graduate students, and other
items
n Need for additional dining facilities and recreational
facilities
n Need for construction of new first-year residence
halls in conjunction with the already-approved
capital plan
that adequate support for the direct instruction of
these students is made available to the various schools
and other offices of the University.
Projected Enrollment Growth (Fall Census Headcount)
Off-Grounds
n
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
25
Enrollment
Enrollment
FY03
The University annually monitors its progress in
attaining this growth on the outlined schedule and
adjusts funding allocations, as necessary, to ensure
Institutional Assessment and Studies December 30, 2012
24
DRAFT
3/4/13
DRAFT
3/4/13
DRAFT
3/4/13
III Academic Division Operating Sources of Funds
27
3. Tuition
In the face of declining state appropriations, the University turned to tuition and fees as an avenue for partially recouping
lost revenue. Revenue from tuition and fees increased from $354.3 million in FY09 to $471.2 million in FY13, an average
of 7.4 percent per year due to rate increases, enrollment growth, and the addition of new degree and nondegree programs.
However, in FY13 the University responded to the Higher Education Opportunity Act of 2011 by slowing its increase in
undergraduate tuition rates. Beginning in FY12, several schools began assessing differential tuition or fees. Differential
tuition recognizes the higher cost of educating students in resource-intensive programs as well as upper-division students who
benefit from smaller class sizes, rigorous capstone courses, global learning opportunities, career placement and internships,
and increased research opportunities. Going forward, the University will pursue moderate increases in base undergraduate
tuition and a comprehensive approach to differential tuition. As a result, the University expects gross tuition and fee revenue
to reach $565.5 million in FY17.*
Context: Undergraduate and
Professional Tuition Rises as State
Support Declines
A
s state appropriations for higher education
declined over the last 20 years, the University
turned to tuition revenues, among other sources, to
meet education funding needs. The proportion of the
University’s operating budget funded from tuition has
increased from about 24 percent to nearly 33 percent
over the same period.
As the accompanying table shows, gross tuition and fees
grew from $354.3 million in FY09 to $471.2 million
in FY13, primarily due to rate increases, enrollment
growth, and new degree and nondegree programs.
From the mid-1990s to the mid-2000s, the University
raised professional and medical degree tuition rates
through a series of surcharges to entering students. As
a result, both in-state and out-of-state rates approached
their appropriate market rate, priced just below top
private peers. Since that period, tuition rates in these
programs have kept pace with the market. In addition,
several new programs have been introduced, including
the Darden School of Business’s Executive MBA and
Global Executive MBA and the McIntire School of
Commerce’s MS in Management of Information
Technology and MS in Commerce, all of which assess
market-based tuition rates.
From 1994 to 2002, the state imposed controls on
in-state undergraduate tuition with tuition caps (two
years), tuition freezes (five years), and a 20 percent
tuition roll-back (one year). Over the same period,
the University relied heavily on out-of-state
undergraduates for incremental revenue as their tuition
rates increased. The University carefully assessed
*The University is considering a base tuition increase of between 2.5 percent and 3.5 percent annually and a tuition differential for third- and fourth-year
students in the undergraduate schools of between $1,500 and $2,000. The projected tuition revenues in the following section and its tables assume a base
tuition increase of 3.5 percent annually and an upper-level differential of $2,000 beginning in FY16.
Financing Academic Excellence FY14–FY17
DRAFT
3/4/13
Financing Academic Excellence FY14–FY17
DRAFT
3/4/13
28
(in 2012 dollars)
$20,000
$18,941
$18,412
15,000
$13,247
$10,066
10,000
$8,346
As the result of these changes, the U.Va. in-state
undergraduate tuition rate now exceeds the average
of the University’s State Council of Higher Education
$5,693
5,000
0
FY95
the impact of the out-of-state rates on the number of
applicants and the quality of the entering class—but
both remained unaffected and, in fact, improved as outof-state undergraduate tuition rates moved to among
the highest of all public institutions. Since 2002, both
in-state and out-of-state tuition rates increased as
state general fund appropriations underwent several
rounds of significant reductions and the state lifted
tuition controls. In FY13, in response to the Higher
Education Opportunity Act of 2011, the state began
to reinvest in higher education, and the University
moderated in-state tuition increases.
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
for Virginia (SCHEV) public peer group. It remains,
however, far below the University’s private peers.
Current Situation: Meeting Specialized
Costs with Differential Tuition and Fees
In the face of both market and mandated limits on
tuition price increases, approximately 50 percent
of the University’s peer public institutions have
instituted tuition supplements in specific instances.
These tuition differentials are most commonly used
to compensate for the additional cost of educating
students in some disciplines and to provide smaller,
more specialized third- and fourth-year classes. In
Historic Undergraduate Tuition and Fees Rates
l Tuition Price (excluding fees) per Undergraduate l Unrestricted general funds per student l tuition price and unrestricted general funds per student
FY04
FY05
FY06
FY07
FY08
FY09
FY10
$6,149
$6,790
$7,370
$8,035
$8,690
$9,490
$9,872
10.4%
8.5%
9.0%
8.2%
9.2%
4.0%
9.7%
8.8%
3.6%
$22,169
$22,890
$24,290
$26,135
$27,940
$29,790
$31,872
$33,774
$36,780
$38,228
3.3%
6.1%
7.6%
6.9%
6.6%
7.0%
6.0%
8.9%
3.9%
In-state Tuition and Required Fees
Annual % increase
Out-of-state Tuition and Required Fees
Annual % increase
FY11
FY12
$10,828
FY13
$11,786
$12,216
Historic Budgeted Tuition and Fees Revenue (in Thousands)
FY13 Undergraduate In-State Tuition and Fees
SCHEV Peer Group—Public & Private
FY09
$50,000
FY10
Private Average = $42,773
40,000
30,000
Overall Average = $25,163
FY12
FY13
Undergraduate—In-state
$66,051
$69,841
$78,861
$88,984
$92,129
Undergraduate—Out-of-state
113,851
121,534
132,209
143,860
150,064
Graduate
34,233
35,640
34,896
34,852
35,961
Professional
84,815
88,682
91,516
101,878
100,466
Medical School
18,704
20,738
22,286
25,656
26,410
Other Tuition and E&G Fees
36,636
44,291
48,738
48,394
61,100
$354,290
$380,726
$408,506
$443,624
$466,130
7.5%
7.3%
8.6%
5.1%
Total Base Tuition and E&G Fees
% Change
20,000
Undergraduate Differential Revenue
Differential Tuition
-
-
-
1,100
2,742
Differential Fees
-
-
-
-
2,280
-
-
-
1,100
5,022
$354,290
$380,726
$408,506
$444,724
$471,152
7.5%
7.3%
8.9%
5.9%
FSU
Total Tuition and E&G Fees
UNC
Buffalo
Nebraska
Iowa
Maryland
Colorado
Arizona
Wisconsin
Total Undergraduate Differential Revenue
Texas
U.VA.
Michigan
UCLA
Rutgers
Berkeley
Illinois
Pittsburgh
Emory
Cornell
Duke
Washington
Vanderbilt
Pennsylvania
USC
Tulane
U. Washington
Public Average = $10,999 U.Va. = $12,216*
10,000
0
FY11
Base Tuition and Fees
% Change
* Includes orientation fee
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
29
Tuition
Tuition
Tuition Price (Excluding Fees) and Unrestricted General Funds per In-State Student
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
30
DRAFT
3/4/13
In FY13, the University assesses differential
undergraduate tuition or fees in three areas:
n
n
n
The McIntire School of Commerce charges
enrolled third- and fourth-year students $4,000
more in tuition than the base undergraduate tuition
rate. The Board of Visitors approved this tuition
differential in 2011 based on the cost of education
and supplementary services.
The School of Engineering and Applied
Science charges an additional $32 per credit hour
to all undergraduate students who enroll in an
undergraduate Engineering course. On average,
an Engineering major pays additional fees of
approximately $750 per year.
The School of Nursing charges an additional
$60 per credit hour to students enrolled in advanced
undergraduate or graduate courses with a clinical
laboratory or practicum. On average, second-year
students pay an additional fee of $600, third-year
students an additional $1,260, and fourth-year
students an additional $1,440.
Projected Undergraduate Tuition and Fees Rates
In-state Tuition and Required Fees
Annual % increase
Out-of-state Tuition and Required Fees
Annual % increase
FY14
FY15
FY16
FY17
$12,644
$13,087
$13,545
$14,019
3.5%
3.5%
3.5%
3.5%
$39,566
$40,951
$42,384
$43,867
3.5%
3.5%
3.5%
3.5%
n
n
Future Directions: Tuition Revenues
Will Rise Modestly
The McIntire School of Commerce will move
forward with its previously approved plan to charge
$5,000 per year more than the base undergraduate
tuition rate.
The School of Engineering and Applied Science
will charge $2,000 per year more than the base
undergraduate tuition rate, beginning with the class
entering in fall 2013. This tuition differential will
apply to all four years and reflects the resourceintensive nature of engineering education.
Base Tuition
The University projects that base undergraduate
tuition will increase 2.5 percent to 3.5 percent per
year over the next four years. Assuming a 3.5 percent
increase, base in-state tuition and required fees per
student will reach $14,019 in FY17 and out-of-state
tuition and required fees will reach $43,867. As a
result of the rate increases, total gross tuition revenue
will grow to $565.5 million at the end of the period.
Batten School of Leadership and Public Policy—
will charge $2,000 per year more than the base
undergraduate tuition rate. This charge will apply
to third- and fourth- year students and reflects
the additional costs of smaller class sizes, rigorous
capstone courses, global learning opportunities,
career placement and internships, and increased
research opportunities.
n Existing undergraduate program fees in the School of
Students who graduate in three years will pay the
differential only one year.
The University anticipates some changes in tuition for
graduate programs, including restructured PhD tuition
that better reflects the alignment of revenue and costs.
The University also expects to see a modified approach
to pricing professional master’s degree programs in
response to market demand. It will continue to charge
market-based tuition for professional programs.
Engineering and Applied Science and the School of
Nursing will be phased out. As a result the effective
annual increase for in-state students entering the
School of Nursing in fall 2013 will be 2.5 percent
while for out-of-state students it will be 2.3 percent
Graduate Programs
Tuition Differential
The University is taking a measured approach to
expanding the tuition differential program, adopting
a comprehensive plan to recognize the higher cost
of educating Engineering students as well as upperdivision students who benefit from smaller class
sizes, rigorous capstone courses, greater faculty
engagement, and increased research opportunities.
Beginning with the enrollment offers in spring 2013
for fall 2013 matriculation, the University will inform
students that it will assess differential undergraduate
tuition in the following areas (implementation will not
affect currently enrolled students):
Combined with the projected base tuition increases,
the effective annual increase over the next four
years for an in-state student entering the School of
Engineering and Applied Science in FY14 will be
5.0 percent and for an out-of-state student 3.1 percent.
This program will begin when the class entering in
fall 2013 begins its third year, in fall 2015.
Combined with the projected base tuition increases,
the effective annual increase over the next four
years for an in-state student entering the College
of Arts & Sciences, the Curry School of Education,
the School of Architecture, and the Batten School
of Leadership and Public Policy in FY14 will be 4.7
percent and for an out-of-state student 3.0 percent.
All remaining undergraduate schools with regular
full-time enrollment—the College of Arts &
Sciences, the School of Nursing, the Curry School
of Education, the School of Architecture, and the
III Academic Division Operating Sources of Funds
Four-Year Projection
The four-year projection shows total base and
differential tuition and fees revenue growing more
slowly than historic rates.
Projected Tuition and Fees Revenue (in Thousands)
FY14
FY15
FY16
FY17
Base Tuition and Fees
Undergraduate­—In-state
$96,945
$102,057
$107,523
$113,143
Undergraduate—Out-of-state
157,793
165,990
174,747
183,752
36,857
37,777
38,722
39,693
Graduate
106,635
109,729
112,914
116,193
Medical School
Professional
27,003
27,605
28,216
28,836
Other Tuition and E&G Fees
62,082
63,087
64,116
65,169
$487,315
$506,245
$526,238
$546,786
4.5%
3.9%
3.9%
3.9%
4,729
6,006
12,519
18,763
Total Base Tuition and E&G Fees
% Change
Undergraduate Differential Revenue
Differential Tuition
Differential Fees
Total Undergraduate Differential Revenue
n
III Academic Division Operating Sources of Funds
Total Tuition and E&G Fees
% Change
Financing Academic Excellence FY14–FY17
1,268
256
128
-
5,997
6,262
12,647
18,763
$493,312
$512,507
$538,885
$565,549
4.7%
3.9%
5.1%
4.9%
31
Tuition
Tuition
levying differential tuition, universities weigh the
impact on net price, competitiveness, and the strength
and diversity of the student body.
DRAFT
3/4/13
DRAFT
3/4/13
DRAFT
3/4/13
III Academic Division Operating Sources of Funds
33
4. Sponsored Research
The University’s sponsored research funding has increased by 50 percent since FY00, primarily because the University’s
faculty has been highly efficient in leveraging state and institutional funds to secure federally sponsored funding. With
federal funding for research declining, the University is launching a series of efforts to diversify its funding sources while
securing a greater share of federal research dollars. As a result, the University forecasts that its sponsored funding in FY17
will reach $332.8 million.
Context: Significant Return on
Investment
I
n 2010, the National Research Council released its
latest assessment of research activity and quality,
examining more than 5,000 doctoral programs in
62 fields at 212 universities across the United States.
It found that five of eight programs in the School of
Medicine, six of nine in the School of Engineering
and Applied Science, and two of eight in the science
and math programs in the Graduate School of Arts &
Sciences placed in the top 15 percent.
The quality of the University’s faculty is the primary
reason the University’s sponsored research totals have
increased more than 50 percent since FY00, from
$210 million to $323 million in FY12. Three schools
have secured nearly 90 percent of this funding: the
Ratio of Federal Research Expenditures to
Combined State and Institutional Research Expenditures (2010)
10
8
6
4
2
0
U.Va.
Penn VanderbiltUNCDukeUCLAMichiganBerkeleyVa. Tech
Financing Academic Excellence FY14–FY17
Financing Academic Excellence FY14–FY17
34
DRAFT
3/4/13
Internal seed programs for the sciences, social
sciences, and humanities
n New research buildings
n Institutional cost share support for transformative
grant submittals
n Partnering with schools and departments on key
faculty recruitments and retentions
n Equipment purchases for collaborative research
n Bridge funding to proven research-active faculty
who are between grants
n Funding proof-of-concept research, innovation
programs, and commercialization efforts.
n
The majority of the University’s sponsored
research—71 percent—comes from federal sponsors,
primarily the National Institutes of Health (NIH),
the Department of Defense (DOD), and the National
Science Foundation (NSF). Based on data from the
NSF Higher Education Research and Development
Survey (2010), which includes research spending from
742 U.S. institutions, U.Va. is ranked 54th in the
nation in securing federal research funds.
When it comes to leveraging state and institutional
support to secure that funding, U.Va.’s federal research
expenditures were 8.7 times its combined state and
institutional research expenditures, compared with
a national average for all public universities of only
3.1 times. This multiplier underscores the national
competitiveness and initiative of the University’s faculty
in securing federal funding.
The University has also been successful in organizing
and funding multidisciplinary research initiatives,
spanning multiple schools and external partners, that
have enabled it to leverage state and institutional
funds more effectively. The return on investment
of these activities has been significant and points to
directions for the future:
n
The institutional programs that support and
enhance research opportunities for faculty have been
instrumental in the faculty’s ability to secure grants.
These initiatives include the following:
The investigators affiliated with the 2020
Nanotechnology and the Morphogenesis/
Regenerative Medicine initiatives produced more
than $220 million in research awards from central
seed funds totaling about $10 million.
III Academic Division Operating Sources of Funds
University initiatives in energy systems and
biomedical innovation proof-of-concept funding
have provided outstanding incremental returns on
investment of 32:1 and 7:1, respectively.
n
The Curry School of Education, based largely on its
educational assessment programs, represents a small
but growing portion of the University’s research
base.
This pattern of high returns can be seen in many
other areas, including genomics, coastal ecosystems,
biomedical engineering, and computer science.
n
The Schools of Nursing and Architecture and the
Batten School of Leadership and Public Policy see
modest ongoing research funding.
n
The McIntire School of Commerce, the Darden
School of Business, and the School of Law receive
limited sponsored research awards, instead using
mechanisms such as endowments to fund research.
n
Current Situation: Sponsored
Research Funding Levels Off
The University’s success in securing federal funds
requires continuous investment. With funding
from federal agencies flat or declining, its current
efforts have been sufficient only to maintain levels of
sponsored funding. Except for FY10 and FY11, when
the totals were enhanced by federal stimulus grants
through the American Recovery and Reinvestment
Act of 2009, the University’s sponsored funding has
similarly remained flat.
Not all areas have been affected equally:
Future Directions: Intensifying and
Diversifying University Efforts
The challenge the University faces is not simply to
sustain current levels of sponsored research but to
regain its upward trajectory. The key is building on
the core of superb faculty and continuing to gain
momentum through the upcoming generational
turnover of faculty. The University’s goal is to create
a faculty, more evenly balanced among ranks, that
combines National Academy–level researchers
with high-potential young faculty who see in the
University a supportive environment to invest their
energies and build their careers.
n
The School of Medicine accounts for more than
half of the University’s sponsored research, mainly
from the NIH. With the flattening of NIH budgets,
the School’s totals have correspondingly leveled off.
n
The College of Arts & Sciences total sponsored
research activity has seen recent growth; the average
level in the past four years was 17 percent above the
FY08 level. Most sponsored research is within the
six science departments and mathematics.
Refocusing on Federal Research
The School of Engineering and Applied Science
has achieved a robust external funding rate increase
over the past five years, increasing its overall
funding by approximately 40 percent through
successful junior and senior faculty hiring, key
strategic industrial partnerships, and alignment with
federal funding opportunities.
n
Historic U.Va.-Sponsored Research Awards
(in Millions)
$400
350
n Total Standard Awards n Stimulus Awards from the American Recovery and Reinvestment Act of 2009
$323
300
250
200
n
$210
150
100
50
0
FY00FY01FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
The University will sponsor a number of initiatives
that will help it secure a larger share of federal
research expenditures:
By leveraging strengths in translational research
(including the new Virginia Institute for Clinical
and Translational Research) and thematic hiring
that aligns well with NIH funding strategies,
the University will grow its NIH funding base
2.5 percent per year between FY14 and FY17
($3.25 million per year).
35
Sponsored Research
Sponsored Research
School of Medicine, the School of Engineering and
Applied Science, and the College and Graduate
School of Arts & Sciences.
DRAFT
3/4/13
DRAFT
3/4/13
Financing Academic Excellence FY14–FY17
36
n
n
n
The University’s Applied Research Institute,
designed to find matches within the University
for government intelligence needs, is working
closely with growing science- and technologybased national security agencies in Charlottesville.
Through this effort, the University envisions
sustaining 5 percent growth in DOD funding each
year for the next four years ($1.1 million per year).
The College of Arts & Sciences will hire a number
of science and mathematics faculty recruits over the
next four years who will generate funding from the
NSF and NIH ($2 million to $4 million per year).
The growing educational assessment activities
through the Center for Advanced Study of Teaching
and Learning (CASTL) and the Curry School of
Education’s science, technology, engineering, and
mathematics (STEM) education research groups will
grow resources from the Department of Education by
5 percent annually over four years ($400,000 per year).
Overall, the projected increase is about 3.5 percent
per year, or $8.75 million annually in new money
from federal agencies.
Expanding the Research Pool
Resources Required
With federal research expenditures decreasing, the
University will seek to diversify its funding sources. It
plans to aggressively pursue foundation funding that
is tailored to existing faculty research strengths. The
University already has had a number of significant
successes in these areas, including Gates Foundation
support for global health and the Beckman Scholars
program for undergraduate research mentoring
in the chemical and biological sciences. The
University sees growth opportunities here in the
order of 5 percent annually over the four-year period
($1.5 million per year).
These efforts, along with thematic strategic program
initiatives and graduate student support, will require
ongoing internal U.Va. funding. These funds will be
generated, at least in part, from facilities and indirect
cost recoveries from incremental sponsored research
programs described above and from philanthropy.
This is in addition to any school plans that include
funding for start-ups or faculty retention. These funds
would be used in the following ways:
In addition, the University expects its industrial
partnering relationships to expand and benefit from
evolving innovation efforts. Existing arrangements
with AstraZeneca and Rolls-Royce provide key
insights into the successful research opportunities
available with companies. The University looks to
increase industrial funding by 3.5 percent annually for
four years ($1.0 million per year).
The University expects to secure more than
$2.5 million in new money from nonfederal sources.
The overall projected increase in awards (federal plus
nonfederal) is about $9.25 million to $11.25 million
per year.
n
n
Coordinate faculty hiring and retention to align
with important strengths and strategic areas of
emphasis
§ Facilitate the evaluation and coordination
of faculty hires and retention among deans,
the Provost, the Vice President for Research,
departments, and centers
§ Increase flexibility and collaboration for faculty
lines
Facilitate faculty collaboration to strengthen and
distinguish research and strategic areas of emphasis
§ Develop ways to produce teams and linkages
among clinical, translational, basic, and science
groups
§ Reward team science and innovation with
visibility, recognition, and promotion
§ Seed major cross-disciplinary initiatives at
$0.5 million to $1 million per year each (examples
are big data, sustainability, energy systems, and
OpenGrounds)
III Academic Division Operating Sources of Funds
n
Enhance productivity and development of
current investigators
§ Proactively match investigators with new funding
opportunities
§ Establish pathways for successful investigator
funding by industry
§ Establish program for coaching and retaining
investigators
§ Provide opportunities for presubmission grant
reviews
§ Improve efforts to promote national recognition
of U.Va.’s successful and promising scientists and
scholars in all fields
§ Provide commonly needed tools for investigators
n
Enhance proof-of-concept research and
innovation programs
n
Develop and improve shared research facilities
§ Evaluate all cores for redundancy and investment
continuation
§ Provide support for big data analytics and
modeling
n
Improve research space allocation to recognize
performance and needs, maximize faculty
collaboration, and align with strategic goals
n
Align clinical and translational research efforts
to support and distinguish the University’s clinical
mission—enable a cycle of reinvestment in research
§ Prioritize research in areas of clinical emphasis
and develop infrastructure
Historic Sponsored Research Awards by School (in Thousands)
School
Architecture
FY08
$1,300
FY09
$594
FY10
$326
FY11
$187
FY12
$222
Arts & Sciences
40,146
44,472
50,461
47,588
44,667
Education
13,461
15,321
14,433
18,152
13,682
Engineering
45,044
47,884
58,826
61,384
63,071
2,356
3,312
895
1,008
537
194,452
189,695
231,002
193,821
176,734
2,492
2,687
3,116
3,136
2,672
Other
14,974
28,142
16,153
13,203
21,370
Total
$314,225
$332,107
$375,212
$338,479
$322,955
Law
Medicine
Nursing
III Academic Division Operating Sources of Funds
Projected Sponsored Research Awards (in Thousands)
FY13
$290,000
FY14
$300,150
Financing Academic Excellence FY14–FY17
FY15
$310,655
FY16
$321,528
FY17
$332,782
37
Sponsored Research
Sponsored Research
n
By reallocating existing seed funds, mentoring
support, and grant-writing staff to faculty labs with
the potential to gain additional NIH support in
the near term, the University will grow its share of
NIH funding.
DRAFT
3/4/13
Financing Academic Excellence FY14–FY17
38
DRAFT
3/4/13
Sponsored Research
§ Expand outreach efforts for clinical trials
enrollment in concert with the University Health
System’s plans for regional health partnerships
§ Work toward establishing NIH Clinical and
Translational Science Awards
n
Expand current and develop new large-scale
industrial, federal, foundation, and private
partnerships
§ Examples include AstraZeneca, Defense
Intelligence Agency, National Ground
Intelligence Center, Rolls-Royce, Keck
Foundation, and Gates Foundation
DRAFT
3/4/13
The University envisions moving its research agenda
forward by enhancing both research intensity and
collaborative interactions across the University
and with external partners. It will critically and
continuously assess research excellence and
strategically support transformational opportunities
that will distinguish the institution and have an impact
on the world.
III Academic Division Operating Sources of Funds
39
5. Facilities and Administrative Cost Recoveries
The University’s research awards peaked in FY10, but facilities and administrative (F&A) cost recoveries did not peak
until FY11, several years after the recession. There are a number of reasons for this delayed impact. The first is the lag time
between the announcement of an award and its expenditure. The second is the effect of government stimulus grants funded
by the American Recovery and Reinvestment Act (ARRA) of 2009. The University attracted $75 million in ARRA grants
between FY09 and FY12, which increased the research award totals in those years. Now that the ARRA program has ended,
the University’s research funding and the F&A recoveries that it generates have leveled off. However, the increase in the
University’s negotiated F&A rate with the federal government, from 54 percent to 58 percent on July 1, 2012, along with
a 3.5 percent annual increase in research awards, will contribute to F&A recoveries resuming their upward trend during the
next four years. The University projects that F&A will grow from $63.2 million in FY14 to $65.2 million in FY17.
Context: Maximizing Potential
Recoveries
F
acilities and administrative (F&A) cost recoveries
are that portion of the University’s costs that are
attributable to sponsored programs and recovered
from the sponsors of those awards. F&A recoveries
are driven by two factors: the amount of sponsored
program funds spent each year and the University’s
negotiated F&A rate. F&A costs charged to a
sponsored program are derived by multiplying the
appropriate amount of a sponsored program’s direct
expenditures by the F&A rate for that program.
Annual F&A recoveries are the total of the F&A
costs charged to each sponsored program throughout
the year.
The University’s F&A rate has increased significantly
over the past 10 years. This rate is set after extensive
negotiations with the federal government to determine
how much of the University’s support costs (F&A) are
allocable to sponsored research projects, and should,
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
therefore, be reimbursed by the federal government
and other sponsors. In recent years, the University has
been successful in raising its F&A rate. This rate is
now one of the highest among public universities and
compares favorably to many of the University’s private
peers. Three very successful F&A rate negotiations
between 2003 and 2012 have raised the University’s
F&A rate 10 points, from 48 percent to 58 percent.
There is a predictable lag between the announcement
of a sponsored programs award and the expenditure
of the award. An analysis of awards received in recent
years shows that 14 percent of award funds are
spent in the first year, 28 percent in the second, 21
percent in the third, 17 percent in the fourth, and the
remainder in the fifth year and beyond. Essentially,
activity in the research award pipeline today will play
out over several years.
DRAFT
3/4/13
40
DRAFT
3/4/13
ARRA grants ran out, the underlying pattern became
clear.
Over the past 10 years, F&A recoveries increased
from $47 million in FY02 to a high of $73.3 million
in FY11, an increase of 56 percent. Reasons for the
increase include a 42 percent growth in the research
expenditure base, driven in part by the opening of
several new research buildings and an increase in the
F&A rate during this period to 54 percent.
The decrease in awards in FY11 and FY12 began
impacting F&A recoveries in FY12 and has continued
to affect F&A recoveries in FY13. The increase of
the F&A rate to 58 percent has not been enough
to sustain recoveries at their previous levels. F&A
recoveries were $71.0 million in FY10, $73.3 million
in FY11, and $69.3 million in FY12; they are expected
to fall to about $65.4 million for FY13. That would
be a decrease of $8 million, or 11 percent, in the two
years since the FY11 peak.
F&A recoveries are now starting to lag. The decrease
in sponsored program awards has been masked
to some extent by the American Recovery and
Reinvestment Act of 2009 (ARRA), which provided
stimulus grants from FY09 through FY12. Once
Historic Sponsored Programs Reimbursements
(in Millions)
Direct Expenditures
F&A Recoveries
Total
FY09
FY10
FY11
FY12
FY13
$238.4
$251.6
$254.3
$243.9
$229.9
66.1
71.0
73.3
69.3
65.4
$304.5
$322.6
$327.6
$313.2
$295.3
Future Directions: Modest INCREASE in
F&A RECOVERIES
The University’s understanding of the award
expenditure cycle provides a solid basis for projecting
F&A recoveries for FY14 to FY17. The University
expects the decline in recoveries to continue into
Aside from the goal of increasing sponsored programs
awards, the University could adopt the following
strategies to mitigate the decline in F&A recoveries:
n
Apply and Recover F&A on External Sales
Transactions: Currently, only sponsored programs
and auxiliary enterprises charge some form of F&A,
but the Academic Division has millions of dollars
in additional sales activity to customers outside the
University. The University will consider requiring
these activities to charge “fully loaded” rates that
Historic Sponsored Awards, Direct Expenditures, and F&A Recoveries
Projected Sponsored Awards, Direct Expenditures, and F&A Recoveries
(in Millions)
(in Millions)
$350
60%
●
$350
F&A Rate
60%
●
58
250
56
200
54
150
F&A Rate
300
58
250
56
200
54
52
150
52
100
50
100
50
50
48
50
48
46
0
0
FY02 FY03 FY04 FY05 FY06 FY07FY08 FY09 FY10 FY11 FY12 FY13
n
Sponsored Awards n
Total Direct Expenditures n
F&A Recoveries
III Academic Division Operating Sources of Funds
F&A Rate (in percentage)
300
41
FY14 and then recover modestly through FY17.
This improvement will be driven by the University’s
58 percent negotiated F&A rate and an anticipated
3.5 percent increase in research awards.
facilities and administrative cost recoveries
facilities and administrative cost recoveries
Current Situation: Declining F&A
Recoveries
III Academic Division Operating Sources of Funds
46
FY14 FY15 FY16FY17
n
Sponsored Awards Financing Academic Excellence FY14–FY17
n
Total Direct Expenditures n
F&A Recoveries
F&A Rate (in percentage)
Financing Academic Excellence FY14–FY17
Financing Academic Excellence FY14–FY17
42
DRAFT
3/4/13
facilities and administrative cost recoveries
would recover the F&A costs allocated to those
sales activities. Charging F&A rates on these and
similar activities has the potential to generate
$3 million to $5 million annually in additional
revenue.
n
Reexamine assignment of “off-Grounds”
F&A Rate: Researchers not using University
facilities to conduct their research charge an F&A
DRAFT
3/4/13
FY14
Direct Expenditures
F&A Recoveries
Total
43
rate of 26 percent for administrative costs. The
University will more strictly enforce its policy
for the assignment of a grant as “on-Grounds”
or “off-Grounds,” potentially increasing its F&A
recoveries. This will be done on a case-by-case
basis, weighing costs and benefits to the academic
mission.
Projected Sponsored Programs Reimbursements (in Millions)
FY15
FY16
FY17
$216.9
$213.4
$212.8
$215.4
63.2
63.2
63.9
65.2
$280.1
$276.6
$276.7
$280.6
6. Philanthropy
Although relatively new to philanthropy when compared with its aspirational peers, the University has quickly turned to
private funding to support its emergence as a premier public university. In two comprehensive capital campaigns, U.Va.
has raised more than $4.2 billion in philanthropic support. The goal of the next campaign, likely entering its quiet phase
in 2018, will exceed that total, and its impact will be profound. In the interim, the University will launch a $400 million
bridge campaign—The Initiative to Finance Academic Excellence—to help fund three strategic institutional priorities:
renewing the faculty, protecting the public mandate through AccessUVa, and restoring the Jeffersonian Grounds. The
University expects this effort to produce a 4 percent annual increase in total philanthropic cash flow from $245 million
in FY12 to almost $300 million in FY17. Achieving and maintaining cash flow at that level and higher will require a
paradigm shift relative to institutional fundraising at the University.
Context: Private Donors Respond as
State Funding Declines
I
n response to dramatic state budget cuts in
the early 1990s, U.Va. leaders committed to
building a fundraising program modeled after the
institution’s private peers—one that could generate
an independent revenue stream that would go beyond
compensating for declines in state appropriations.
Since that time, the importance of the fundraising
program has only grown in response to increasing
pressure on the University’s traditional sources of
revenue. In the past, Virginia’s General Assembly
has capped tuition increases and could do so again.
Revenues from technology transfer, although
significant, can be unpredictable, and funding from
federal agencies is subject to the pressures of state and
national economic issues. Since FY08, private gifts
and distribution from the endowment have provided
a larger proportion of U.Va.’s operating budget than
state revenues appropriated by the General Assembly.
III Academic Division Operating Sources of Funds
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
When U.Va.’s first major capital campaign launched
in 1995, University officials and members of the
Board of Visitors envisioned a goal of between
$350 and $500 million. As fundraising progressed, the
goal was increased several times—first to $500 million
and ultimately to $1 billion. On its completion in
2000, the campaign had raised a total of $1.43 billion,
making it the second-largest fundraising campaign
ever among public universities. It resulted in new
and expanded facilities around Grounds, donor
commitments for 154 endowed professorships,
122 endowed fellowships, and 619 endowed
scholarships—evidence of how private philanthropy
enables academic excellence.
The current campaign—launched in 2004 with a goal
of $3 billion and expected to be completed in 2013—
was, at its announcement, the largest fundraising
campaign by any institution of higher education,
public or private. The campaign initially focused on
raising funds for such capital projects as laboratories,
classrooms, and faculty offices. When combined with
DRAFT
3/4/13
Financing Academic Excellence FY14–FY17
44
Another measure of the effectiveness of a capital
campaign is philanthropic cash flow. This includes all
philanthropic gifts (gifts and realized bequests, pledge
payments, private grants, and deferred gifts, as well
as noncash gifts) to the University and to affiliated
foundations, whether invested in the endowment, to
support capital projects, or for operations. Each year’s
cash flow is derived from sources such as annual fund
gifts, capital campaign gifts, and bequests. In FY04,
philanthropic cash flow was $175.0 million. As a result
of the campaign, the 10-year average from FY04
to FY13 was $234.4 million, even counting for the
effects of the recession.
Current Situation: A Leading
Fundraising Operation
Council for Aid to Education statistics show that
U.Va.’s fundraising performance either leads or
is among the leaders of nationally ranked public
research universities in virtually every giving category,
particularly when adjusted for size.
n
n
The University performs well in terms of its
public peers, a group that includes the University
of California, Berkeley; University of Florida;
University of Georgia; University of Illinois;
University of North Carolina; University of Texas;
and University of Wisconsin. The University leads
in alumni participation, total giving per alumnus,
alumni giving per student, and parent giving.
The University’s fundraising performance also
compares well with an aspirational peer group that
includes the University of Pennsylvania, Cornell
University, Vanderbilt University, Duke University,
45
Historic Philanthropic Cash Flow (in Millions)
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13*
10-Year Average
$175.0
$183.5
$230.1
$302.1
$286.7
$248.1
$203.8
$229.2
$245.5
$240.0
$234.4
* Based on actual cash flow to-date (through Jan. 31, 2013); does not reflect anticipated growth resulting from end-of-campaign momentum.
and Northwestern University. It leads Vanderbilt
and Northwestern in alumni participation and
outperforms Northwestern in giving per alumnus
and in giving per student. In parent giving, U.Va.
leads Duke and Northwestern. To date, more than 43 percent of U.Va.’s alumni have
made gifts to the current capital campaign; close
to 60 percent have made a gift to the University at
some point in their lifetime. This high percentage of
alumni participation speaks to their passion for, and
commitment to, the University.
makes faculty recruitment and retention of vital
importance to its future. A renewed faculty that
combines highly promising young talent and
eminent scholars will enable the University to take
a leadership position in critical areas of research,
scholarship, and curriculum innovation. The goal
of the bridge campaign reflects a focus on faculty
recruitment and retention, as well as funding
for faculty research, scholarship, and curricular
enhancement.
n
Future Directions: A Bridge Campaign
for Pan-University Priorities
Sources of Funds
Academic Division Operating Budget
15.0%
Expendable Gifts
and Endowment
Distribution
15.8%
State Appropriations
19.4%
10.2%
Expendable Gifts
and Endowment
Distribution
State
Appropriations
12.4%
Sales & Services
and Other
17.5%
27.0%
Sales & Services
and Other
Sponsored Programs
22.6%
Sponsored Programs
32.4%
Tuition & Fees
24.7%
Tuition & Fees
Operating Cash Balance 3.0%
(Operating Cash Balance 0%)
FY03
FY13
III Academic Division Operating Sources of Funds
III Academic Division Operating Sources of Funds
While focused on completing the current campaign,
the Office of Development and Public Affairs is
preparing to launch a bridge campaign that will begin
July 1, 2013, and continue beyond the launch of the
University’s third major capital campaign (2017). This
bridge campaign—tentatively called the Initiative
to Finance Academic Excellence—will provide the
impetus to complete the current campaign, build the
foundation for the next one, and, most importantly,
help address pressing pan-University issues. With a
bridge campaign goal of $400 million in endowment,
the campaign will (a) increase cash flow as
commitments are paid, and (b) add tens of millions of
dollars to the University’s endowment, thus providing
increased revenue, in perpetuity, to the University for
the following purposes:
n
Faculty support (Bridge Goal: $250 million). The
University is moving rapidly toward a dramatic
generational transformation of its faculty, which
Financing Academic Excellence FY14–FY17
AccessUVa (Bridge Goal: $50 million). To
fulfill its public mandate, the University strives
to be financially accessible to all who are offered
admission, regardless of financial status or economic
strata. Launched in 2004, AccessUVa guarantees
access to all admitted students, regardless of their
families’ finances. AccessUVa has helped distinguish
U.Va. as a “best value,” important when colleges
and universities compete for the brightest and
best students.
The need for AccessUVa has grown significantly
since the program’s launch, and so has its expense.
Endowment funding to AccessUVa eases the burden
on unrestricted University resources, making funds
available for other academic purposes.
n
The Rotunda and the Jeffersonian Grounds
(Bridge Goal: $100 million). The Rotunda and
the Jeffersonian Grounds are among those few
outstanding structures designated UNESCO
World Heritage sites. For alumni, students, and
Virginians generally, their value is incalculable.
Funding for historic preservation must be secured
to restore, maintain, and steward the University’s
priceless architectural heritage—beginning with the
Rotunda restoration at $50 million already under
Philanthropy
Philanthropy
the capital projects funded by the prior campaign,
fully 41 percent of U.Va.’s current physical footprint
has been constructed, expanded, or renovated over the
past two decades, almost entirely with private funds.
DRAFT
3/4/13
Financing Academic Excellence FY14–FY17
46
DRAFT
3/4/13
Focused Pan-University Fundraising
While the Office of Development and Public Affairs
will continue to provide leadership, service, and
critical infrastructure support for the entire University
development community, it is clear that the
University’s strategic priorities depend on a focused
pan-University fundraising effort. To support this
change, the office will allocate its resources around
two foci: a) continued and improved infrastructure
service to schools and units, and b) institutional, or
pan-University, fundraising.
The office will continue to provide services to
schools and units for areas such as training, prospect
research, gift processing, planned giving, leadership
annual giving, reunion giving, and parent giving. Gift
officers will be deployed to cultivate and solicit gifts
in support of the strategic institutional initiatives
described above, or for those yet to be articulated.
This reallocation of effort represents a significant
philosophical shift for University fundraising. The
University currently has a decentralized, schooland unit-centered development model that has, in
many ways, served the University well in the past.
The numerous University-related foundations have
effectively cultivated donors around school-specific
needs, such as the College of Arts & Sciences’ South
Lawn complex, the McIntire School of Commerce’s
Robertson Hall, and the Curry School of Education’s
Bavaro Hall.
The school-based model, however, is far less
productive in supporting pan-University priorities or
unique institutional needs, such as the renovation of
the Rotunda and the preservation of the Jeffersonian
Grounds.
Although the Office of Development and Public
Affairs will raise significant contributions for the
Initiative to Finance Academic Excellence,
ultimately the effort’s success will depend on a
partnership that includes shared ownership and
accountability between the University and its
fundraising schools and units.
As is the case with every campaign, gifts of
seven, eight, and even nine figures will drive the
$400 million bridge campaign. These major gifts are
typically paid out in multiyear pledges; while the full
commitment will count toward the campaign goal, the
effect on cash flow will be staggered and cumulative.
In anticipation of a $5 billion Bicentennial Campaign,
the office is examining all of its operations—
engagement, advancement services, and
communications, as well as fundraising. Raising
$5 billion will produce philanthropic cash flow
significantly higher than the current 10-year average
of $236.6 million annually, and every component of
the organization will have an expanded and enhanced
role to play.
however, will depend on a unanimity of focus new to
the University’s decentralized fundraising structure.
Each school, dean, director, and, ultimately, thousands
of donors must align behind a unified effort that puts
institutional priorities first, realizing that the health
and success of the institution benefits all.
Projected Philanthropic Cash Flow from Bridge Campaign and Gifts Expendable for Operations
(in Thousands)
FY14
Total Philanthropic Cash Flow
$265,509
FY15
$276,129
FY16
$287,175
FY17
$298,662
Gifts Expendable for Operations
Gifts Made to the Rector and Visitors
Gifts Transferred from Affiliated Foundations
Total Gifts Expendable for Operations
Between FY06 and FY12, philanthropic cash flow
increased at an average annual rate of 2 percent. The
Office of Development and Public Affairs believes
it possible to double the current annual growth rate
to 4 percent, as a result of a focused and coordinated
bridge campaign built on the University’s core—its
faculty, students, and Jeffersonian Grounds.
Achieving and sustaining annual cash flow at that
level will require a deeper and broader prospect
pool, additional major gift officers to cultivate and
solicit that pool, and a partnership with the schools
and units, and their respective foundations. This
insures a coordinated effort to advance both school
and institutional strategic priorities.
The proposed Initiative to Finance Academic
Excellence presents an opportunity to dramatically
strengthen the University’s core—its faculty, its
students, and its historic Grounds. Its success,
III Academic Division Operating Sources of Funds
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
16,640
17,306
17,998
18,718
100,550
104,572
108,755
113,105
$117,190
$121,878
$126,753
$131,823
47
Philanthropy
Philanthropy
way and continuing through a broader Jeffersonian
Grounds initiative, estimated to cost an additional
$150 million. The ultimate goal is to ensure that
the heart of the Grounds remains as a vital part of
student and faculty life as it has for two centuries.
DRAFT
3/4/13
DRAFT
3/4/13
DRAFT
3/4/13
III Academic Division Operating Sources of Funds
49
7. Endowment Distribution
The University manages the distribution of its $3.5 billion endowment, while the affiliated foundations manage the
distribution of a collective endowment of $1.3 billion. The University’s endowment is divided into true endowment and
quasi‑endowment, as well as restricted endowment and unrestricted endowment. All of these categories determine the
availability of endowment distributions for specific purposes. The long-term return expectation for the endowment is
8.0 percent, although this return is dependent on market conditions. The policy of the Board of Visitors currently limits the
distribution of the University’s endowment to a band of between 4 percent and 6 percent of market value—and the affiliated
endowments usually follow suit. This approach preserves both the stability of distribution flows and the purchasing power of
the funded programs. In recent years, the distribution rate has remained slightly below 5 percent. The University assesses
an administrative fee of 0.5 percent on the endowment each year. Given the true costs of development-related expenditures,
measured in 2008 and confirmed by more recent surveys by industry groups, the University is raising this fee by 50 basis
points to 1.0 percent beginning in FY14.
Context: Endowment Spending
Categories
T
he University (Rector and Visitors) has
more than 2,400 separate endowments, with
a combined market value of $3.5 billion as of
December 31, 2012. All but $100 million of the
University’s endowment is invested in the Long-Term
Pool (LTP) managed by the University of Virginia
Investment Management Company (UVIMCO).
The LTP is operated like a mutual fund. The schools
and departments purchase shares when they create a
new endowment or add to an existing one, and they
sell shares when they divest part of the endowment
investment to fund spending distribution or pay fees.
Prices are based on the monthly net asset value set by
UVIMCO.
Affiliated foundations hold another $1.3 billion in
endowment. The Law School Foundation, Darden
Financing Academic Excellence FY14–FY17
School Foundation, Alumni Association, and
Jefferson Scholars Foundation, for instance, all have
investments with UVIMCO in excess of $200 million.
Distributions from foundation endowments provide
another funding source to the University in the form
of spendable gifts.
The University’s endowment includes true
endowments and what are called quasi-endowments.
True endowments are created through an endowment
gift, which must be held permanently in ways
that are consistent with the donor’s requirements.
Their earnings alone are distributed to support
operations. The Board of Visitors creates quasiendowments by having otherwise spendable funds
invested in the LTP to generate investment earnings
to support operations. Unlike true endowments,
quasi-endowments can be divested in the same
way they were created, by Board action. As of
December 31, 2012, there was slightly more quasi-
DRAFT
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Financing Academic Excellence FY14–FY17
50
DRAFT
3/4/13
Historic U.Va. Endowment Growth
The two primary objectives of any endowment
spending policy are to provide reliable, predictable, and
preferably inflation-protected distributions to support
programs and to preserve the purchasing power of
endowment principal to fund programs in perpetuity.
Governing boards have to manage the tension
between these two competing goals, finding the
balance between current budgetary support and asset
preservation. In effect, boards make decisions about
intergenerational equity­—how much to spend this year
on the current generation of beneficiaries versus how
much to reinvest for future generations.
As of June 30 (in Millions)
3,200
Market Value 6/30/84
2,800
2,400
$213
New Gifts to Endowment
539
Net Adds to Quasi-endowments
592
Inflation757
Performance
net of distributions
Subtotal2,101
2,000
When the asset markets are rising, this approach
produces modest growth in annual payout. In a falling
market, this policy puts a mathematically calculated
cap on the decrease but leaves room for prudent
judgment. The market decline of FY09 presented
such a case. Because the LTP declined in value, the
University’s already-determined FY10 spending
distribution would have risen from below 5 percent
to well above the 6 percent ceiling. As a result, the
Performance, net of distributions:
Market Appreciation, net
1,600
Distributions, net
(1,451)
Market Value
Adjusted for Inflation
Subtotal1,313
1,200
Market Value 6/30/12
The University’s current spending policy is described
as “inflation growth within a band.” This approach
emphasizes both the stability of distribution flows
and purchasing power protection for the funded
programs. The linkage of payout to market value is
2,764
$3,414
51
accomplished through a requirement that spending
must fit within an established range, rather than a
fixed percentage. Each year, the University adjusts
the previous year’s endowment payout by an inflation
factor. As long as that adjustment results in a
distribution that falls between 4 percent and 6 percent
of market value, it accomplishes the purpose of the
spending policy described above.
Endowment Distribution
Endowment Distribution
$3,600
III Academic Division Operating Sources of Funds
Net Additions
to Quasi-endowment
800
Historic U.Va. Endowment Distribution (Academic Division)
400
New Endowment Gifts
(in Millions and in Percentage of Beginning-of-Year Market Value)
$180
1984 Market Value
0
FY84
FY86
FY88
FY90
FY92
FY94
FY96
FY98
FY00
FY02
FY04
FY06
FY08
FY10
FY12
6%
160
n $Millions l Percentage
endowment, at $1.8 billion, than true endowment, at
$1.7 billion.
The University’s $3.5 billion endowment is also
divided between restricted and unrestricted
endowment. Sixty-eight percent is restricted, while
32 percent is unrestricted. Endowment is restricted
when a donor places one or more conditions on the
use of the funds. Restrictions can be broad or narrow
and can relate to purpose, time, or other conditions.
Endowments must be evaluated to determine if they
can be used for specific pan-University priorities.
One of the University’s funding challenges is to
obtain more unrestricted endowments. While
restricted endowments certainly provide vital funding
for programs, additional unrestricted endowments
would give the University more flexibility to fund
other important priorities. Currently, much of the
University’s unrestricted endowment is already
committed to existing priorities.
140
5.5%
5.50
120
5.25
5.%
5.00
4.93
100
4.77
4.75
4.83
4.77
4.63
Context: Spending Policy
The University’s endowment has grown dramatically
since 1984, even when adjusted for inflation. Market
value in 1984 was $213 million; on December 31, 2012,
it was $3.5 billion. During this period, the
endowment has also been subject to market volatility,
especially over the past 12 years. Both inflation and
volatility factor into how the University determines an
appropriate endowment spending distribution.
III Academic Division Operating Sources of Funds
80
4.44
4.5%
4.50
4.50
4.41
4.39
4.16
60
4.05
4.%
3.97
40
3.5%
20
3.%
0
FY98
FY99
FY00
FY01
FY02
FY03
Financing Academic Excellence FY14–FY17
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
Financing Academic Excellence FY14–FY17
DRAFT
3/4/13
DRAFT
3/4/13
52
The University of Virginia Investment Management Company (UVIMCO) manages the University’s
endowment, investing it and other long-term funds held by the University and its related foundations in
a Long Term Pool (LTP).  Over the 10- and 20-year periods ending June 30, 2012, the LTP compounded at
an annualized rate of 9.8 percent and 12.1 percent, respectively.  This long-term performance comfortably
exceeds both the University’s spending rate (plus inflation) and the 6.7 percent and 7.5 percent annualized
returns available through ownership of the passive policy portfolio (60 percent equity, 10 percent real estate,
and 30 percent fixed income) over the same 10- and 20-year time horizons, respectively.
The Long-Term Pool returns have also exceeded the broad institutional investor universe over ten and twenty
years, as measured by the Trusts Universe Comparison Service® All Master Trusts Top Quartile.  The University
has also outperformed its peer group of colleges and universities with assets under management (AUM)
above $2 billion, as measured by the Cambridge $2+ Billion Top Quartile.
The University’s endowment has grown over the past 30 years as a result of both careful spending decisions
and impressive investment returns.  However, it is important to note that the investment environment the
University faces today is more challenging than before.  Passive capital market returns over the last three
decades have been high enough to support the spending needs of endowments and foundations, as the
model policy portfolio generated a real return in excess of 10 percent over this period.
The last five years have been a very different story. UVIMCO’s model policy portfolio delivered a return of
Board of Visitors decided to reset the distribution
percentage, raising it to 5.5 percent for FY10, the
highest ever for the University. At the same time,
this policy preserved more of the endowment for
future years. It generated a distribution that was
nearly $27 million less than in FY09. The reverse
has occurred as well, where the markets rose so
sharply in a single year that the University’s alreadydetermined distribution rate fell below the 4 percent
floor. This situation occurred in FY07, FY08, and
FY09. In each of those years, the Board of Visitors
reset the spending rate to be 4.0 percent, 4.5 percent,
and 5.0 percent, respectively, producing significantly
higher dollar payouts. In similar circumstances, if the
Board of Visitors wishes to increase funding without
resetting the spending rate, the University can turn to
other strategies, such as deferring expenses or issuing
short-term commercial paper.
things as unitizing the overall endowment spending
distribution among the more than 2,400 separate
endowment accounts, securing endowment gifts
and communicating with donors, processing
disbursements from endowment accounts, and legal
services, among others. Prior to instituting the fee,
these costs were absorbed by other unrestricted
fund sources. The results of a full cost study in
2008 supported a fee of 1.34 percent. The average
administrative fee charged by public institutions
at that time was 1.10 percent. Because this was
a new action, the administration recommended
the University start with the 50-basis point fee.
Currently, half of this revenue is returned to the unit
that owns the endowment, with the other half used to
pay central development fundraising and other costs.
In June 2008, the Board of Visitors approved an
administrative fee of 0.50 percent (50 basis points)
to be charged to endowment accounts to cover
the expenses of administering the endowment.
The Board’s objective was to better align the
administrative cost of the endowment with the source
of funds generating those costs to free up unrestricted
resources to address strategic priorities.
Future Directions: AN INCREASE IN THE
ADMINISTRATIVE FEE
1.0 percent per annum, and the LTP compounded at only 4.7 percent per year over the same period.  Value
added from active management, portfolio tilts, and illiquid investments generated an additional 3.7 percent
above the market, but UVIMCO dipped into accumulated excess returns to fund spending. After considering
inflation, UVIMCO’s policy portfolio return was negative, and the LTP earned only about 2.5 percent per year.
The administrative fee is distinct from the
investment fee charged by UVIMCO and relates
to expenses incurred by the University for such
The University’s endowment spending distribution
remains a critical source of funding for operations.
The endowment distribution provided 10.4 percent of
the Academic Division’s operational funding in FY12,
totaling nearly $132 million. The spending rates for
FY13 and FY14 have already been determined, as
they are based on FY12 market value, increased by an
inflation factor. The payout can also be expressed as a
percentage of the market value at a point in time. The
Investment Goals
Going forward, UVIMCO’s long-term return expectation for the LTP is 8.0 percent, including inflation of
2.5 percent.  To achieve this return, UVIMCO must continue to generate meaningful value added beyond the
expected returns of a passive institutional portfolio. This increase is far from guaranteed.  Also, the actual
Projected Endowment Distribution and University Endowment Administrative Fee,
Academic Division (in Millions)
short-term returns of the LTP will deviate significantly from the long-term estimate.  Assuming annual
inflation of 2.5 percent, UVIMCO projects that a long-term return of at least 8.0 percent will be required to
Endowment Distribution
Endowment Administrative Fee (1.0%)
maintain the endowment’s purchasing power.
Total
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
FY14
FY15
FY16
FY17
$141.1
$145.1
$149.3
$153.5
30.0
30.9
31.8
32.8
$171.1
$176.0
$181.1
$186.3
53
Endowment Distribution
Endowment Distribution
Endowment Performance
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
54
DRAFT
3/4/13
Endowment Distribution
FY13 and FY14 spending rates will be 4.83 percent
and 4.93 percent, respectively, of the June 30, 2012,
market value of the endowment.
In 2010, the Association of Governing Boards,
in partnership with the Commonfund Institute,
conducted a survey of endowment spending
and management under the Uniform Prudent
Management of Institutional Funds Act. Eighty-seven
percent of the respondents assessed a fee. The average
was 1.3 percent and the median was 1.0 percent.
For institutions in U.Va’s cohort, with endowments
greater than $500 million, the average fee assessment
DRAFT
3/4/13
III Academic Division Operating Sources of Funds
55
was 1.2 percent. Five responses from an informal
study that the University conducted of its ACC peers
revealed fees that ranged from 85 basis points to 240
basis points.
The University will raise its administrative fee from
50 basis points to 100 basis points. This increase will
be used to address central development fundraising
and back office costs as described above. This 50
basis-point increase will result in total fees ranging
from $30.0 million in FY14 to $32.8 million in FY17.
8. Athletics, Residence Halls, and
Other Auxiliary Enterprises
A long history of responsible financial operations and self-sufficiency has enabled the University’s auxiliary enterprises
to support the University’s mission, enhance the student experience, and meet the changing needs of the University
community. They continue to innovate, finding new ways to improve the experience for students, faculty, staff, and
the public. About a third of auxiliary revenues come from student fees and housing and dining charges, which,
thanks to efforts to contain and reduce costs, are low in comparison with peer institutions. In the face of competitive
pressures and expected cost increases, the University’s auxiliary enterprises are committed to exploring new options for
ensuring effective and efficient delivery of services, simplifying and streamlining administrative processes and services,
implementing robust technology platforms, and exploring new revenue opportunities.
Context: A History of Responsible
Financial Operations
T
he University’s auxiliary enterprises exist to
furnish goods or services to students, faculty,
or staff in ways that are safe, effective, and efficient
and that are compatible with, and facilitate the
accomplishment of, the University’s educational
mission. Auxiliary enterprises are expected to be
self-supporting, generating revenues that fully
sustain their direct and indirect operating and
capital expenditures. They receive no state support.
The University’s auxiliary enterprises include the
following:
Athletics and Intramural-Recreational Sports
(IM-Rec)
n Business Operations, including Housing, Dining,
Parking and Transportation, University Bookstores,
and others
n Communications Services
n
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
n
n
Newcomb Hall and Student Programming
Student Health
These auxiliary enterprises have a strong history of
responsible financial operations that have allowed
them to support the University’s mission, enhance
the student experience, and meet the changing needs
of the University community. They continue to
innovate, finding new ways to improve the experience
for students, faculty, staff, and the public. Consider
the following examples:
Transit service has been enhanced to provide
more frequent route service, a GPS-based and cell
phone–available bus locater service, expanded latenight service, and route service to areas off Grounds
with a high density of student residences.
n Bookstores have expanded student textbook
options—including used textbooks, e-texts, and rental
textbooks—to increase choices and lower costs.
n Cavalier Computers provides student computers
n
Financing Academic Excellence FY14–FY17
56
DRAFT
3/4/13
In addition, auxiliaries also provide opportunities
for the University to achieve important strategic
goals. They play a fundamental role, for instance,
in University efforts to achieve high levels of
sustainability:
Dining Services, Housing, and Parking and
Transportation have received Virginia’s Department
of Environmental Quality E3 (Exemplary
Environmental Enterprise) designation.
n Both Parking and Transportation and the Dining
Program recently received the Governor’s
Environmental Excellence Award.
n The building housing the new data center for
Communications Services and the Printing and
Copying Services addition received LEED Silver
Certification from the U.S. Green Building
Council.
n
Quite often, auxiliaries partner with schools and
units to directly promote the academic mission of
the University. IM-Rec, for instance, is collaborating
with the newly established Contemplative Sciences
Center to provide core academic support and offer a
variety of mind/body programs. The student housing
portfolio includes three residential colleges and
several residential language houses that are operated
in conjunction with the language departments in the
College and Graduate School of Arts & Sciences.
Current Situation: Competitively
Priced Services Efficiently Delivered
Auxiliary
Description of Core Services
Athletics
Administers 12 intercollegiate athletics programs for men and 13 for
women, providing competition opportunities for 694 student-athletes,
425 of whom receive scholarship support.
Business Operations
Provides services to students, faculty, and staff through Student (137
buildings) and Faculty (90 apartments, townhouses, and detached homes)
Housing, Dining Services (eight meal plans in four locations plus 20
retail dining operations), Parking and Transportation (11 garages, 100
lots, and 70,000 hours of bus service), Printing and Copying Services
(five copy centers and a printing plant), University Bookstore and
Cavalier Computers (five locations), John Paul Jones Arena, the Child
Development Centers, and other activities.
Communication
Services
Provides telecommunication services (including telephone system, data
network, voicemail, long distance, cellular, operator services, wireless data
network, Internet connectivity, paging, automatic call distribution, and
cable television) and manages the University’s campus-wide Microsoft
licensing agreement for all academic departments, the Health System,
students in residence halls, foundations, and other related organizations.
IntramuralRecreational Sports
(IM-Rec)
Addresses student (87 percent participation) and faculty/staff life as it
relates to health, wellness, and fitness. Operates four indoor venues—the
Aquatics and Fitness Center, Slaughter Recreation Center, Memorial
Gym, and North Grounds Recreation Center—and more than 30 acres
of sports fields with a variety of equipment, services, classes/programs,
leagues, and club sports.
Newcomb Hall
& Student
Programming
Serves as a community gathering place and a center for student activities
at the University, providing organizational support to more than 700
student groups and housing Student Council, University Programs
Council, Fraternity and Sorority Life, Orientation, Student Legal
Services, and the Honor/Judiciary Committees.
Student Health
Provides physical and mental health care education and health promotion
for all students. Manages more than 61,000 clinic visits annually, ranging
from counseling and psychological services to general medicine and
learning needs and evaluation.
Revenues
In FY13, auxiliary units are expected to generate a
combined $194.1 million in revenues from all sources,
as the following examples illustrate:
35 percent from external sources (e.g., athletic
conference revenue, gate receipts, corporate
sponsorships, bookstore merchandise purchases,
and parking fees)
n 33 percent from student fees (e.g., student housing
and dining fees and mandatory auxiliary fees)
n 16 percent from recoveries from internal
departments (e.g., telephone/data and printing
services provided to University units)
n 11 percent from private gifts, gifts from affiliated
foundations, and endowment distributions
n 4 percent from other sources
n
The University’s mandatory auxiliary fee and its housing
and dining charges are extremely competitive. Currently,
FY13 Auxiliary Revenues by Source
15.9%
Internal Departments
11.0%
Athletics strives to distinguish the University among
intercollegiate athletics programs by its relatively high
graduation success rate for its student-athletes. The
academic affairs staff in the Department of Athletics
is made up of 14 individuals dedicated to providing
competition opportunities for 694 student-athletes on
an annual basis.
Gifts/Endowment
33.4%
4.3% Other
Student Fees
35.4%
III Academic Division Operating Sources of Funds
External Sources
Other University auxiliary units include WTJU radio station, the School of Continuing & Professional Studies’ Satellite Uplink,
and leased facilities (the National Radio Astronomy Observatory and the Judge Advocate General’s Legal Center and School).
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
57
Athletics, Residence Halls, and Other Auxiliary Enterprises
Athletics, Residence Halls, and Other Auxiliary Enterprises
that are preconfigured for University applications,
can be delivered to the student’s dorm room, have
an exclusive four-year warranty, and can be serviced
in-house at two convenient locations.
DRAFT
3/4/13
DRAFT
3/4/13
Virginia Public Institutions*
$12,000
10,000
8,000
Regular-Session Virginia Public Institutions
$6,000
5,000
Virginia Tech
U.VA.
VCU
George Mason University
Virginia State University
University of MARY WASHINGTON
Radford University
Old Dominion University
Norfolk State University
University of Virginia-Wise
James Madison University
Christopher Newport College
Longwood University
College of william and Mary
The auxiliary units face a number of challenges in
common with the rest of the University, including
increased competition, enrollment growth, higher
expectations for service, and cost increases. They are
committed to exploring new options for ensuring
effective and efficient delivery of services, simplifying
and streamlining administrative processes and services,
*U.Va. total includes $44 University student activity fee
III Academic Division Operating Sources of Funds
Virginia Military Institute
Radford University
Norfolk State University
Competition—Auxiliary units must ensure that
their prices, rates, and fees are value sensitive and
competitive with the market. This is particularly
true for students and their parents, who now
scrutinize fees and room and board rates as part
of the total price of education. Additionally, some
auxiliaries, such as the University Bookstore,
Cavalier Computers, and Printing and Copying
Services, compete with external entities, while
others, such as Athletics and the John Paul Jones
Arena, compete with alternatives for discretionary
entertainment dollars. A further challenge is
the impact that increasing auxiliary rates have
on institutionally funded financial aid, which is
primarily funded from tuition.
n
Enrollment growth—The University’s enrollment
growth affects virtually every auxiliary enterprise,
Future Directions: Innovating
to Address Change
Virginia Military Institute
0
James Madison University
n
Average Combined Rate = $3,418 U.Va. =$1,940*
1,000
Virginia Commonwealth University
implementing robust technology platforms, and
exploring new revenue opportunities.
4,000
3,000
Longwood University
* Virginia Tech is not included because it does not offer any weekly board plans.
The Board of Visitors requires self-supporting units,
including auxiliaries, to have operating reserves
equivalent to three months of operating expenses and
annual capital expenditures or contributions to capital
reserves of at least 1.5 percent of replacement value
of buildings and equipment. In FY13, the six largest
auxiliary units anticipate transferring $44.2 million to
reserves for renewal, replacement, and debt service.
FY13 Required Non-E&G Fees
George Mason University
0
University of Virginia
2,000
University of Virginia-Wise
4,000
Old Dominion University
6,000
Virginia State University
Combined operating expenditures for the University’s
auxiliaries are budgeted at $191.0 million in FY13.
Planned expenditures include salaries and fringe benefits,
operations and maintenance, equipment replacement,
renovations and repairs, facility expansion, and a general
and administrative (G&A) charge for support services.
The Commonwealth requires that auxiliaries be charged
an overhead rate to support the G&A services provided
by E&G operations. In FY13, the auxiliaries will be
charged 6.0 percent of their operating expenditures. A
total of nearly $5.2 million will then be recovered by
the central administration from auxiliaries to pay for
accounting, human resources, information technology,
and other services.
Financing Academic Excellence FY14–FY17
Sources: SCHEV Public Institutions survey & Business Operations web-based survey
Average Combined Rate = $9,159 U.Va. =$9,419
Because the auxiliary enterprises have been
successful in holding down increases in costs,
the University’s fees are now the lowest of any
state institution in Virginia with the exception
of Virginia Tech (which benefits from its larger
enrollment, older facilities, and revenues from its
athletic program). The University’s regular-session
non–Education and General (E&G) fee, which
includes the auxiliary fee of $1,896 and the $44
University student activity fee, is $1,940, compared
with the state average of $3,418. The University’s
FY13 combined room and board rate of $9,419 is
2,000
59
FY13 Combined Room & Board Rates
Christopher Newport University
Athletics, Residence Halls, and Other Auxiliary Enterprises
Expenditures
III Academic Division Operating Sources of Funds
Athletics, Residence Halls, and Other Auxiliary Enterprises
slightly above the average rate as compared with
other Virginia public higher education institutions;
when compared with selected peer institutions, the
University’s rate is quite competitive.
University students enrolled in regular sessions pay
a mandatory comprehensive auxiliary fee of $1,896
annually, which supports the University Transit Service,
IM-REC, Student Health, Newcomb Hall, Athletics,
Safe Ride, Student Programming, technology, and
WTJU, the University’s community radio station.
A lower per-session rate is assessed to students
enrolled in the summer session ($278) or in executive
programs ($147).
college of william and Mary
58
DRAFT
3/4/13
University of Mary Washington
Financing Academic Excellence FY14–FY17
DRAFT
3/4/13
Financing Academic Excellence FY14–FY17
60
DRAFT
3/4/13
III Academic Division Operating Sources of Funds
61
FY13 Combined Room & Board Rates
U.Va. “Peer” and Selected Other Institutions
14,000
n The Housing Division's Alderman Road Residence Hall replacement project took
advantage of favorable construction pricing to accelerate the construction schedule,
producing a total savings of approximately $40 million.
12,000
Average Combined Rate = $11,694 U.Va. =$9,419
n The Child Development Center expanded to two facilities by partnering with a
contractor to convert an existing center, at a renovation cost of $545,000, rather than
constructing a new University facility, at an estimated cost of $2 million.
10,000
8,000
n Student Health implemented an Electronic Health Records system, leading both to
operational efficiencies and better record management and support of patients.
Higher service level expectation—All auxiliaries
face demands from consumers for high-quality
performance. This is as true on the athletic field as
in the dining or residence hall.
n
General cost increases—Rising personnel costs
are a challenge for most of the auxiliary enterprises.
The looming shortage, for instance, in primary
care and mental health providers will affect Student
n
UNIVERSITY OF FLORIDA
Sources: Business Operations web-based survey
Georgia Institute of Technology
University of North Carolina
University of Virginia
UNIVERSITY OF MICHIGAN
University of ILLINOIS
Health. Auxiliaries are also affected by the price of
consumables such as fuel, utilities, food, medical
supplies, pharmaceuticals, and immunizations. As
tuition and fees increase, Athletics and the Virginia
Athletics Foundation face a unique challenge to
their commitment to provide the maximum number
of allowable athletic scholarships.
from University Transit Service to Housing to
Student Health. While new students also provide
incremental sources of revenue, enrollment
growth requires advanced planning to ensure
that appropriate staffing, equipment, and physical
infrastructure are in place when the new students
arrive on Grounds.
n
RUTGERS UNIVERSITY
EMORY & Henry College
UNIVERSITY OF PENNSYLVANIA
WAKE FOREST University
RICE University
PRINCETON University
0
NORTHWESTERN University
2,000
VANDERBILT University
CORNELL University
4,000
JOHNS HOPKINS University
6,000
n The Housing Division has contracted with Facilities Management to provide
housekeeping and maintenance. As part of this agreement, Facilities Management will
take over the HVAC maintenance program from Honeywell for an estimated $100,000
savings. Similarly, Newcomb Hall has internally contracted with Facilities Management
for all housekeeping services, netting savings of $16,000 annually.
n Newcomb Hall and the Office of the Dean of Students have implemented shared
budget management, human resources, and technology services, resulting in a planned
reduction in staff and more integrated, efficient services that improve satisfaction by
allowing students to better navigate within multiple systems and reduce the amount of
time spent on non-value-added activities.
n External procurements are carefully managed to take advantage of high volume
to reduce overall costs. For example, Printing and Copying Services entered into an
agreement in 2011 with Ricoh for departmental copier equipment and support that is
expected to save $150,000 annually. Similarly, Communication Services negotiated a
campus-wide Microsoft license agreement that saved the institution about $200,000 in
aggregate.
Facility maintenance, upgrade, and
replacement—Auxiliaries must actively plan to
address aging facilities and technologies over the
next decade. New facilities must accommodate
increasing demands by student and other users.
Athletics strives to develop high-quality facilities to
support top rankings for its programs and attract
the best coaches, student-athletes, and supporters.
III Academic Division Operating Sources of Funds
Financing Academic Excellence FY14–FY17
Athletics, Residence Halls, and Other Auxiliary Enterprises
Athletics, Residence Halls, and Other Auxiliary Enterprises
Recent Measures Taken by Auxiliary Enterprises to
Actively Manage Costs
$16,000
Financing Academic Excellence FY14–FY17
62
n
DRAFT
3/4/13
Athletics, Residence Halls, and Other Auxiliary Enterprises
Evolving external markets—The operations
of many auxiliary units are affected by economic
uncertainties, evolving business models (for
example, e-textbooks), rapidly changing
technologies, and individual preferences (e.g., desire
for single bedrooms). For Athletics, this includes
63
recent national developments around conference
realignments and new television agreements. Units
will need to continue exploring new opportunities
for revenue-generating operations, such as new
partnership and sponsorship initiatives.
Projected Non-E&G Fees
FY14
Required non-E&G Fees—regular session*
% Change
Housing—weighted average
% Change
Dining—full plan
% Change
FY15
FY16
FY17
$1,994
$2,037
$2,065
2.8%
2.2%
1.4%
$2,087
1.1%
$4,380
$4,555
$4,735
$4,925
3.1%
4.0%
4.0%
4.0%
$5,350
$5,564
$5,786
$6,018
3.5%
4.0%
4.0%
4.0%
* includes auxiliary fee and University student activity fee
IV Academic Division Operating Uses
DRAFT
3/4/13
III Academic Division Operating Sources of Funds
DRAFT
3/4/13
DRAFT
3/4/13
V Academic Division Operating Uses of Funds
65
1. Faculty Advancement
The generational turnover in faculty means that, during the next decade, universities across the nation will be competing
for talent. If the University is to emerge from this transformation a more dynamic and vital institution, its salaries must
be competitive. In FY04, the Board of Visitors focused on regaining the University’s former position among Association of
American Universities (AAU) peers and came close to doing so, but its efforts were undermined by the recession. There has
not been a state-authorized salary increase since November 2007. The University now proposes a four-year plan to improve
faculty salaries, targeting the 20th position in the salary rankings of AAU peer institutions. The University will also
provide competitive start-up packages for new science, technology, engineering, and mathematics (STEM) faculty. These
initiatives are critical because they have long-term implications for the future of the University.
Context: The Economy Undermines the
University’s Efforts to Reach salary
Benchmark
A
fter two years in which the state did not
authorize a salary increase, the University’s Board
of Visitors decided in FY04 to address the issue. It
adopted the goal of increasing faculty compensation
to market levels by FY07 and setting the salary
benchmark at a position between the 15th and 19th
rank of the University’s 62 Association of American
Universities (AAU) peers.
The Board subsequently approved supplemental
salary increases, awarded based on merit, that enabled
the University to approach this goal. By 2007, the
University was within $600 of achieving the 19th
rank. Unfortunately, because of the recession, the
state has not authorized a salary increase since
November 2007.
By FY10, faculty salaries dropped to 29th place in
the AAU rankings. In FY12, the University’s deans
Financing Academic Excellence FY14–FY17
provided increases for promotions, retention, and
additional responsibilities as well as to address equity
issues. Funding to support these increases, which
was provided from existing school resources, resulted
in an average increase of 4.3 percent. The median
increase among AAU institutions was 2.4 percent,
which allowed the University’s rank to rise to the
26th position, sixth among public AAU institutions.
This ranking still represents a gap of $4,300 in
average salary from the Board’s previously established
minimum goal.
This figure represents an average. The School of
Law and Darden School of Business pay salaries at
levels higher than the 20th rank in keeping with their
competitive position. In the undergraduate schools,
the gap is more significant. In the College and
Graduate School of Arts & Sciences, for instance, it
represents a gap of $9,027 for an assistant professor,
$15,479 for an associate professor, and $24,266 for a
full professor.
Financing Academic Excellence FY14–FY17
66
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DRAFT
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Current Faculty Rank Distribution*
Projected Faculty Rank Distribution
FY13
FY17
15
17
15.9%
19
Assistant Professor
21
35.0%
23
25.0%
Assistant Professor
Professor
25
Salary
27
29
Total Compensation
31
52.3%
Professor
31.8%
Associate Professor
40.0%
33
Associate Professor
35
37
19909192 93949596979899
2000
01020304050607 080910 1112
Current Situation: The Generational
Turnover
The University, along with other institutions of
higher learning, faces a dramatic generational
turnover in faculty during the coming decade.
According to a study commissioned by TIAA-CREF,
universities are on the “forefront of the workforce
challenges presented by the aging U.S. population.”
In the fall of 2011, the average age of tenured and
tenure-track faculty at all AAU institutions was
51 years old. This situation is even more critical at
the University, where 65 percent of tenured faculty
members are age 55 and older, and 16 percent are 65
and older. If the University is to emerge from this
transformation a more dynamic and vital institution,
its salaries must be competitive.
Cost: $140.5 million @ 26th Position
(Excluding Law, Darden, and Medicine)
Cost: $155.2 million @ 20th Position
(Excluding Law, Darden, and Medicine)
To approach the generational turnover from a
position of strength, the University will improve the
average faculty salary at each rank to the 20th position
of its AAU peers. Over the past 10 years, the average
annual faculty salary increase for peers in the 15–20th
positions of the AAU ranking has been 2.8 percent.
Assuming that these peers will raise their average
faculty salary by 3 percent each year through FY17,
the University can attain the 20th rank with annual
merit-based increases for continuing faculty of 4.75
percent. The University will prepare a report annually
to show how this goal is being met, taking into
account state salary actions.
at age 68, an estimated 291 faculty members will leave
the University by FY17. Of these, 178 will come from
the undergraduate schools. Retiring faculty, primarily
full professors, will be replaced largely with assistant
and associate professors at the appropriate competitive
faculty salary as the University returns to a more
sustainable mix of 35 percent full professor, 40 percent
associate professor, and 25 percent assistant professor.
Future Directions: Securing THE
UNIVERSITY’S Place Among the Nation’s
Best Schools
Faculty Salaries
Over the next four years, the University will find itself
in a highly competitive environment. Its AAU peers
will be mounting aggressive efforts to recruit and
hire faculty talent as they face their own generational
turnover. The University’s challenge will be especially
difficult considering the desire not simply to replace
faculty but to attract those who potentially can set the
direction of research in their fields and who combine
a commitment to innovation in education with
intellectual leadership. In other words, to be true to
the University’s intellectual and educational heritage,
it must target a small and very desirable subset of the
available talent.
Renewing the faculty given these aspirations is a
daunting challenge, but successfully accomplishing
this task is crucial to the University’s future. The
University’s response to the generational turnover
will determine whether it flourishes during the next
50 years as it has during the last 50.
Across the University, these increases would total
$64.4 million between FY14 and FY17—$28.7
million for the undergraduate schools—if the current
distribution of 855 faculty members by rank were
held constant. The primary factor determining the
total cost of faculty salaries is mix by rank. Currently,
52.3 percent of the University’s faculty members are
full professors, 31.8 percent are associate professors,
and 15.9 percent are assistant professors. If they retire
This calculation assumes a 50 percent retention and
promotion rate into the associate professor ranks
and a retention and promotion rate of associate
professor to full professor over the four-year period
that is comparable to current rates. In addition, it
assumes funds made available from retirements will
be reinvested into improving overall compensation of
the faculty.
As a result of these savings, funding required from
new sources to sustain the 4.75 percent annual
increase needed to achieve the 20th rank by FY17 is
$14.8 million over the four years. The University will
monitor these key assumptions and adjust its funding
*There are currently 855 tenured and tenure-track faculty in the undergraduate schools.
V Academic Division Operating Uses of Funds
Financing Academic Excellence FY14–FY17
67
faculty advancement
faculty advancement
U.Va.’s Performance on the AAU Rankings of
Salary and Compensation for Instructional Faculty
V Academic Division Operating Uses of Funds
Financing Academic Excellence FY14–FY17
68
DRAFT
3/4/13
faculty advancement
plan so that it is successful in attaining the 20th
position in the AAU rankings by FY17. In addition,
the University expects to hire new faculty to support
undergraduate enrollment growth at a studentto-faculty ratio of 16:1 and at the projected new
distribution of faculty. These positions will be funded
from incremental tuition and general funds related to
enrollment growth.
Start-up Packages
New faculty in the School of Engineering and
Applied Science and a third of new faculty in the
College of Arts & Sciences will be in STEM-related
DRAFT
3/4/13
FY13
FY14
Base Salary
and Benefits
Subtotal Undergraduate Schools
FY15
FY16
FY17
Subtotal *
FY17
Base Salary
and Benefits *
4.75% Increase *
$140,460
$6,680
$6,990
$7,320
$7,670
$28,660
$169,120
139,360
6,620
6,930
7,260
7,610
28,420
167,780
Law
20,830
990
1,040
1,090
1,140
4,260
25,090
Darden
14,880
710
740
780
810
3,040
17,920
Medicine
Subtotal Medicine, Law, and Darden
175,070
8,320
8,710
9,130
9,560
35,720
210,790
Grand Total
$315,530
$15,000
$15,700
$16,450
$17,230
$64,380
$379,910
Subtotal Undergraduate Schools
$140,460
$6,680
$6,990
$7,320
$7,670
$28,660
$169,120
Funded from Generational Change in Undergraduate Faculty
(3,466)
(3,466)
(3,466)
(3,466)
(13,864)
(13,864)
Projected New Investment in Undergraduate Schools
$3,214
$3,524
$3,854
$4,204
$14,796
$155,256
* The 4.75% salary increase will not be evenly spread; the salary increase will differ school by school, based on distance from salary benchmarks.
Also, some schools may utilize different benchmarks that better reflect their peer group.
Projected Faculty Start-up Packages (in Millions)
FY14
FY15
FY16
Total Faculty Start-up Packages
$25.0
$25.0
$25.0
$25.0
Less: Amount Funded from Existing Resources
(18.0)
(18.0)
(18.0)
(18.0)
$7.0
$7.0
$7.0
$7.0
Amount to be Funded from New Resources
69
fields. They will require start-up packages that now
average $627,000. Start-up packages are essential for
launching a career as a scientist or in engineering.
They typically include graduate student support,
summer salary support, laboratory and computer
equipment, reduced teaching load, and a small amount
of unrestricted funds. The total cost of these start-up
packages over the next four years will be $100 million.
Approximately $72 million of required start-up
packages will be funded from existing resources (cash
reserves and allocations from the Higher Education
Equipment Trust Fund), with the remaining
$28 million funded from central operations.
Projected Teaching and Research Faculty Salary Increases (in Thousands)
FY17
2. Staff Compensation and
Faculty/Staff Fringe Benefits
After successfully designing and implementing the University Staff Human Resources Plan, authorized under the Higher
Education Restructuring Act, and transforming paper-driven human resources processes to web-based systems, University
Human Resources (UHR) is concentrating on the strategic issue that represents the most significant human-resourcesrelated financial challenges facing the University—the cost of competitive staff compensation and fringe benefits. The
University’s ability to attract and retain the best faculty and staff is directly linked to its ability to offer competitive fringe
benefits and staff compensation and is, therefore, essential to the institution’s ability to maintain academic excellence. By
FY17, the University expects staff salary and fringe expenditures to reach $353.9 million from $310.8 million in FY13
and fringe benefits for faculty to total $92.7 million, up from $80.4 million currently.
Overview
Context: A Streamlined HR Program
That Controls Costs
U
niversity Human Resources (UHR) supports
the mission of the University by creating a work
environment that attracts, develops, and retains an
outstanding and diverse workforce. Between 2006
and 2009, under the impetus of the Higher Education
Restructuring Act, UHR designed and implemented
the new University Staff Human Resources Plan.
UHR followed up by automating manual and paperdriven human resources (HR) processes. Although it
represented a significant change for the University
community, employees and managers now have
desktop access to all HR information and services.
These systems implementations allowed UHR
to reassign resources within the department to
V Academic Division Operating Uses of Funds
V Academic Division Operating Uses of Funds
Financing Academic Excellence FY14–FY17
more value-added, mission-critical functions. This
reorganization has helped produce savings in the
following areas, among others:
n
UHR reduced its headcount from 115 to 85. As
a result, it was able to lower personnel costs by
$1.0 million.
n
Savings from managing the U.Va. Health Plan
equate to $8 million a year when compared with
the state’s plan. In a time of drastic increases in
health care costs across the country, UHR’s Benefits
Office has held down both employee and employer
costs over the last five years. Based on data from a
2012 study of large U.S. employers (both private
and public) conducted by Aon Hewitt, the average
cost per employee of U.Va. health benefits was
9.7 percent less than other employers. Over time,
U.Va.’s cost per employee has been consistently less
than other large employers.
DRAFT
3/4/13
n
n
n
UHR manages a series of benefit plans covering
retirement, disability, life insurance, dental, and
accidental death and dismemberment, among
others. By aggressively negotiating contract
renewals, the University has added educational
and back-up child and elder care benefits at no
additional cost.
Executive Search Group, a fee-for-service in-house
executive search team known for high-quality, hightouch recruitment, costs significantly less than using
outside search firms, saving University departments
$900,000 per year.
The Payroll Office processes 324,000 payments
annually, totaling a gross payroll of approximately
$705 million, at a cost of $1.30 per check. By
comparison, the American Payroll Association’s
national average is $1.76 per check.
UHR is conducting an assessment in FY13 to
redesign the continuum of HR services provided
across the institution using metrics to improve
service delivery at the highest level of efficiency and
the lowest cost. The goal is to ensure schools/units
have quality HR support by streamlining processes,
reducing redundancy, optimizing economies of scale,
and capitalizing on critical skill sets.
All new employees hired since July 1, 2006, are
designated University Staff and are covered by policies
adopted under the authority granted to the Board of
Visitors by the Higher Education Restructuring Act.
Other staff are Classified Staff subject to state policies
as established by the Commonwealth of Virginia
Personnel Act. As staff turns over, eventually all staff
will be University Staff. Currently there are 3,005
University Staff and 2,080 Classified Staff.
With every aspect of operating the University
growing in sophistication, the skills of a large
proportion of the staff must also increase, which has
a direct effect on their compensation. For instance, a
recent survey of University information technology
leaders cited the need to recruit and retain skilled
technologists to create, administer, and monitor the
growing online curriculum.
Changing demands are not isolated to the technology
world. As the University’s emphasis on research grows
and faculty become more interdisciplinary, the need
Median Salary Increases for Midlevel University
Positions (in Percentage)
Job Category
2008*
2009
2010
2011
2012
Academic Affairs
3.5
3.5
0
1.1
2.0
Business & Administrative
Affairs
4.0
3.5
0
1.0
2.0
Human Resources
4.0
3.7
0
1.0
2.0
Information Technology
3.9
3.7
0
1.5
2.0
Athletics
4.0
3.8
0
1.5
2.0
Student Affairs
3.5
3.5
0
1.2
2.0
External Affairs
4.0
3.5
0
1.5
2.0
Engineering/Research &
Agricultural
3.9
3.4
0
1.0
1.8
0
0
0
2.0
0
U.Va. Average
* Calendar Years
V Academic Division Operating Uses of Funds
40
Future Directions: Reaching the
Market Average in Staff Compensation
30
The institutional goal for University Staff salaries is
the average salary paid by the market. It is projected
that reaching the mean pay range will require a
3 percent salary increase each year through FY17.
This plan takes into consideration the cost of a higher
proportion of skilled positions in the University’s job
mix, the pressures created by a local climate of low
unemployment, and rising staff salaries in colleges and
universities nationally.
20
10
0
2010
2011
2012
for highly qualified, adaptable research support staff
grows as well. Staff with these new competencies
are harder to find and cost more in the marketplace.
After four years without staff salary increases, U.Va.
is slowly losing its competitiveness to attract and keep
many of these qualified individuals.
The University’s goal is to offer salaries at the
average market rate. The University compiles a
market range for each University Staff position and
averages these to arrive at the overall metric for
salary competitiveness. Market is defined as local,
regional, or national depending on the job category.
On this metric, salaries for University Staff have
increased from 34.9 percent in FY10 to 36.8 percent
in FY11, to 43 percent in FY12 (due in great part to
the 5 percent state-mandated increase that offsets
a required 5 percent contribution to retirement
accounts).
Data from the College and University Professional
Association for Human Resources indicates that other
institutions have maintained aggressive staff increases
between 2008 and 2012. By contrast, University staff
had just one real 2 percent salary increase during
this period.
In addition to facing increasing staff salaries within
higher education, the most recent unemployment rate
Financing Academic Excellence FY14–FY17
For Classified Staff, annual increases are determined
by the State Appropriation Act, usually on an acrossthe-board basis. For University Staff, annual increases
are set by the Board of Visitors, based on merit. This
plan assumes the state will authorize a 2 percent
increase annually for Classified Staff, while the
Board will authorize a 3 percent increase annually for
University staff.
U.Va. Minimum Hourly Rate
$14
12
10
8
6
12/04
12/05
12/06
12/07
$11.53
$10,197
$11.30
$11,188
$10.65
2013 (projected)
Goal
50
$10.14
$9,270
$9.75
$10,522
60%
Current Situation: The Effects of five
Years With just one minimal Salary
Increase
$9.37
2012
in the Charlottesville area dropped to 4.3 percent,
making the local competition for qualified staff that
much more challenging.
$8.88
U.Va. Average
University Staff Salaries as a
Percentage of Market Range
$8.62
National Average
Staff Compensation
4
2
0
FY03–04
11/04
3/06
7/11
7/2
7/13
(proposed)
71
Staff Compensation and Faculty/Staff Fringe Benefits
Staff Compensation and Faculty/Staff Fringe Benefits
Comparison of Annual UVa Health Plan Cost per
Employee to National Average
V Academic Division Operating Uses of Funds
$8.37
70
DRAFT
3/4/13
$6.44
Financing Academic Excellence FY14–FY17
Financing Academic Excellence FY14–FY17
72
DRAFT
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DRAFT
3/4/13
Faculty/Staff Fringe Benefits
During the period between 2008 and 2013, the total
faculty fringe benefits rate has held steady in the
range of 26 to 27 percent, with only a slight decline
in retirement contributions as a result of legislatively
mandated changes. Health benefits, which were 8
percent of faculty salaries five years ago, are at 8.5
percent now, a significant cost containment given the
rising cost of health care.
Current Situation: Controlling Costs
At a time when employee benefits across the country
are seriously eroding, U.Va. has been able to improve
benefits while controlling costs. The total fringe
benefits rate for staff decreased from just under
37 percent in 2008 to just under 36 percent in 2013.
The significant drop in the fringe rate in FY11 and
FY12 is the result of legislative changes to Virginia
Retirement System (VRS) contributions. That rate
has started to recover and is expected to continue to
increase in the future. There is more volatility within
categories and in the staff rate as a whole than with
the faculty rate because staff salaries are lower and
small changes have greater proportional effects.
The additional resources required to fund the salary
plan for both Classified and University Staff through
FY17 are approximately $32.6 million.
Future Directions: Rates Could Rise
with Rising Health care Costs
Fringe benefits rates are projected to increase for
both faculty and staff a total of 4 percent over the next
4 years. These projections reflect anticipated increases
in both health care and retirement costs.
One way to assess faculty fringe benefits is to examine
AAU rankings. The University is currently 26th in the
salary rankings but just 29th in total compensation.
The value of faculty benefits lags because the
University does not offer a dependent tuition benefit.
In addition to health care, the state’s plan to shore
up the current and unfunded liability in the VRS will
have a significant impact on the cost of benefits as the
retirement contribution rate increases. Projections
of retirement costs reflect these increases as well as
salary increases envisioned in the four-year financial
plan. Existing resources (over recoveries from prior
years) are used to offset future rate increases. Faculty
fringe rates will increase from 26.3 percent in FY13 to
By comparison, the Commonwealth’s fringe benefits
rate for classified employees was 43 percent in 2010,
while the U.Va. fringe rate was 39 percent. The
primary difference is the comparative cost of health
benefits, equivalent to $8 million per year in savings.
Historic Faculty and Staff Fringe Benefits Rates
Projected Faculty and Staff Fringe Benefits Rates
(by Percentage)
(by Percentage)
45%
45%
40
40
n
35
36.8
Health benefit costs are slated to increase by 9 percent
per year given additional employer costs associated
with the Affordable Care Act. A combination of plan
design changes and use of existing plan resources will
help mitigate health plan cost increases.
38.6
38.9
30
n
Faculty n
Faculty n
Staff
Staff
35
30
31.3
27.6
25
25
20
20
15
15
10
10
5
5
0
0
FY08
FY09
FY10
FY11
FY12
V Academic Division Operating Uses of Funds
FY13
FY14
Financing Academic Excellence FY14–FY17
FY10
FY15
FY16
73
Staff Compensation and Faculty/Staff Fringe Benefits
Staff Compensation and Faculty/Staff Fringe Benefits
In addition to the 3 percent increase, which affects
salaries for University Staff, the University will
continue to allocate $250,000 each year for strategic
compensation funding, devoted to improving pay
for lowest-paid employees and those in critical
occupational groups. Plans are already under way to
increase the minimum hiring rate to $11.53 ($23,998
annually) in 2013, in addition to continuing to address
other strategic compensation priorities.
V Academic Division Operating Uses of Funds
Financing Academic Excellence FY14–FY17
74
DRAFT
3/4/13
Staff Compensation and Faculty/Staff Fringe Benefits
30.3 percent in FY17; the staff fringe rate will increase
from 35.6 percent in FY13 to 40.2 percent in FY17,
resulting in fringe benefits for both staff and faculty
totaling $184.8 million, up from $162.0 million
currently.
Conclusion
The University’s ability to recruit and retain the best
faculty and staff is directly linked to its ability to
offer competitive compensation and fringe benefits
DRAFT
3/4/13
and is essential to its ability to maintain academic
excellence. The University must be able to offer
competitive salaries if it is to attract and keep talented
staff in highly skilled positions against the backdrop
of low unemployment in the Charlottesville area and
increasing staff salaries in colleges and universities
nationally. Increases in health care and retirement
costs will drive future increases in fringe benefits
for faculty and staff. A combination of plan design
changes and use of reserves is expected to offset
these increases, resulting in a projected net increase
in fringe benefits of $22.8 million over the next
four years.
V Academic Division Operating Uses of Funds
75
3. AccessUVa/Financial Aid
The Board of Visitors authorized AccessUVa in February 2004 to ensure that an undergraduate education at the
University would be available to all students regardless of their financial circumstances. The program was successful in
increasing socioeconomic diversity, reducing student loan debt, and meeting 100 percent of need for all of the University’s
students. With the dramatic economic downturn, cuts in state and federal funding, and the increasing cost of attendance,
institutional expenditures for the program have risen sharply, projected to total approximately $40.2 million in FY13. The
University is developing an approach to AccessUVa that is flexible enough to meet economic realities while enabling the
University to meet its public mandate in ways consistent with its Jeffersonian origins. As a result, University spending for
AccessUVa is expected to increase to $48.7 million by FY17, once program changes are fully implemented.
Projected Staff Salary Costs and Staff/Faculty Fringe Benefits Costs (in Thousands)
FY14
FY15
FY16
FY17
Classified Staff Salaries
$97,377
$97,377
$97,377
$97,377
University Staff Salaries
131,809
131,809
131,809
131,809
81,590
81,590
81,590
81,590
Staff Benefits Cost Increase
(458)
4,355
7,334
10,543
Staff Salary Increase (plus related benefits cost)
7,991
16,106
24,298
32,572
$318,309
$331,237
$342,408
$353,891
80,432
80,432
80,432
80,432
Staff Benefits
Total Staff Salaries and Benefits
Faculty Benefits
Faculty Benefits Cost Increase
Wages, Adjuncts, Overtime, GTA/GRAs, and Other
Total Staff Salaries and Staff/Faculty Fringe Benefits
2,563
7,360
9,658
12,232
111,000
113,000
115,000
117,000
$512,304
$532,029
$547,498
$563,555
Context: IMPROVING ACCESS AND Limiting
Students’ Debt Burden
S
ince 1990, the University has had a financial aid
philosophy designed to promote equal access for
all admitted undergraduate candidates and retention
and graduation success. There are several principles at
the core of this philosophy:
n
Students whose need is extreme should be given
first priority for grant assistance. These students
are, in many instances, more at risk because their
financial circumstances present an obstacle to
completion of their education.
n
Students will receive self-help (loan and workstudy) in their financial assistance packages if
sufficient grant funding is unavailable to provide for
the students’ need.
Today, the University operates under the AccessUVa
resolution approved by the Board of Visitors in
February 2004 and updated in 2005. The Board
V Academic Division Operating Uses of Funds
Financing Academic Excellence FY14–FY17
committed to meeting 100 percent of demonstrated
financial need for qualifying undergraduate students
at all income levels in FY05.
At the same time, the Board implemented a phased
program of replacing loans with grants. In FY05,
the Board began a four-year effort to completely
replace need-based loans with grants for qualifying
undergraduate students with family income at or
below 150 percent of the federal poverty level (later
amended to 200 percent of the federal poverty level).
This was followed the next year by a corresponding
program for all students, capping their loans at
25 percent of the projected undergraduate in-state
cost of attendance over four years and replacing the
rest with grants. AccessUVa was fully implemented in
Academic Year 2009.
A number of factors govern how AccessUVa is
managed:
n
Need is defined as the cost of attendance (tuition,
required fees, housing, dining, personal expenses,
Financing Academic Excellence FY14–FY17
76
DRAFT
3/4/13
n
Funding for AccessUVa is considered part of the
annual budget process.
n
The University does not distinguish between
in-state and out-of-state students in regard to
AccessUVa. All students have 100 percent of their
need met with loans, work-study, and grants.
Eligible low-income students receive all grant funds
to meet their need.
n
International students do not receive financial aid
from either the University’s need-based sources or
endowments.
n
AccessUVa is for undergraduate students only.
Graduate and professional students are not eligible.
n
AccessUVa’s benefits cover up to eight semesters
(four years) of enrollment.
Current Situation: BALANCING
INCREASING COSTS WITH U.VA.’S
PUBLIC MANDATE
Student Financial Services (SFS) oversees AccessUVa.
SFS meets 100 percent of demonstrated financial need
for all students with a combination of loans, workstudy, and grants. Low-income students, those within
200 percent of the Department of Health and Human
Services’ Poverty Guidelines, receive an award
package that contains no loans and no work-study.
As a result of AccessUVa, socioeconomic diversity has
improved, the number of Pell Grant recipients has
increased, and undergraduate loan indebtedness has
been eliminated for some students, while it has been
kept to a minimum for others.
AccessUVa predate the program. The last major gift
to support need-based scholarships since AccessUVa
began in 2005 was received in 2006. Additional
endowed scholarships could slow down the growth
and dependency on unrestricted revenues to support
the majority of need-based aid at the University. As
mentioned in the Philanthropy section, the Initiative
to Fund Academic Excellence includes a bridge goal
of $50 million for AccessUVa.
High-achieving, low-income students applying to the
University receive a consistent message regarding
financial aid: by minimizing their indebtedness, the
University encourages them to pursue the major
and career of their choice. AccessUVa was rated the
best financial aid program among public colleges
and universities in Princeton Review’s 2012 Guide to
Best Colleges and second best in Kiplinger’s Personal
Finance magazine’s 100 Best Values in Public Colleges
list for 2012–13.
The final factor is the growth in the price of
attendance. The tuition price drives AccessUVa
costs. During the first year of AccessUVa, in-state
undergraduate tuition and fees for entering students
totaled $6,790, with an overall price of attendance of
$15,865. Non-Virginians paid $22,890 for tuition and
fees, with an overall price of attendance of $33,020.
During the current award year, tuition and fees and
overall price of attendance for entering Virginians
From a financial viewpoint, however, AccessUVa has
proved increasingly hard to sustain. Unrestricted
institutional funds devoted to the program have
increased from about $11.5 million at the inception of
the program to an estimated $40.2 million for FY13.
The annual cost of supporting the program is affected
by several factors. First, the number of undergraduate
students with demonstrated financial need continues
to increase. During the first year of AccessUVa,
24 percent of the University’s undergraduate student
population qualified for need-based financial aid.
Today, that number has increased to more than
34 percent, or 4,912 undergraduates. The economic
downturn was the primary driver for this increase in
need. The University’s phased enrollment growth also
contributed.
Second, the amount of need-based aid from outside
the University has remained flat or declined in real
terms during this time of increasing need. The
federal government provides funding for Pell Grants,
Supplemental Educational Opportunity Grants,
direct subsidized loans, Perkins Loans, and workstudy. Of these programs, only Pell Grant support has
increased, but its eligibility requirements have been
tightened. While grant support for need-based aid
from the Commonwealth has increased slightly by
$1.5 million from FY05 to FY13, this growth has not
kept pace with the overall costs of AccessUVa.
The third factor influencing annual costs is the
amount of endowed scholarships for need-based
aid. Most of the endowed scholarships supporting
V Academic Division Operating Uses of Funds
V Academic Division Operating Uses of Funds
equal $12,216 and $25,354, respectively, and for
non-Virginians, $38,228 and $52,606, respectively.
The price of attendance for all students has increased
60 percent in the last nine academic years. Some
of the components of the price of attendance, such
as housing, dining, and textbooks, are not entirely
under the University’s control and have increased
significantly over time.
Cost, however, is not the only measure of a
financial aid program. The University’s private peer
institutions have long approached financial aid from
a tuition-discounting perspective. The National
Association of College and University Business
Officers (NACUBO) conducts an annual survey of
private institutions’ tuition-discounting practices
and defines tuition discount as all institutional grant
dollars (restricted and unrestricted grants, including
merit aid and athletic scholarships) as a percentage of
AccessUVa Sources of Funds—Need-Based Financial Aid
Years Ending June 30 (in Millions)
$100
AccessUVa
Fully Implemented
Federal—Grants
80
Federal—Loans
Federal—Work-Study
60
State—Grants
Outside—Grants
AccessUVa Begins
Athletic
Endowment—Grants
40
Unrestricted
Institutional Grants
20
0
FY99
FY00
FY01
FY02
FY03
Financing Academic Excellence FY14–FY17
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY12
FY11
FY13
77
AccessUVA/Financial aid
AccessUVA/Financial aid
books, supplies, and travel) less expected family
contribution as determined by data gathered from
the Free Application for Federal Student Aid
(FAFSA) and various institutional applications.
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Financing Academic Excellence FY14–FY17
78
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V Academic Division Operating Uses of Funds
79
Historic Investment of Unrestricted Resources in AccessUVa (in Thousands)
AccessUVA/Financial aid
FY09
Undergraduate Tuition
Unrestricted Endowment
FY10
$21,239
5,103
0
Gross Undergraduate Tuition and Differential Revenue
Unrestricted AccessUVa Rate
Net Tuition Revenue
gross tuition and fee revenue. According to the 2011
NACUBO study, the average private tuition discount
rate for all undergraduate students was 37.2 percent.
NACUBO is expected to expand the next tuitiondiscount study to include public universities. The
University intends to participate, which will provide
a way of comparing its policies with both public and
private peer institutions.
FY12
FY13
$7,839
$27,674
$31,058
6,000
0
10,660
9,110
0
22,435
0
0
$21,581
$27,239
$30,274
$38,334
$40,168
$179,902
$191,375
$211,070
$233,944
$247,215
12.0%
14.2%
14.3%
16.4%
16.2%
$158,314
$164,200
$180,887
$195,577
$207,166
American Recovery and Reinvestment Act of 2009
Total Unrestricted Institutional Sources Allocated to AccessUVa
FY11
$16,478
expects to hold costs to 15.4 percent of gross
undergraduate tuition revenue. As a result, the
University foresees its institutional contribution to
the program to be $40.2 million in FY14 and projects
a gradual increase to $48.7 million by FY17.
Going forward, the University will establish a regular
program review process using a set of predetermined
metrics by which the cost and objectives of the program
can be evaluated.
Future Directions: PRESERVING the
Program’s Viability
I
Projected Investment of Unrestricted Resources in AccessUVa (in Thousands)
Unrestricted Endowment
Total Unrestricted Institutional Sources Allocated to AccessUVa
Gross Undergraduate Tuition and Differential Revenue
Unrestricted AccessUVa Rate
Net Tuition Revenue
Information technology (IT) plays two complementary roles at U.Va. The daily activities of the University depend on
having a robust and predictable IT infrastructure that is sized to capitalize on economies of scale. At the same time, IT
plays an important strategic role for the University. Global networks, big data, and unprecedented computational power
are fundamentally changing the ways scientists and scholars ask and answer questions and the ways students and teachers
interact. The institutions that best discern how to leverage IT in the service of discovery and learning will define the
playing field for the century ahead. The University’s challenge is to run the IT utility efficiently, predictably, and securely
while developing strategic IT initiatives that position U.Va. to lead in the quest for discovery. To do this, the University
will require $15.3 million in one-time capital, equipment, and implementation funding and $2.9 million in additional
ongoing funding between FY14 and FY17 to support four new initiatives: 1) enhanced security, records management, and
compliance; 2) online and technology-enhanced learning; 3) big data, computation, and digital scholarship; and 4) analytics.
Context: From Maintenance to
Modernization
Over the next four years, the University will continue
to carefully manage its institutional commitment to
AccessUVa with resources dedicated to financial aid
(e.g., new restricted endowments). The University
Undergraduate Tuition
4. Information Technology
FY14
FY15
FY16
FY17
$32,655
$36,180
$41,430
$46,730
7,545
6,000
4,000
2,000
$40,200
$42,180
$45,430
$48,730
$260,735
$274,309
$294,917
$315,658
15.4%
15.4%
15.4%
15.4%
$220,582
$232,065
$249,500
$267,047
V Academic Division Operating Uses of Funds
n 2006, information technology (IT) at
the University operated in a decentralized
environment using systems that were often
homegrown, poorly designed, and vulnerable to
failure. Central IT functions were split across three
organizations reporting to different vice presidents.
Without competitive IT tools and skills, U.Va.
risked not only its ability to attract and retain the
best faculty members, but also its standing as a
leading research institution. Since 2006, the mandate
has been one of technical and organizational
change. Despite the challenges imposed by the
budget cuts of the last few years, the University has
made significant progress in modernizing its
computational infrastructure. It has consolidated
central IT into a single organization, thereby gaining
financial and operational efficiency, and harnessed
technology to further an advanced educational and
Financing Academic Excellence FY14–FY17
research agenda. Examples of improvements that
were achieved primarily through reallocation and
increased efficiency include the following:
Replacing Social Security numbers as the
primary identifier in all University systems and
consolidating and securing the storage of legacy
data to reduce the risk of data breaches that expose
Social Security numbers
n Phasing out the public computing labs and
reinvesting the savings in virtualization technology
that takes advantage of student investments in
technology and enables the University to deliver
specialized programs to their devices anytime and
anywhere
n Moving the IT help desk out of the University to
a company that provides 24-hour coverage at the
same cost as 9 a.m.–5 p.m. in-house coverage
n Moving student e-mail to Google and Microsoft
at no cost and reinvesting the savings to provide
increased support of advanced computing
n
Financing Academic Excellence FY14–FY17
80
n
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Another source of efficiency has been the second data
center, opened in 2011 to handle both administrative
and research computing needs. The second data
center reduced the need for additional machine
rooms across Grounds and increased the reliability of
computing services.
There are still additional efficiencies to be realized.
The second data center cost $2 million less than had
been originally estimated. Of that sum, $1.5 million
was used to upgrade power. The University is
considering allocating the remainder of the loan
to renovate and modernize the original Carruthers
Hall data center, optimizing the benefits of the dual
data center approach. The University is currently
obtaining cost estimates for this final phase and will
seek approval to allocate the remaining loan balance
for this purpose.
Current Situation: Consolidating and
Strengthening the Operational and
Technological Infrastructure
In 2011, the University completed the operational
reorganization that consolidated central IT services
in a single office. The new structure has three
components: Information Technology Services (ITS),
Information Security Policy and Records Management
(ISPRO), and Information Technology Architecture.
On a typical day, ITS moves 18.4 terabytes of data
across its network, supports hundreds of terabytes of
data storage, delivers 1.2 million e-mails coming in
from outside the University (and blocks an additional
15 million spam messages), and processes almost
12,000 expenditure transactions.
University pursues its teaching, research, and service
missions. Examples include funding faculty-governed
centers that support research and scholarship,
partnership with the University Library to develop
digital preservation strategies, and multi-institutional
collaborations such as the 4-VA partnership.
Operational and Financial Reorganization
The reorganization of central IT to consolidate
operations, strategy, architecture, administrative
computing, high-performance computing, and
security/policy under a single vice president
allowed the University to take an “all funds”
approach to funding and managing central IT
services. That approach has been effective. The
majority of improvements that have been made
over the last five years have been accomplished in
the context of a flat base budget—$40.6 million
in FY07 compared to budget, after adjusting
for the Student Information System and fringe
benefits, of $45.1 million in FY13—and with fewer
staff—236 full-time equivalent (FTE) workers in
FY06 versus 205 FTE staff in FY11.
In addition to organizational efficiency, central IT
has been able to satisfy rapidly growing demand with
steady or declining funding through a combination of
efforts, including 1) finding better and more efficient
ways of providing services; 2) taking advantage of
Moore’s Law, which provides roughly double the
computer chip performance every 18 months for
the same cost; and 3) moving aggressively to take
advantage of cloud computing and the associated
favorable economies of scale that characterize the
networked world.
The savings realized through technology refresh/
redesign are then reinvested in the infrastructure.
Examples include the following projects:
n
In addition, the central IT office works closely with
the academic and administrative units to leverage
technology to provide competitive advantage as the
Funding more than half of the cost of the new
University Data Center, which currently provides
machine room space at no cost to individual
researchers and departments
V Academic Division Operating Uses of Funds
V Academic Division Operating Uses of Funds
81
Historic Information Technology Budget (in Millions)
Pre-Student Information System (SIS) Budget
Revenues and Recoveries
FY07
FY08
FY09
FY10
FY11
FY12
FY13
$25.7
$26.9
$27.2
$26.0
$25.5
$24.1
$24.1
14.9
15.1
15.2
16.1
15.6
16.0
16.6
0.0
0.0
0.0
0.0
0.0
0.0
(1.5)
40.6
42.0
42.4
42.1
41.1
40.1
39.2
0.0
0.0
0.0
0.0
6.5
5.9
5.9
$40.6
$42.0
$42.4
$42.1
$47.6
$46.0
$45.1
Net Fringe Benefits Changes
Adjusted Pre-SIS Budget
SIS
Total Operating Budget
Funding a wireless network upgrade that will support
increasing demands from students and faculty
n Funding a core network refresh that will support
increasing bandwidth demand from researchers
n
Future Directions: SUPPORTING
Innovation
Base Operation Four-Year Projection
Over the next four years, central IT will continue
to leverage efficiencies and favorable technology
cost strategies to meet the normal rise in demand.
From a budget perspective, it will accomplish this by
internally recovering and reallocating a minimum of
3 percent of its budget annually.
Four Areas of Strategic Focus
The University’s current funding for IT has allowed
it to meet normal growth in IT service demand.
These are not, however, normal times. Information
and communication technologies are changing
fundamentally the ways people teach, learn, discover,
publish, and collaborate. The very fabric of inquiry
is being altered by data, computation, and emerging
tools of digital expression.
The University’s current resources are inadequate
to meet the challenges it faces from this information
revolution and are small in comparison with its
Financing Academic Excellence FY14–FY17
peers. A recent survey of doctoral institutions, for
example, found that, on average, central IT accounted
for 3 percent of the total institutional budget.
For U.Va., central IT accounts for 2.4 percent of its
total budget.
Looking forward, central IT will need additional
funds in four areas to remain competitive in the face
of rapidly emerging IT needs and capabilities.
Enhanced IT Security, Records Management, and
Compliance
The University network is tested thousands of
times a day by hackers and their automated bots. In
addition, each year brings a host of new compliance
requirements associated with protecting and
monitoring sensitive data and archiving and managing
electronic University records. Over the last five
years, progress in these areas has been accomplished
through a combination of one-time funds and
internal reallocation, but the University is in a poor
position to respond to the rapidly changing threat
environment and rising compliance pressures.
Over the next four years, the University should
double its ongoing investment in security and records
management services with particular emphasis
on mobile technology, secure research DMZs (a
subnetwork that provides the enhanced security
required for big data), eDiscovery, intrusion detection,
and data loss prevention.
Information technology
Information technology
Establishing campus-wide licensing for Microsoft
that resulted in annual savings to the University of
$100,000
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Financing Academic Excellence FY14–FY17
82
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Advanced Networks, Big Data, and Digital Scholarship
In this century, leading institutions will be the ones
that master the new tools of data-intensive discovery
and digital scholarship. Three areas specifically
require attention:
n
Online and Technology-Enhanced Learning
Technology is changing the way teachers teach and
students learn—both online and face-to-face. U.Va.’s
faculty and academic programs are actively engaged
in finding ways to use technology to enhance and
transform the residential experience and to extend
the U.Va. experience beyond the Grounds. Central
IT plays two roles in supporting these activities.
First, it provides a network infrastructure and suite
of applications that support technology-enhanced
learning. Assuming the University makes planned
network upgrades and continues to refresh its learning
management suite, it should be well positioned to
provide robust support. Second, central IT supports
the creation of online content. This will require
additional investment in such central services as video
production, copyright clearance, and intellectual
property management; project management for
University-wide endeavors like Coursera; and
accessibility services.
The University has written a draft proposal for
a statewide terabit plus research and education
network with the capabilities necessary for full
and direct participation in cutting-edge national
cyberinfrastructure. U.Va. is aggressively seeking
compatible partners to offset both capital and
operational costs. The University estimates the
capital cost to build the network to be about
$8 million to $10 million and ongoing operational
costs to be about $1.25 million to $2 million per
year, to be shared across consortium members in
proportion to their research activity. Capital costs
to U.Va. will be approximately $2.5 million, but
offset by $1 million in fiber investment already
made; annual operating costs to U.Va. will be
approximately $500,000.
n
Cost summary for this initiative—Over the next two
years, central IT should invest in five FTE staff to
support copyright clearance, video production, and
project management and accessibility compliance at
an ongoing central cost of $500,000. The University
should also invest in additional instructional
technology designers. Those positions should be
located and funded within the academic units because
the need for discipline-specific knowledge limits the
ability to scale them across units.
Advanced Networks—The National Science
Foundation is encouraging research institutions to
move to 100-gigabit-per-second (100G) networks.
Approximately a dozen institutions have responded
to this call. At present, U.Va. is not one of them. Technical Infrastructure for Big Data
Services—Although much is not yet known
about the full range of research and services to be
provided as a part of U.Va.’s Big Data Initiative,
two things are certain: 1) the University will need
to provide dramatically more storage for much
longer periods of time than it does now; and 2)
researchers will need help organizing, tagging, and
moving data from their research environments into
long-term institutional environments. It will cost
$2 million over four years to provision 2.6 petabytes
of storage (based on an allocation of 1 terabyte per
active funded program, 250 gigabytes per faculty for
unsponsored research).
V Academic Division Operating Uses of Funds
n
Faculty Support for Computationally Intense/
Digital Scholarship—The Sciences, Humanities
and Arts Network of Technological Initiatives
(SHANTI) and University of Virginia Alliance for
Computational Science and Engineering (UVACSE)
were started four years ago to promote digital
research and scholarship. Because they have been so
successful, both SHANTI and UVACSE face more
demand than they can meet. Both initiatives depend
on “tiger teams,” groups of computational/digital
experts, often students working with professional
staff, who partner intensively with scholars for a
limited period of time to raise their research to the
next computational level. The University should
invest in two additional computational scientists
each for SHANTI and UVACSE, along with one
data visualization expert to be shared between
SHANTI and UVACSE. When fully implemented,
the annual compensation costs associated with these
positions will be $700,000.
V Academic Division Operating Uses of Funds
83
Analytics
When U.Va. implemented the Oracle finance
systems a decade ago, creating a data warehouse
was deemed beyond the scope of the project. As a
result, U.Va. lacks the robust central reporting and
analysis environment that many of its peers have. The
urgency for having financial reporting and budgeting
tools in place increases as U.Va. moves to a more
decentralized financial model, driven by the principle
that units will be held accountable for their revenues
and expenses. In addition, analytics is a growth area
for student learning and the student experience.
Cost summary for this initiative—Based on the
work of the financial reporting task force and
comparison of costs incurred at peer institutions,
the University expects the initial implementation of
financial reporting to cost $10.8 million in one-time
implementation costs and $1.4 million in ongoing
maintenance support centrally (beginning in FY18).
Cost summary for this initiative—Needed
investment is estimated at $3.5 million in capital and
$1.0 million in annual ongoing support.
Projected IT Budget Including Costs Associated with New Strategic Initiatives (in Thousands)
FY14
FY15
FY16
FY17
$46,563
$47,963
$48,863
$49,163
Advanced Networks, Big Data, and Digital Scholarship
1,250
1,250
750
250
Enhanced IT Security, Records Management, and Compliance
1,000
0
0
0
Analytics
3,550
2,550
2,700
2,000
5,800
3,800
3,450
2,250
850
350
0
0
Base Operating Budget
One-time Implementation Costs of Strategic Initiatives
Ongoing Costs of Strategic Initiatives
Advanced Networks, Big Data, and Digital Scholarship
Enhanced IT Security, Records Management, and Compliance
300
300
300
300
Online and Technology-Enhanced Learning
250
250
0
0
1,400
900
300
300
$53,763
$52,663
$52,613
$51,713
Total Budget Including Strategic Initiatives
Financing Academic Excellence FY14–FY17
Information technology
Information technology
Cost summary for this initiative—Over the next four
years, the University will need to increase its ongoing
investment in IT security and policy by $200,000 per
year ($800,000 cumulatively) and its investment in
records management by $100,000 per year ($400,000
cumulatively). Implementing eDiscovery and e-mail
archiving will add an additional $1 million in onetime costs for software licenses and equipment.
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Financing Academic Excellence FY14–FY17
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84
Looking Forward
Information technology
Information technology is both a strategic asset and
basic utility in the life of the modern university. To
remain competitive, the University must invest in the
tools that fuel discovery. The proposed investments in
big data and online and technology-enhanced learning
will provide the central infrastructure that can address
this concern. Similarly, as the University’s dependence
on technology increases, so does its vulnerability
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V Academic Division Operating Uses of Funds
85
to data loss and intrusion. Investment in enhanced
IT security, records management, and compliance
initiatives will help shore up the University’s defenses
in this area and allow it to proactively address
eDiscovery and growing compliance demands. Finally,
the analytics initiative will allow the University
to provide a reporting environment that supports
enhanced financial planning and accountability for the
New Internal Financial Model.
5. University Library
Although the University Library is significantly underfunded compared to its peers, it has to date remained competitive by
rigorously reallocating funds, securing grant funding, and leveraging collaborations through on-Grounds and off-Grounds
partnerships. However, the challenges it faces—in the form of new programs, growing enrollment, and an explosion of
materials in all medias and digital formats—promise to undercut its competitiveness. To effectively support the University’s
goals of new faculty hires and curriculum reinvention, the University plans to increase the base budget for the Library by
$3.5 million over four years and institute policy changes that create a more direct relationship between Library resources
and the drivers of growth.
Context: A Pioneer in Digital
Scholarship
J
efferson’s model for the Academical Village placed
the Library in the Rotunda, at the very heart of the
Grounds. The University Library continues to have
functional relevance and symbolic importance for the
University—as a common ground for disciplines to
intersect and collaborate, a welcoming and productive
place for student study and group work, and a
resource for faculty seeking specialized help with their
research or curriculum.
The Library has invested heavily in technology
centers to support future scholarship and ensure
that the University can compete in the digital
age. These include the Digital Media Lab,
Scholars’ Lab, and the Scientific Data Consulting
Group. More recent efforts to support digital
scholarship include Libra, the University’s
institutional repository for digital content, as
well as the Academic Preservation Trust and the
Digital Preservation Network. The two national
digital preservation efforts are spearheaded by
V Academic Division Operating Uses of Funds
Financing Academic Excellence FY14–FY17
the University Library and the Office of the
Vice President and Chief Information Officer.
For these efforts and others, the Library is
internationally recognized for its digital initiatives,
collections, and services. For decades, the Library
has been ranked among the top 30 in the annual
Association of Research Libraries Index. Because
this index is based on expenditures for materials and
staffing rather than on quality and innovation, the
University believes it underestimates the Library’s
preeminence.
Current Situation: Managing the Costs
of Digital and Analog Information
Current Challenges
All academic libraries are facing changes that
require new approaches, new funding models, and
new expertise. Because of shortfalls, U.Va. is at a
disadvantage in meeting the following challenges:
86
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the Library’s success in securing research grants.
Funding agencies now routinely require research
data to be deposited in a location where they can be
found and used by others.
(in Millions)
$4.5
4
n
3.5
3
2.5
2
1.5
1
.5
0
FY08FY09 FY10FY11 FY12FY13 FY14FY15
n
n
n
n
The explosion of scholarly information in digital
format. The Library currently signs multiyear
contracts with four major journal publishers that
collectively provide close to 100,000 academic
journals. While these arrangements guarantee
access to a very broad range of important content
at low cost-per-use levels, annual price increases
are creating unsustainable growth in the cost of this
core content.
The need for highly skilled staff. To manage an
increasingly digital environment, the Library
needs more staff with the technical expertise to
build and maintain its online presence, assist
scholars using digital tools and information,
manage massive amounts of data, and preserve
digital scholarship. Salaries for Library staff are
increasing at a rate of $10,000 to $30,000 per
full-time-equivalent worker hired.
Significant growth in the demand for nontext
resources. Video, audio, and massive amounts of
quantitative and qualitative data, both in digital
and analog formats, require unique tools for access,
storage, and preservation. Having these tools affects
n
n
Shifting academic priorities. New programs,
supported by new faculty hires, translate into
immediate needs for new Library resources.
Expansion of STEM programs has substantially
increased the number of science materials requested.
The recent ramp-up of East Asian collections
required a doubling of the annual collections budget
for that area. The new PhD programs for music and
architecture (pending) and the newly established
Batten School of Leadership and Public Policy all
drive the acquisition of new materials, yet they have
no designated funding stream.
Current Responses
Despite these pressing issues, the Library’s budget
has remained relatively flat over the last four years.
Tuition and General Fund appropriations, which
account for approximately 75 percent of the Library’s
revenue, have been essentially unchanged for the last
four years.
To meet these needs within its current budget, the
Library has engaged in a series of highly productive
collaborations within U.Va. and beyond to address
service issues and avoid duplication. The Library
has worked collaboratively with central IT to launch
national initiatives in digital preservation and with
peer institutions to develop open source solutions
for online tools and digital preservation (e.g., Hydra,
Hathi Trust, APTrust). As a member of the Virtual
Library of Virginia since 1993, the University gains
access to thousands of important academic resources
at a significant discount.
Significant increases in enrollment (residential or
online). Digital resources are priced in a variety of
ways, but all relate to the size of student enrollment.
For this reason, resources for massive online
open courses (MOOCs) will have to be carefully
considered.
Long-term preservation of scholarly content.
While preservation of analog formats remains
important, reliable and robust preservation of
digital content has become increasingly significant.
The University has taken a lead role in addressing
this national problem by providing staff and raising
start-up capital from other institutions to build a
digital preservation infrastructure that includes
the Academic Preservation Trust and the Digital
Preservation Network.
Historic Library Expenses (in Thousands)
Personal Services
FY09
FY10
FY11
FY12
FY13
$17,175
$17,339
$16,129
$15,904
$16,706
Operations
4,222
3,600
6,524
6,930
3,089
Collections
7,512
6,344
7,228
7,273
7,978
$28,909
$27,283
$29,881
$30,107
$27,773
Total Expenses
V Academic Division Operating Uses of Funds
Aging buildings in need of renovation. Alderman
Library needs renovation to address safety
issues, bring it into code compliance, improve
infrastructure such as HVAC and plumbing
facilities, modernize the spaces to be made useful
for today’s scholars, and restore its beauty as one of
the most visited buildings on Grounds.
The Library has also been an active fundraiser.
Approximately 10 percent of its annual budget comes
from gifts and endowment income.
Nonetheless, the Library remains underfunded in
relation to peer institutions. While this situation
has not yet seriously compromised the quality of
scholarship at U.Va., it leaves the Library unable to
respond to growth in the size of the University or the
scope of research and teaching. Of equal concern, the
Library will no longer be an attractive collaborator if
it has fewer resources to bring to the table.
Future Directions: Increasing Support
for the Library
Looking forward, the Library will pursue the
following actions to address escalating costs:
n
Consider reducing the number of physical locations
that need to be staffed and maintained while
increasing seating capacity. This may require a
short-term investment to renovate spaces.
n
Where possible, reduce the reliance on expensive
online software systems by investigating open
source options.
n
Expand its participation in partnerships that
leverage expertise and resources across similar
communities to solve common problems such as
escalating costs of collections and high demand for
non-English-language expertise.
n
Increase work with faculty to change scholarly
communication paradigms so that more content
is available through institutional repositories. The
Library has 10 years of leadership in this area through
hosting the Scholarly Communication Institute.
n
Seek grant funding for addressing large-scale issues.
The Library has successfully obtained well over
$10 million in grants from the Mellon Foundation
Peer Comparison FY11 Library Expenditures
Institution
Total
Expenditures
Full-time (FT)
students
Expenditures
per FT student
Duke University
$40,696,213
13,457
$3,024
Emory University
$33,592,247
11,900
$2,823
Cornell University
$44,199,742
20,095
$2,200
University of Pennsylvania
$42,126,455
20,128
$2,093
UNC, Chapel Hill
$41,802,228
23,788
$1,757
University of Michigan
$63,957,474
38,278
$1,671
UC Berkeley
$50,050,063
32,563
$1,537
University of Virginia*
$31,487,948
20,894
$1,507
*Includes libraries in Darden, Health Sciences, and Law. 
Most recent year for which data is available.
Financing Academic Excellence FY14–FY17
V Academic Division Operating Uses of Funds
87
University Library
University Library
Cost of Large Journal Packages
(Elsevier, Wiley, Springer, and Sage)
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Data from Association of Research Libraries FY2011
Financing Academic Excellence FY14–FY17
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Financing Academic Excellence FY14–FY17
88
University Library
and other funders over the past decade to address
a broad range of issues, from research in digital
library infrastructures to strengthening U.Va.’s
preservation program to national/international
programs for scholarly communication.
n
Lead and invest in national partnerships to ensure
preservation of digital scholarship for future
generations.
n
Seek start-up funds for new research and teaching
faculty hires that are library and/or database
dependent.
To remain competitive, the University will increase
the base budget for the Library by $3.5 million over
four years. The Library would allocate these funds in
the following ways:
n
$1 million for increased salary costs of Library
professional staff with highly specialized skills:
§ Six to eight blended professionals (employees with
a combination of academic discipline knowledge
plus technology skills) at an average cost of
$90,000 per employee (including fringe benefits),
totaling $540,000–$720,000
§ Eight to ten replacements for current staff at an
increased salary rate of $10,000–$30,000 per FTE,
totaling $80,000–$300,000
n
$1.8 million for acquisition and management
of scholarly content to address the following
conditions::
§ Significant increase in enrollment (residential or
online)
§ Escalating costs of collections
§ The explosion of scholarly information in digital
format
§ Significant growth in the demand for nontext
resources
§ Shifting academic priorities
n
$700,000 for technology initiatives, including the
following:
§ Nonpersonal services costs associated with the
long-term preservation of scholarly content
§ Costs of new and emerging technologies
Once the base is raised, the implementation of the
New Internal Financial Model will help ensure that
Library resources and services grow in response to
the University’s program portfolio and changes in
enrollment. It will do so by creating a more direct
relationship between Library resources and the drivers
of growth. This model could easily be adjusted to
determine an appropriate level of funding needed per
student, faculty, and/or PhD program and creates a
more responsive model that ties Library resources to the
true academic drivers of the need for those resources.
89
V Treasury Management
Projected Library Expenses (in Thousands)
FY14
Personal Services
FY15
FY16
FY17
$17,594
$18,361
$18,837
$19,221
Operations
3,359
3,494
3,630
3,767
Collections
8,353
8,828
9,603
10,478
$29,306
$30,683
$32,070
$33,466
Total Expenses
V Academic Division Operating Uses of Funds
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V treasury Management
91
1. Treasury Management
To assist the University in meeting its strategic objectives, the Treasury Management Department issues debt and provides
financing to the University’s schools and departments through its internal banking activities. The primary use of funds
by Treasury is to make debt service payments. The Treasury generates cash flow for the University through its debt and
investment management activities.
Overview
Context: Treasury’s Formation
T
he Treasury Management Department
adheres to best practices in debt management,
investment management, cash and liquidity
management, and internal banking. It has
implemented industry-leading programs that have
generated significant savings and revenues for
the University. The Treasury manages both sources and uses of
financial resources. Sources take the form of debt
proceeds, internal bank reserves, and operational
savings that may be utilized to meet strategic
initiatives. Its uses of cash include debt service
payments on outstanding debt. The Treasury pursues cost-saving opportunities
where possible. A recent example is the rebidding of
the University’s commercial banking contract. As a
result, the University will realize average savings of
approximately $800,000 per year over the next five
years.
Financing Academic Excellence FY14–FY17
The discussion in this section is arranged in three parts:
n Debt management
n Internal banking
n Debt servicing
Debt Management
Current Situation: Assessing Debt
Capacity and Affordability
The University has a long history of issuing and
managing U.Va.-backed debt, a function today
overseen by the Treasury. The Treasury issues debt
primarily to fund capital projects. In managing
the University’s debt, it seeks to ensure that the
appropriate discipline is in place regarding capital
rationing, reporting requirements, debt portfolio
composition, debt servicing, and debt authorization.
It establishes guidelines to ensure that existing and
proposed debt issues are consistent with financial
resources needed to maintain an optimal amount of
leverage and a strong financial profile.
Financing Academic Excellence FY14–FY17
92
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Debt is managed to achieve the following goals:
Internal Banking
incremental capacity is currently allocated to projects
in the following manner:
In assessing its current debt levels and when planning
for additional debt, the University takes into account
both its debt affordability and debt capacity:
n
n
Debt affordability focuses on the University’s
ability to service its debt through its operating
budget and identified revenue streams and is driven
by strength in income and cash flows.
Debt capacity focuses on the University’s financial
leverage in terms of debt funding as a percentage of
the University’s total capital.
The Treasury regularly analyzes the University’s debt
capacity and affordability to estimate the amount
of debt the University can comfortably issue while
maintaining its AAA rating. As part of this analysis,
the Treasury gathers input from its banking partners
and its financial advisors.
Future Directions: Making Choices
about Finite Debt Capacity
The University believes it can issue approximately
$625 million in additional debt while still maintaining
its AAA rating. Adding this incremental capacity to
U.Va.’s $1.2 billion of outstanding debt would result
in total debt capacity estimated at $1.8 billion. This
Projects under Construction
Projects in FY14–24 Capital Plan
Medical Center Strategic Priorities Total Debt Needs
$150 million
$350 million
$125 million
Internal banking has been used for some time in the
corporate world as a way to centrally manage financial
assets and liabilities and to streamline and net
transactions between departments or subsidiaries. $625 million
Existing and future debt needs fully utilize the
approximately $625 million of forecasted incremental
debt capacity. About $430 million of this total is
projected to be needed between FY14 and FY17.
Each internal bank is unique in its design and
purpose, but most involve debt, investment, and/or
cash management. The University fully implemented
its internal bank in FY08. The advantage of the
centralized management of assets and liabilities
conducted by the University’s internal bank is that
it moves the responsibilities and risks away from the
schools and departments and into the Treasury, where
they can be more effectively managed. In addition,
these activities give the Treasury a comprehensive
view of the University’s cash flows, helping it to
manage University liquidity and optimize its return
on operating cash. To address debt capacity, the Treasury will give
consideration to the prioritization of capital projects,
the necessity of debt funding, and the use of debt for
non-capital needs of the Medical Center.
Another alternative, which needs to be properly
analyzed, is whether the debt capacity for both the
University and the Medical Center could be increased
by creating a separate debt-issuer credit rating for
the Medical Center. Under this plan, the University
would continue to issue debt under its AAA-rated
credit, while the Medical Center would issue debt in
the AA range under its own credit. Currently, there
are no AAA-rated health systems in the United States.
Having the Medical Center maintain debt levels that
support the University’s AAA rating may result in it
being underleveraged compared with its peers. This
solution may have merit in two instances:
The internal bank’s activities are grouped into two
pools, an operating pool and a capital pool. The
operating pool is designed to administer external and
Provide for adequate liquidity for departments and
the University as a whole
n Realize economies of scale regarding investable
asset balances
n Streamline and settle net investment transactions
that may occur between the University’s units and
UVIMCO
n
The Treasury centrally manages cash and banking
activities for the University and invests its working
capital. Internally, it offers short-term investment
options for departments through the Internal
Investment Program and monitors department cash
balances to address any cash deficits.
The capital pool is designed to manage internal and
external debt activities, and has the following two goals:
Create budget stability for units by providing a
blended borrowing rate to reduce fluctuating debtfinancing costs
n Build sufficient reserves to meet future debt service
requirements n
Top Internal Borrowers
(in Millions as of November 30, 2012)
$450
If the University feels its AAA rating may be in
jeopardy
n If the University feels its debt capacity at AAA is too
limiting to support strategic priorities
400
This idea is progressive and would require a great deal
of review from legal counsel, advisors, and the rating
agencies. Additionally, there would be a number of
operational issues to be worked through related to
debt management.
200
n
internal investment and cash management activities.
The goals of the operating pool are as follows:
Current Situation: Centrally Managing
Financial Assets and Liabilities
n
V treasury Management
Represents 98% of $1.048 billion
of outstanding internal loans
350
300
250
150
100
50
0
* paid by student fees and centrally managed indirect cost recoveries
V treasury Management
Financing Academic Excellence FY14–FY17
93
Treasury Management
Treasury Management
Maintain cost-effective access to capital, money, and
bank markets
n Manage the University’s credit profile to meet its
strategic objectives while maintaining the highest
acceptable creditworthiness and most favorable
relative cost of capital and borrowing terms
n Optimize the University’s debt mix (e.g., shortterm and long-term, fixed-rate and floating-rate,
traditional and synthetic)
n Manage the structure and maturity profile of debt
to meet liquidity objectives as well as repayment
objectives
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7
6
6
5
5
Debt Servicing
4
4
3
3
Current Situation: Innovative Debt
Financing Approaches
2
2
1
1
The University’s AAA rating is a reflection of the
institution’s underlying financial strength and its
prudent use of debt. Commentary from the rating
agencies following the University’s November 2011
bond issuance provides evidence of what they view to
be the institution’s strengths, including the following
attributes:
0
0
Superior balance sheet position
Healthy operating performance
n Considerable liquidity
n Solid financial resources
n Manageable debt burden
n
n
As a % of Operating Expenses
(Based on Moody’s 2011 Scorecard Rating—Low Score = Strength)
3
2.5
2.35
1.8
2.1
2.15
FY09
FY10
FY11
FY12
FY13
$32,262
$33,771
$42,774
$41,800
$43,471
1.1%
1.5%
1.6%
1.9%
1.8%
1.8%
V treasury Management
2.5
2.35
1.9
1.5
1
$23,341
2.5
Indiana
FY08
U.Va. Financial Ratings Strength vs. AAA-rated Public Peers
2
The University has carried a AAA rating for nearly
10 years, which has led to reduced borrowing costs
The Treasury monitors a number of financial ratios
to assess the University’s financial health and ensure
the stability of its credit rating. One metric that it
tracks is the ratio between financial resources and
outstanding debt. Over the past 10 years, U.Va. has
maintained a consistent relationship between these
two factors. The significant drop in the ratio in FY09
was the result of the financial crisis, which affected the
UNC
Perhaps the broadest indicator of the University’s
financial standing, from a credit rating perspective,
is Moody’s Investors Service Scorecard. Moody’s
develops a composite score that it uses to help guide
its ratings decisions. When comparing U.Va. with
its Moody’s AAA-rated peers, the University has the
second strongest scorecard ratio.
Historic Interest Expense (in Thousands)
Interest Expense
for its debt. Over the past 10 years, the interest rate
spread between higher education borrowers with a
AAA rating and those with a AA+ rating, the next
highest Moody’s rating, has been seven basis points.
When that seven basis points of savings is applied to
the average outstanding debt for the University over
the same period, it results in interest expense savings
of approximately $5 million each year.
.5
0
Financing Academic Excellence FY14–FY17
Purdue
The capital pool has generated unrestricted reserves
during its 10-year existence. A portion of these
reserves was pledged to construct two research
buildings, the Rice Hall computer science building
and the College of Arts & Sciences research building.
Future commitments to these two buildings from this
reserve are approximately $40 million.
7
UT System
Future Directions: Operating Pool Is
a Possible Source of Funding
8
95
Ratio of Debt Service to
Operational Expense
9
8
University of Washington
The success of this activity depends on certain
assumptions holding true over time, such as the
expected higher return of long-term investments over
short-term investments.
9
Ratio of Cash, Pledge Gifts,
and Investments to Outstanding Debt
Texas A&M
Both the operating pool and capital pool programs
seek to achieve positive operating margins by
capitalizing on the timing differences between the
internal cash inflows from units and the external
cash outflows for capital or operating liabilities. The
operating pool uses the concept of fractional-reserve
banking, whereby a fraction of department deposits
are held in reserve in the form of cash and other
highly liquid assets and the remainder is invested in
assets with a higher return potential. This approach
capitalizes on the fact that not all departments will
need all of their reserves at the same time.
The operating pool has been in existence for five
years. In that time, only minor distributions have been
made. The Treasury has developed a model to test the
impact of various distribution scenarios on the pool’s
reserves as well as draft distribution guidelines.
V treasury Management
Treasury Management
Treasury Management
Starting with the University’s issuance of its Series
2003 bonds, the capital pool created a pool of bond
proceeds from which loans were made to departments
for capital projects. This pool of bond proceeds has
grown with each successive issuance of University
debt. The largest internal borrowers of this debt are
the Health System and Business Operations.
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U.VA.
94
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Michigan
Financing Academic Excellence FY14–FY17
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Financing Academic Excellence FY14–FY17
96
Treasury Management
entire industry and effectively reset this ratio for all
debt-issuing schools. U.Va. has begun to improve on
this ratio in the years following the crisis.
Another ratio, the University’s debt service as a
percentage of its operating expenses, has remained
manageable over the past eight years. U.Va.’s debt
service was 2.9 percent of its operating expenses in
FY11, which compares very favorably with the median
for AAA-rated schools of 4.16 percent.
The rating agencies place a great deal of focus on the
liquidity of universities. A key liquidity ratio included
in Moody’s composite rating is Monthly Days Cash
on Hand. The University has Monthly Days Cash on
Hand of 235 days. This means that the University can
fund 235 days of operating expenses from its existing
liquidity balances. The University has the third highest
coverage among the AAA-rated public cohort, where
the average Monthly Days Cash on Hand is 202 days.
Two of the University’s most recent bond issuances
were made as part of the federal government’s Build
America Bonds program. Under that program, the
University received an interest rebate from the federal
government, reducing its effective interest rate in the
process. The rebate for FY12 was $8.7 million.
97
Future Situation: Innovative Debt
Financing Approaches
The University is presently considering refinancing
two series of its bonds, with a projected savings of
between $15 and $20 million. These savings would be
realized over the life of the new bond, approximately
30 years, with annual savings of just over $1 million.
The University’s weighted-average cost of debt is
4.14 percent. With this refunding, the Treasury
expects the resulting weighted-average rate to be less
than 4.10 percent.
The Treasury has been working with one of its
investment banks on a financing strategy that
provides an alternative way to refund a portion of the
University’s outstanding bonds. This approach would
front-load the cash flows from a refunding, allowing
the University to shift the cash flow savings to the
earlier part of the refunding period. The Treasury
projects that cash flows may be as high as $6 million
in year one under this approach. It should be noted
that this approach requires review and approval by
executive management and the Board of Visitors.
VI Strategic Investment fund
The Treasury continually looks for opportunities to
reduce the University’s debt-funding costs. This is
typically done by refinancing outstanding debt with
lower-costing debt. While refunding savings have
typically gone into the internal bank’s capital pool,
these savings could also be placed into an account to
fund priorities.
Projected Interest Expense (in Thousands)
Interest Expense
As a % of Operating Expenses
FY14
FY15
FY16
FY17
$42,735
$42,118
$41,475
$40,790
1.7%
1.7%
1.6%
1.5%
V treasury Management
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VI Strategic Investment Fund
99
1. Strategic Investment Fund
The University will establish the Strategic Investment Fund effective July 1, 2013, to support the University’s strategic
plan, scheduled for completion in fall 2013. Drawing on the fund, the University will be able to immediately build
momentum for parts of the plan as soon as they are finalized. In addition, the fund will give the University the flexibility to
seize opportunities as they emerge to advance its academic mission. This is especially important during this critical period in
the University’s history.
G
overned by the President and the Provost,
the Strategic Investment Fund will be used to
support the following areas of emphasis:
Selective hiring of key faculty
Start-up of new programs in high-potential areas
n Collaborative projects that maximize existing synergies
n Sponsored program and research opportunities
n Streamlining and efficiency initiatives
n Investments in the 21st-century curriculum
n The seeding of innovative, paradigm-changing ideas
n Development of pedagogical knowledge, methods,
and processes
n
n
Fund commitments could be in the form of grants or
loans with repayment provisions. As appropriate, the
University will track return on investment on fund
investments and loans.
The fund’s advisory council, including the Chief
Operating Officer, faculty members, and other
stakeholders, will advise the President and the Provost
on the use of monies in the fund. The University
will prepare an annual report that will provide
transparency on fund sources and uses and document
the outcome of fund commitments.
The Strategic Investment Fund is one element in a
comprehensive University strategy to move forward
from a position of strength as higher education
undergoes its most profound change in half a
century. Its purpose is not simply to help sustain the
University during the next decade but to strengthen
its distinctive qualities as it enters its third century.
Projected Contributions to Strategic Investment Fund (in Millions)
Annual contribution
Financing Academic Excellence FY14–FY17
FY14
FY15
FY16
FY17
$15.0
$17.0
$27.0
$41.0
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101
VII Schedule of Operating Sources and Uses of Funds
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VII Schedule of Operating Sources and Uses of Funds
103
1. Schedule of Operating Sources
and Uses of Funds
BACKGROUND
n
Depreciation is not recognized, and most
equipment purchases and capital activity less than
$2 million are reported as a use of funds, not
capitalized. Capital activity in excess of $2 million is
reported separately on the capital plan.
n
Only gifts received and available for the operating
plan are included. Pledges, noncash gifts, gifts
transferred to the endowment or capital program,
and gifts held at foundations are excluded.
n
The operating plan nets financial aid funded
from tuition against gross tuition. It does not net
financial aid funded from other sources (gifts,
endowments, and grants) against tuition.
T
his Academic Division Operating Sources and
Uses of Funds Schedule covers FY12 (budgeted
and actual), FY13 (revised budget), and FY14–17
(projected). In each year, total sources cover all
anticipated expenses. Additionally, the University will
make contributions to contingency reserves, schools
will invest incremental restricted resources in strategic
initiatives, and a new Strategic Investment Fund will
seed strategic priorities identified by the President
and the Provost. It is expected that certain restricted
sources will not be expended each year, adding to
accumulated net assets.
This Operating Sources and Uses of Funds Schedule
reflects a broad perspective. Going forward, it will
incorporate multiyear financial planning at the school
level in a more comprehensive manner. This cashbased schedule differs from financial statements
developed using generally accepted accounting
principles in the following ways:
ASSUMPTIONS
State Appropriations
n
n
External debt service, U.Va. Health Plan activities,
and endowment investment performance are
excluded, while repayments of debt to the internal
bank and the expendable endowment distribution
are included.
Financing Academic Excellence FY14–FY17
The state will continue to fund its appropriate
share of in-state undergraduate enrollment
growth. Enrollment used in the plan is based on
the projections to be considered by the Board
of Visitors in February 2013. Totals for FY13
reflect actual enrollment as of the October 2012
census date.
Financing Academic Excellence FY14–FY17
104
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The state will continue to authorize and fund its
proportionate share of state-authorized salary
increases and benefit cost increases.
n
No further increases or reductions in state support
for operations are anticipated for planning
purposes.
undergraduate tuition rate. This charge will apply
to third- and fourth- year students and reflects the
additional costs of an intensive capstone project,
career placement, and smaller classes.
n
n
McIntire School of Commerce graduate tuition
will increase by 4.0 percent annually from FY14
through FY17 for both in-state and out-of-state
students, based on assessment of market capacity.
n
Existing undergraduate program fees will phase out
as the differential tuition rates are implemented.
VII Schedule of Operating Sources and Uses of Funds
The endowment administrative fee is intended
to recover the expenses of raising and managing
the endowment. The fee, currently at 0.5 percent
(50 basis points) of the prior June 30 market value
of the endowment, will increase to 1.0 percent
(100 basis points), based on an analysis of the
underlying development cost.
AccessUVa
Graduate
n
Tuition and Fees
n
Undergraduate
n
n
The University is considering a base tuition
increase of between 2.5 and 3.5 percent annually.
The calculations in this section are based on
3.5 percent.
Base undergraduate tuition and educational and
general (E&G) fees will grow by 3.5 percent
annually from FY14 through FY17 for both
in-state and out-of-state students. In FY14, base
undergraduate tuition and E&G fees will increase
by $352 for an in-state student and $1,262 for an
out-of-state student.
n
n
In-state graduate tuition and E&G fees will increase
by 3.5 percent annually from FY14 through FY17.
Out-of-state students will pay $10,000 more than
in-state students.
All incremental revenues generated by graduate
tuition increases will be used to fund graduate
support packages.
While the University anticipates that there will be
a new graduate tuition structure for the Graduate
School of Arts & Sciences in FY14 as well as new
tuition rates for several professional master’s degree
programs, details have not been finalized and are
not reflected in this schedule.
The University will manage future expenditures
from unrestricted institutional sources to a target of
approximately 15.4 percent of gross undergraduate
tuition revenue.
Philanthropy
n
Grants and Contracts (Reimbursement
of Direct Expenditures)
n
The Sources and Uses of Funds Schedule reflects
actual reimbursed expenditures, not awards (which
will be future expenditures). Given declines in
federal research awards in FY12 and FY13, actual
expenditures reimbursed from external sponsors
will decline from $229.9 million in FY13 to $215.4
million in FY17.
Auxiliary Revenues
n
Mandatory auxiliary fees will increase by an average
of 1.8 percent, or $35, annually over the four-year
period.
n
The weighted-average room rate will increase by an
average of 3.8 percent, or $169, annually over the
four-year period.
n
The full meal plan rate will increase by an average
of 3.9 percent, or $212, annually over the four-year
period.
Professional
n
n
n
The McIntire School of Commerce will move
forward with its previously approved plan to charge
$5,000 per year more than the base undergraduate
tuition rate.
The School of Engineering and Applied Science
will charge $2,000 per year more than the base
undergraduate tuition rate, beginning with the class
entering in fall 2013. This tuition differential will
apply to all four years and reflects the resourceintensive nature of engineering education.
All remaining undergraduate schools with regular
full-time enrollment—the College of Arts &
Sciences, the School of Nursing, the Curry School
of Education, the School of Architecture, and the
Batten School of Leadership and Public Policy—
will charge $2,000 per year more than the base
n
n
n
n
School of Medicine tuition will increase by
1.5 percent annually from FY14 through FY17 for
both in-state and out-of-state students, based on
assessment of market capacity.
Related expenditures will decline at a similar rate;
however, the University anticipates that investments
in new faculty hiring, start-up packages, and seed
funding from the Strategic Investment Fund will
fuel future research growth.
Darden School of Business tuition will increase by
3.0 percent annually from FY14 through FY17 for
in-state students, based on assessment of market
capacity. Out-of-state students will pay $5,000 more
than in-state students.
n
School of Law tuition will increase by 3.0 percent
annually from FY14 through FY17 for in-state
students, based on assessment of market capacity.
Out-of-state students will pay $5,000 more than
in-state students.
Endowment
VII Schedule of Operating Sources and Uses of Funds
Annual giving available for operations (excluding
gifts to foundations, additions to endowments,
and contributions to capital projects) will increase
4 percent annually.
For awards secured in FY13 through FY17, the
federally approved indirect cost reimbursement rate
will be 58 percent.
Faculty Salaries
n
n
The endowment spending policy, as adopted by
the Board of Visitors, will result in the endowment
spending distribution increasing annually by an
inflation factor of 2.4 to 2.5 percent.
Financing Academic Excellence FY14–FY17
The University will provide merit-based increases
to improve the average faculty salary at each faculty
rank to the 20th position of the corresponding rank
of its AAU peers. The University projects that an
annual merit-based increase for continuing faculty
of 4.75 percent will allow the University to achieve
this goal.
105
Schedule of Operating Sources and Uses of funds
Schedule of Operating Sources and Uses of funds
n
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Financing Academic Excellence FY14–FY17
106
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VII Schedule of Operating Sources and Uses of Funds
Academic Division Projected Operating Sources and Uses of Funds (in Thousands)
n
n
n
Employer contributions to the UVa Health Plan
are expected to increase due to provisions of the
Affordable Care Act.
Projected benefits costs are expected to increase on
average by 1.0 percent per year.
Other
FY12
Operating and maintenance costs for completed
construction projects will be funded.
The University anticipates that faculty will retire
at an average age of 68, with an estimated 291
expected to retire by FY17. As faculty retire, the
mix of University faculty by rank will change,
enabling the University to reallocate funds to
improve faculty compensation.
n
Utility costs and the general and administrative
assessment charged to auxiliary units for their share
of central support services will increase by 3 percent
annually.
Financial Aid—All Other includes graduate and
undergraduate scholarships and fellowships funded
from sources other than tuition or the unrestricted
endowment.
Staff Compensation
n
n
The state will authorize an annual 2 percent acrossthe-board increase for Classified Staff.
The University will provide merit-based increases
to improve the University Staff salaries to the 50th
percentile of market-based salary ranges. The
University projects that an annual merit-based
increase for University Staff of 3 percent will allow
the University to achieve this goal.
n
Over the next four years, supporting institutional
technology requirements and improving
internal financial reporting will require a onetime investment of $15.3 million and ongoing
maintenance support of $2.9 million.
University Library
Employee Benefits
n
The employee benefits package will not change.
A $3.5 million base budget increase is needed by
FY17 to serve needs of existing and increasing
student enrollment.
n The state will increase the employer contribution rate
to the Virginia Retirement System (VRS) defined
benefit plan from 8.76 percent in FY14 to 10.19
percent in FY15 and FY16 and 11.63 percent in FY17.
131,492
131,581
139,466
139,725
141,028
146,412
152,335
Total Tuition and E&G Fees
444,724
441,200
471,152
493,312
512,507
538,885
565,549
Total Tuition Re-directed to Financial Aid
(60,547)
(58,382)
(62,826)
(65,319)
(69,764)
(75,959)
(82,230)
Net Tuition and E&G Fees
384,177
382,818
408,326
427,993
442,742
462,925
483,319
Grants & Contracts (Reimbursement of Direct Expenditures)
243,000
243,900
229,900
216,900
213,400
212,800
215,400
Facilities & Administrative Cost Recoveries
Projected
68,300
69,300
65,400
63,200
63,200
63,900
65,200
150,410
151,994
151,600
171,100
176,000
181,100
186,300
Expendable Gifts via Affiliated Foundations
96,049
101,802
96,683
100,550
104,572
108,755
113,105
Expendable Gifts
15,500
21,413
16,000
16,640
17,306
17,998
18,718
238,661
224,921
220,663
225,729
233,135
240,697
249,825
56,920
26,008
41,929
-
-
-
-
Operating Cash Balances
Total Operating Sources of Funds
$1,384,509 $1,353,737 $1,369,967 $1,361,837 $1,391,383 $1,434,587 $1,484,201
Uses
Compensation
$387,240
$387,240
$386,255
$404,145
$425,048
$444,127
$464,236
Staff Salaries & Benefits
266,154
266,154
310,776
318,309
331,237
342,408
353,891
Wages, Adjuncts, Overtime, GTA/GRAs, and Other
126,817
107,272
126,380
111,000
113,000
115,000
117,000
Total Compensation
780,211
760,666
823,411
833,454
869,285
901,535
935,127
Other Than Personal Services
943,548
951,678
932,116
908,860
912,713
915,531
919,191
7,000
7,000
7,000
7,000
Student Affairs to support enrollment growth
163
339
532
721
University Library to support enrollment growth
875
1,750
2,625
3,500
Other Enrollment growth support costs
453
1,008
1,700
2,364
IT­—One-time implementation costs
5,800
3,800
3,450
2,250
IT­—On-going maintenance
1,400
2,300
2,600
2,900
Total Other Than Personal Services
943,548
951,678
932,116
924,551
928,910
933,438
937,926
Internal Service Provider Recoveries
(556,321)
(573,714)
(585,894)
(596,894)
(607,894)
(618,894)
(629,894)
Transfers to Debt Service, Capital Activities and Reserves
87,272
87,000
91,313
93,776
97,041
100,045
103,638
Financial Aid—AccessUVa Unrestricted Endowment Contribution
10,660
10,660
9,110
7,545
6,000
4,000
2,000
Financial Aid—All Other
89,036
89,781
92,276
95,506
98,848
102,308
105,889
Projected Decrease in Sponsored Research Expenditures
-
-
-
(13,000)
(16,500)
(17,100)
(14,500)
Projected Productivity and Efficiency Savings
-
-
(7,400)
(16,400)
(25,400)
(34,400)
(44,400)
1,354,406
1,326,071
1,354,932
1,328,538
1,350,291
1,370,932
1,395,786
Contribution to Contingent Operating Reserves
2,000
2,000
6,200
3,000
4,000
5,000
6,000
Contribution to School Strategic Reserves/Plans
-
-
-
5,000
10,000
21,000
31,000
Contribution to Strategic Investment Reserve
-
-
-
15,000
17,000
27,000
41,000
2,000
2,000
6,200
23,000
31,000
53,000
78,000
$28,103
$25,666
$8,835
$10,299
$10,092
$10,656
$10,415
Contributions to Reserves
Total Contributions to Reserves
TOTAL OPERATING SURPLUS
VII Schedule of Operating Sources and Uses of Funds
107
Total State Appropriations
Total Operating Uses of Funds
n
FY17
Revised Budget
Faculty Start-up Packages
Information Technology
FY16
Actual Results
Faculty Salaries & Benefits
n
FY15
Revised Budget
Auxiliary Enterprises, Fines, Rents, Sales, Services, and Other
n
FY14
Sources
Endowment Distribution and Fee
n
FY13
Financing Academic Excellence FY14–FY17
Schedule of Operating Sources and Uses of funds
Schedule of Operating Sources and Uses of funds
The University will hire new faculty to support
undergraduate enrollment growth at a facultyto-student ratio of 16:1. New faculty in science,
technology, engineering, and mathematics (i.e., all
faculty in the School of Engineering and Applied
Science and a third of the faculty in the College
of Arts & Sciences) will require average start-up
packages of $627,000. Approximately $100 million
in start-up packages will be required over the fouryear period, with $72 million funded from existing
cash reserves and allocations from the Higher
Education Equipment Trust Fund and $28 million
requiring new resources.
Financing Academic Excellence FY14–FY17
108
DRAFT
3/4/13
109
Operational Excellence Savings
Schedule of Operating Sources and Uses of funds
n
The University will achieve annual operational
savings of 1.0 percent of nonsponsored research
operating expenses through various initiatives
including optimal space utilization, closer
relationships with University-affiliated foundations,
and a shared-services strategy.
Contributions to Reserves
n
Contributions to a contingent operating reserve will
be set aside, with distribution approved by senior
administration. It is expected that the reserve will
guard against possible events such as state budget
reductions, endowment downturns, or reduced
federal funding.
n
Differential tuition and new restricted revenues
from the endowment distribution will be distributed
to schools to meet strategic initiatives.
n
A Strategic Investment Fund will be created for
the President and the Provost to meet the highest
strategic needs of the University.
VIII Schedule of Capital Sources and Uses of Funds
DRAFT
3/4/13
VII Schedule of Operating Sources and Uses of Funds
DRAFT
3/4/13
DRAFT
3/4/13
VIII Schedule of Capital Sources and Uses of Funds
111
1. Schedule of Capital Sources
and Uses of Funds
Background
T
he University maintains a Major Capital Projects
Program (Capital Plan), a comprehensive
listing of authorized construction, renovation, and
acquisition projects in excess of $2 million that are
under way, in active planning, and slated for active
planning. These projects include those for the
Academic Division, the Medical Center, and the
University of Virginia’s College at Wise, as well as
those to be constructed or financed by the University
for other entities (for example, the Judge Advocate
General’s Legal Center and School (TJAGLCS)).
The Capital Plan serves as a planning tool and as
supporting documentation for capital project funding
at the state level.
Every two years, the University updates the Capital
Plan. Project sponsors bring forward new and revised
projects for consideration by the Executive Review
Committee (ERC), comprising senior management.
As part of this analysis, the ERC’s duties include the
following:
Prioritize capital needs within the context of the
University’s mission and strategic initiatives
n Evaluate business and academic plans and related
project initiatives
n Ensure that relevant issues related to the sustainable
growth of the University are addressed
Make certain that adequate consultation with
constituent groups and/or stakeholders takes place
n Ensure that appropriate standards for use of
University financial and facility resources are
developed and applied n
The University then presents the revised plan to the
Board of Visitors for authorization. A description
of each project is found in a written report to the
Buildings and Grounds Committee.
The accompanying Capital Sources and Uses of Funds
Schedule is a subset of the full Capital Plan. It covers
all Academic Division projects expected to begin by
June 2017, with an estimated construction cash flow
along a standard spending curve. The projects are
divided into the following three categories:
Fully Funded and in Active Construction
n
n
Financing Academic Excellence FY14–FY17
Four projects—Alderman Road Residence
Halls 3–5 Construction; New Cabell Hall
Renovation; Ruffner Hall Renovation; and North
Grounds Recreation Center Renovation/Addition—
are fully funded and in active construction.
In Active Planning but Not Under Construction
n
Four projects—Alderman Road Residence Hall 6;
North Grounds Mechanical Plant; Newcomb
Financing Academic Excellence FY14–FY17
Schedule of Capital Sources and Uses of Funds
Road Chiller Plant; and Rotunda Renovation—
are in active planning but have not yet begun
construction. Funding for the first three projects is
in place. It is anticipated that the Commonwealth
and the University will provide funding for the
Rotunda Renovation. The Commonwealth has
committed funds for the first-phase roof repair
and will shortly authorize construction for the full
project. The University is raising private funds—
related to the Jeffersonian Grounds Initiative­—to
provide its share.
In Early Planning or Awaiting Funding
n
The remaining projects are in the early stages
of planning and/or awaiting funding. While the
University has assigned these projects a start date,
no project will move forward until its funding plan
is solidified with cash on hand, enforceable pledges
recorded, state authorizations in place, or debt
repayment plans approved.
Current funding sources for the projects in the
last category follow. If funding sources change (for
example, if state general funds are not forthcoming),
the University will alert the Board of Visitors.
n
n
Projects primarily financed through philanthropy
in hand or to be raised include the Jeffersonian
Grounds Initiative, Contemplative Sciences Center,
560 Ray C. Hunt Acquisition, Miller Center Phase
III, Bayly Building Renovation/Addition, AnheuserBusch Coastal Research Center Phase II, Science
and Engineering Teaching and Research Facility
(partial), and the University Conservation Center.
Projects included in the request for state general
funds submitted in spring 2013 include Gilmer Hall
and Chemistry Building Renovation, Alderman
Library Renewal, Science and Engineering
Teaching and Research Facility (partial), and several
infrastructure projects (Main Heat Plant Biomass,
Health System Chiller Plant [partially financed by
the Medical Center], Science/Engineering Chiller
Plant, North Grounds to Old Ivy Road Duct Bank).
n
n
DRAFT
3/4/13
The Slaughter Recreation Center Renovation/
Addition will be funded from auxiliary revenues,
partially in cash and partially through internal bank
borrowings, which will be repaid from auxiliary
revenues.
TJAGLCS will use debt financing, with debt service
paid by TJAGLCS; the Facilities Management
Shop/Office Building will be financed from existing
cash balances and internal borrowings to be repaid
from operating revenues.
The accompanying Capital Sources and Uses of
Funds Schedule identifies the estimated ongoing
operating and maintenance cost of each capital
project, including custodial, utilities, minor and
major repairs, security, and landscaping expenses.
For those projects to be completed in the four-year
period ending FY17, the Operating Sources and
Uses Schedule has included the projected operating
and maintenance costs. The University will identify
funding for operating and maintenance when
approving financing plans for projects now in the
early stages.
Key Projects in Planning or Near Term
Rotunda Renovation
The University’s Rotunda, the heart of the
Jeffersonian Grounds, is in urgent need of repair,
as indicated by its score of 21 percent on the
latest Facilities Condition Index. A score above 10
percent is considered poor. To maintain this historic
Jeffersonian structure and ensure its long-term
preservation, the Board of Visitors authorized a
two-phase renovation project covering the Rotunda
and its wings, as well as the contiguous North Plaza
and two courtyard gardens. The renovations also
address landscape and program issues. The University
is currently undertaking phase one of the project,
repairing and replacing the dome roof. The total cost
of both phases will be $50.6 million.
VIII Schedule of Capital Sources and Uses of Funds
VIII Schedule of Capital Sources and Uses of Funds
Jeffersonian Grounds Initiative
Alderman Library Renewal
113
The work includes interior and exterior building
renovations and restorations, roof replacements,
removal of modern alterations, new building utility
and fire suppression systems, relocation of utilities,
Americans with Disabilities Act (ADA) compliance
upgrades, exterior lighting and security upgrades,
drainage improvements, road and walk repairs, and
landscape replanting and enhancements. Given the
broad scope and number of buildings involved, the
University envisions this project as a 10-year effort.
This project will renew Alderman Library’s 195,000
gsf for the 21st century. The Library’s current life
safety and operational systems are between 25 and
75 years old. To address safety issues, the University
will install complete fire suppression and alarm
systems, improved emergency warning systems,
and egress signage. It will address accessibility by
renovating spaces, including elevators and bathrooms,
in accordance with ADA guidelines. In addition, the
University will replace all mechanical, electrical,
and plumbing systems to provide better protection
for collections, more comfort for people, and more
sustainable energy efficiency.
Schedule of Capital Sources and Uses of Funds
112
DRAFT
3/4/13
Gilmer Hall and Chemistry Building
Renovations
To meet key programmatic requirements necessary to
address the growing demand for science, technology,
engineering, and mathematics programs, the
University plans to renovate aging infrastructure and
redesign outdated teaching and research laboratories
in Gilmer Hall and the Chemistry Building. Both
of these buildings are nearly 50 years old, and their
infrastructure, particularly in the Chemistry Building,
has outlived its design lifespan. The University will
renew the mechanical, electrical, and plumbing
systems of this 578,000 gross square foot (gsf) pair of
buildings, replacing antiquated and inefficient systems
with a modern, efficient, and adaptable infrastructure.
In addition, the University will renovate more than
300,000 gsf of instruction and research laboratories.
The goal is to maximize space utilization through
efficient and flexible laboratory design.
Contemplative Sciences Center
This new 22,200-gsf facility provides dedicated space
for the Contemplative Sciences Center, setting the
stage for positioning the University as a national
and world leader in contemplative sciences theory
and practical applications. The project will include
offices, contemplative and meditation areas, showers
and locker rooms, customer service areas, a 50-person
classroom, small conference room, research and
assessment space, storage areas, and parking.
Financing Academic Excellence FY14–FY17
560 Ray C. Hunt Drive Acquisition
The University will acquire from the University of
Virginia Foundation 560 Ray C. Hunt Drive (68,165
gsf) in the Fontaine Research Park and renovate this
building to support the University’s medical research
activities. This building will be devoted primarily
to translational research, enabling basic and clinical
researchers to partner in the development of new
treatments, new medicines, and new methods to
prevent and detect disease.
Financing Academic Excellence FY14–FY17
114
DRAFT
3/4/13
DRAFT
3/4/13
Academic Division Projected Capital Sources and Uses of Funds (in Thousands)
Schedule of Capital Sources and Uses of Funds
Total Project
Cost
Annual Operating Costs
at Completion
FY14
FY15
FY16
FY17
$8,975
$2,325
$1,875
$2,155
Included in Existing Operating Cash Balances or Sources
Auxiliary Cash Balances
Gifts Cash Balances in Hand
4,000
TBD
TBD
TBD
Academic Cash Balances
3,236
12,123
9,009
1,754
44,431
20,442
1,471
-
Internal Bank Borrowing
25,582
35,715
15,986
12,094
Gifts to Be Raised
23,463
23,935
27,294
51,519
1,800
51,470
88,335
112,614
$111,487
$146,010
$143,970
$180,136
$69,821
$2,911
$-
$-
$-
$2,467
New Cabell Hall
64,520
15,817
8,000
-
-
712
Ruffner Hall Renovation
18,815
8,053
5,369
-
-
106
North Grounds Recreation Center Renovation/Addition
17,210
7,315
-
-
-
486
Alderman Road Residence Halls, Building 6
30,000
14,000
16,000
-
-
967
North Grounds Mechanical Plant
13,110
3,633
5,450
3,028
-
-
Newcomb Road Chiller Plant
11,640
3,192
4,788
2,660
-
-
Rotunda Renovation
50,640
29,056
13,370
2,769
-
-
Jeffersonian Grounds
125,000
12,500
12,500
12,500
12,500
-
Gilmer Hall and Chemistry Building Renovation
135,800
1,800
33,500
40,200
40,200
TBD
35,000
3,457
12,100
15,986
3,457
1,105
Authorized/Pending State General Funds
Incremental Funding Required
Requested State General Funds
Total Sources of Capital Plan
Capital Projects (>$2M)
Alderman Road Residence Halls, Buildings 3–5
Judge Advocate General’s Legal Center and School Addition
Contemplative Sciences Center
Alderman Library Renewal
560 Ray C. Hunt Drive Acquisition
Facilities Management Shop/Office Building
Main Heat Plant Biomass
14,680
1,468
5,138
6,606
1,468
499
120,000
-
12,000
42,000
54,000
3,331
TBD
-
TBD
-
-
1,193
6,000
-
6,000
-
-
228
2,600
-
970
1,135
495
-
Miller Center Phase III
34,820
-
-
3,482
12,187
800
Bayly Building Renovation/Addition
28,000
-
-
2,800
9,800
861
Slaughter Recreation Center Renovation/Addition
22,810
-
-
2,281
7,984
781
Anheuser-Busch Coastal Research Center—Phase II
Science and Engineering Teaching and Research Facility
Health System Chiller Replacement/Expansion
6,080
-
-
608
2,128
427
147,290
-
-
-
22,094
4,668
21,500
-
-
-
3,225
-
University Conservation Center
8,100
-
-
-
810
477
Science/Engineering Chiller Plant Expansion
6,650
-
-
-
998
-
North Grounds to Old Ivy Road Ductbank
5,600
-
-
-
840
-
Annual Renovation and Infrastructure Program (ARIP)
var.
3,285
5,825
2,915
2,950
Major and Deferred Maintenance Program
var.
5,000
5,000
5,000
5,000
$111,487
$146,010
$143,970
$180,136
-
-
-
-
TOTAL USES OF FUNDS
Total Capital Surplus/(Deficit)
n Authorized projects in construction n Authorized projects in planning n Proposed projects
VIII Schedule of Capital Sources and Uses of Funds