Rumble at the Rotunda

affordable_excellence

by James A. Bacon

Two state senators, one Democratic and one Republican, have dialed up the heat on the University of Virginia by calling for an investigation and forensic audit of a $2.3 billion fund that the university describes as a “Strategic Investment Fund” and ex-Board of Trustees member Helen Dragas characterizes as a “slush fund” for favored projects.

Sens. Chap Peterson, D-Fairfax, and Bill DeSteph, R-Virginia Beach, said the surplus operating monies accumulated in the account should be returned to Virginia students and families through lower tuition.

According to the Virginian-Pilot:

“As a senator, and as a citizen, I have more questions than UVA has answers,” DeSteph said in the statement. “There are families and students in Virginia Beach who are struggling to pay for college tuition, and I can’t explain to them why a public university is sitting on $2.3 billion. This was all done in closed session meetings, under the cover of ‘personnel matters,’ which I feel is completely inappropriate.”

Peterson added: “It is uniquely inappropriate for a nonprofit institution to consistently overcharge for its services – there is no legal authority for the university to do this, and no authority for its faculty or the board of visitors to spend these massive sums of money, which represent tuition and fees paid by thousands of working families who apparently have been over charged.”

The university administration presented its defense of the fund on the university website. The fund, the article states, will provide about $100 million a year for the university to pursue excellence at the university and its medical center without passing on additional costs in the form of tuition increases.

Bacon’s bottom line: Here’s what the argument boils down to. UVa says the money can be used to pursue excellence without jacking up tuition. Dragas, Peterson, DeStaph and others say the money could be used to actually lower tuition.

At a deeper level, this controversy reflects a difference in visions. The UVa administration and its allies on the Board of Visitors prioritize building a more prestigious institution. Here’s what Rector William H. Goodwin had to say:

Over the next decade, these investments should elevate the University to be among the top 10 universities in the nation, while keeping our net tuition costs among the lowest in the country.”

That’s the first time I recall anyone articulating the goal of lifting UVa into the ranks of the Top 10 universities in the country. It’s an extraordinarily ambitious goal because you can be assured that the universities standing between UVa and the Top 10 are doing everything they can to rise in the standings as well. (UVa ranks 26th nationally in the U.S. News & World-Report tally, third nationally among public universities.)

There is nothing inherently wrong with this goal. But money spent on pursuing excellence is money that cannot be rebated to students and parents paying a tuition that, despite all of UVa’s verbal circumlocutions, is massively higher today than it used to be.

My problem with the UVa administration is not the goal of putting prestige over affordability — I’ve often opined that we should let the university go private and be done with it — but the less-than-fully-transparent manner in which administrators have gone about achieving that goal.

UVa needs to come out and say, “Yeah, we’re going for Top 10. That’s going to cost a lot of money, and we’re going to jack up the tuition to help pay for it. As for that $2.3 billion fund, we’re keeping most of it to recruit star faculty, buy expensive lab equipment, and do other stuff in the pursuit of excellence. But we know affordability is an issue, so we’ll set aside a few tens of millions of dollars a year to ease the pain for the third of students with lowest incomes. Everyone else can suck it up.”

If UVa could come out and say that, we could have an honest and potentially fruitful conversation.

There are currently no comments highlighted.

13 responses to “Rumble at the Rotunda

  1. I’m not opposed to outside audits but I point out that the Auditor of Public accounts has done several for UVA – one last year .

    But I AM opposed to putting different standards on UVA than would be put on other Universities in Virginia and I ask – is UVA more costly than other Universities and if they are not – then why should they have a unique requirement put on them alone?

    And if UVA – IS commingling State money with endowment money for a strategic fund – I’d want the state to make that illegal not only for UVA but all higher ed getting state funds. Restrict what that money can be used for -period.

    Finally – if someone wants higher ed money from the state – to be used specifically to buy down tuition – make that a requirement on state funds – not only for UVA but all of them.

    The current trajectory – and I’m surprised Chap Peterson has bought into it -still has a strong whiff of personal vendetta that – for me – undermines the credibility of the complaint.

    I”d like to see a unanimous vote of the UVA BOV -as a start – not one person writing Op Eds – the same person who has a record of disagreements with UVA – and a failure to marshall the entire or a majority of the BOV to AGREE to pursue changes rather than the lone wolf approach.

    I still think Dragas had ample opportunity to engage the BOV as a body and collaborate things they could agree on … compromise rather than “my way or I make a stink”.

    • The executive team of any organization with a board serves at the pleasure of the duly appointed board. That board has not only the right but the obligation to ensure compliance with laws and regulations, understand and support the entity’s overall strategy and ensure that well conceived succession plans are in place for key executives.

      Chap Peterson is both a fine lawyer and a committed Democrat. As a fine lawyer (and longstanding member of the legislature) he believes that the management of the University is acting with “no legal authority”. Acting outside its legal authority means that the board is failing in its obligation to ensure that the entity is in compliance with applicable laws and regulations. As a committed Democrat I struggle to see a personal vendetta between Sen. Peterson and UVa’s management.

      Finally, the idea that returns earned on an entity’s investments are somehow available to spend on anything management wants without the proper respect for mission is ludicrous.

      If the Board of Visitors doesn’t know where this money came from or whether spending it is within the mission of the University of Virginia they should either tender their resignations or be relieved of their office by Gov McAuliffe. If they did know that management was accumulating these funds without legal authority and did nothing they should be relieved of the office by the governor and investigated by the Attorney General.

      And anybody who believes that the University of Virginia will move from its recent rankings position (approx 26) to “in the top 10” within ten years should be relived of any responsibility for anything.

      • “The executive team of any organization with a board serves at the pleasure of the duly appointed board. That board has not only the right but the obligation to ensure compliance with laws and regulations, understand and support the entity’s overall strategy and ensure that well conceived succession plans are in place for key executives.’

        Don – I agree with your statement. However, that is not how things have been working at UVA since at least the summer of 2012. Indeed that predicate has been severely undermined over the past four years at UVA since the unsuccessful effort to remove Sullivan as President.

        And if Chap Peterson and others are not successful in their current initiative to reverse this ongoing trend, then this long established predicate of corporate governance at UVA will likely be irrevocable reversed at UVA. For all practical purposes UVA will then be run by its Administrators and its Faculty subject only to the Federal Government.

        “Finally, the idea that returns earned on an entity’s investments are somehow available to spend on anything management wants without the proper respect for mission is ludicrous.”

        Don – I also agree with this statement of yours. But, however ludicrous the current proposal of UVA’s administrators and Faculty is in fact, that proposal has been in affect and working to undermine the BoV for the last four years and that ludicrous proposal will be etched into stone at UVA very soon unless stopped by the Peterson’s initiative.

        “And anybody who believes that the University of Virginia will move from its recent rankings position (approx 26) to “in the top 10” within ten years should be relived of any responsibility for anything.”

        Don – You are right again. But the administrators and faculty believe that they will put UVA in the “top 10″ within 10 years, and they are and have been covertly putting in place their own plan to be that very thing. Unfortunately, very few on the board or outside it have been paying this problem the attention it deserves. The beating Dragas took four years ago and ever since has scared a lot of Board members and others off what is happening. People don’t typically go on boards to have their reputations ruined.

        In any case, the current Administration / Faculty plan ( frankly it is an attempted coup) is an extremely risky plan that is fraught with risk. A Fool’s Errand” in my judgement. But these “True Believers” within the UVA administrative and faculty ranks think they have nothing to lose. Perhaps they are right personally. But the people of Virginia have a huge amount at stake – the lost of their university, a precious assets of their Commonwealth, and their children’s ability to get educated at their University.

        “Chap Peterson is both a fine lawyer and a committed Democrat. As a fine lawyer (and longstanding member of the legislature) he believes that the management of the University is acting with “no legal authority”.”

        Don – You are right again on all counts. And Chap Peterson is a honest and character driven man as well. To us your words below he is “one of the few rays of light in Richmond.”

      • DonR,

        Emory University went from 25th to 9th in the U.S. News rankings b/w 1994 and 1998. It’s actually pretty simple for private universities. Washington University in St. Louis climbed from 22nd to 7th at one point as well.

        30% of the U.S. News ranking is determined by faculty and financial resources (faculty salaries/$ spent per student). 12.5% of the ranking is determined by student selectivity (SAT scores and admittance %). The smaller the university, the easier to manipulate all of these factors.

        I think U.Va. could easily rise 10 spots, I don’t know about 16, if it privatized and added $2.3 billion to go towards the resources category. If the school privatized, it could prune its student body and easily boost its SAT scores in the selectivity category. Recall that until the late 90s, U.Va. used to have a majority out-of-state student body. Now the legislature demands that the school admit at least 2/3 Virginia residents. Imagine a privatized school that could go back to the pre-00s when it was majority out-of-state prep school kids. Plus, it could marketize its tuition to the $45-50K per year range just like Cornell and Vandy.

        Trimming the undergrad student body to 12,000, having no subsidized state kids, and tossing in an extra 2.3 billion to a smaller student body would transform U.Va. to a school that could compete with Wash U./Cornell/Brown in the U.S. News rankings.

  2. >>The current trajectory – and I’m surprised Chap Peterson has bought into it -still has a strong whiff of personal vendetta that – for me – undermines the credibility of the complaint. >>

    And your evidence for the “personal vendetta” would be? That she complained by herself? That she wanted change at the top? Did she make some personal remark about the President? Was it supposed to be a “compromise” complaint?

  3. I am starting to see the University of Virginia’s executive team as fundamentally dishonest. They quote investment returns from a baseline of 2009. Yeah, pick the bottom of the Great Recession and measure from there. They claim their goal is to shoot from #26 to “in the top 10” in 10 years. Has any university ever moved 16+ slots in 10 years?

    Chap Peterson is one of the few rays of light in Richmond. He gets some stuff wrong (love for the one term governor for example) but he gets more right than wrong. He’s certainly right on this one.

    • “I am starting to see the University of Virginia’s executive team as fundamentally dishonest.”

      Don – So am I. And for the reason you state. But for many other reasons as well.

      These reasons include most vividly the actions and lack of actions of UVA’s executive team during, leading up to, and after the publishing of the Rolling Stones article. The conduct of UVA’s executive team in this still ongoing scandal is cowardly, its dishonorable, and its a gross breach of that executive team’s fiduciary duties that are owned to UVA students, and well as the honor and reputation of UVA as an institution of higher education.

      That stain will remain and it will spread and it will deepen unless and until it is addressed by those top executives involved or by the BoV with the truth of what happened, and until those top executives take responsibly and accountability for their actions. And also address the underlying problems, including the hook-up culture that despoils the lives of so many UVA students, particular its young undergraduate women. Here in am not referring to assistant dean level people but their leaders who failed them.

  4. I’m not going to defend UVA but only point out that we seem to be holding UVA to a separate standard for “affordability” and how they administer their funds.

    The “scandal” is not so much about their “funds” as it is about them not using those funds to make college more affordable. that’s a little bizarre.

    That’s conflating the issues.

    If you want UVA to make college more affordable – then address it on it’s merits – and don’t single out UVA alone to lecture them on how YOU think they should balance strategic issues with college cost issues.

    So let’s hear from the BOV on this – as a start.

    If you don’t want state funds to be used for “strategic” stuff then restrict it.
    If you do want it to be used to buy down costs -then require it and do it for higher ed across the board – not just UVA.

    • I think Larry makes a good point – what is sauce for the goose.

      The problem I see is that Virginia may form some type of task force or committee to review all public institutions of higher education. But the committee will have at least a strong plurality of people who do not wish to rock the boat or who don’t have the time or the interest in making positive change – even incrementally. (And incremental change is often the best as it gives people time to adjust.) Finally, the study group will be largely dependent on staff and information from the very institutions being reviewed.

      With all our focus on diversity, here is a place where we really need people of different backgrounds and economic views.

  5. I’m not opposed to big changes – in affordability if it is shown that Virginia or UVA are out of the norms.

    I’m not even opposed to changes in Va even if Va institutions are within National norms if we want to make college more affordable to Virginians.

    I’m just not in favor of targeting specific institutions nor am I in favor of redirecting existing funding – arbitrarily.

    One assumes – perhaps wrongly – that when the Va General Assembly distributes funding to higher ed that they have some idea how it will be spent in general – and if they actually intend for some of the funding to go specifically to make college more affordable -then fine.

    I just don’t think individuals or even groups of individuals should be basically attacking colleges for having “slush funds” because they disagree with priorities chosen – and allowed – if the money from the GA was not restricted and was discretionary.

    I understand the frustration about the affordability of college in general but I also think people do have choices and there are, in fact, affordable choices in that market – but people want certain colleges and worse they want full-boat – not only tuition but room and board and more… and those are choices people are making. Other people ARE choosing to NOT pay for the top rates. They ARE choosing the Toyota Corolla and not the BMW of college.

    I still maintain that people are making financially stupid choices in part because of the college equivalent of pay-day loans – for the middle class.

    Why in the world would anyone with half a brain be going into decades worth of debt to pay for food and rent? yet because it’s college -they seem to think it’s okay. People are apparently no more intelligent about loans for college than they were about mortgages for over-priced homes.

    Whenever I hear the argument that people choose wiser than the government when spending money – I think about these things.

    People buy BMWs instead of putting money in their 401K or buying adequate health insurance. think about it.

    the same folks who oppose the govt setting prices for other products and services – do want them to set prices for college. it defies logic.

    If you want to stop the college price escalation – stop giving higher ed – unrestricted money. Any money they get should be specifically limited to ONLY reductions in tuition. And yes – people who attend college (or their parents) should pay for room and board – not taxpayers. where in the world do we think that?

    this whole thing is just foolish. we have lost our minds on common sense.

  6. >>the same folks who oppose the govt setting prices for other products and services – do want them to set prices for college. it defies logic. >>

    Would you care to provide factual support for this statement?

  7. how about some of the self-proclaimed free market conservatives who post right here in BR?

    you know this is hilarious actually. On what planet should we be subsidizing the middle class for ANYTHING? How do we oppose entitlements for the poor, food stamps, head start, medicaid – and at the same time say that Virginia taxpayers should buy down tuition costs for those who can go to UVA?

Leave a Reply