UVa Fund Is Legal and Proper, State Auditor Finds

Source: Auditor of Public Accounts

Source: Auditor of Public Accounts. (Click for more legible image)

by James A. Bacon

In morning testimony before the General Assembly, a state auditor provided a detailed breakdown of how the University of Virginia cobbled together its controversial $2.2 billion Strategic Investment Fund: UVa was in full compliance with the Code of Virginia, and all of its monies have been properly accounted for over the years.

To label the Strategic Investment Fund a “slush fund,” as former Rector Helen Dragas had done in a Washington Post op-ed was “a little bit of a mischaracterization,” said Eric M. Sandridge, the audit director in charge of higher education programs for the Department of Public Accounts. “The university was allowed to do what it did.”

While the term slush fund has a connotation of illegality, Dragas said in submitted remarks, she did  not mean to imply that UVa had done something illegal or “nefarious.” Rather, she said, “It was in view of these facts … that a small group of people went behind closed doors to discuss how to spend large sums of public money for other-than-originally-intended purposes … that the term slush seemed to fit.” (Dragas did not deliver her remarks in person because of a personal commitment of long standing.)

While Sandridge’s account supported the narrative maintained by UVa officials about the origin of the fund, he stated that his audit did not inquire into the legality under the Freedom of Information Act of a closed Board of Visitors session in which the fund was discussed, nor did it address the appropriateness of the university’s policy.

From the beginning of the controversy, which originated when Dragas first revealed the existence of the Strategic Investment Fund, UVa maintained that the fund was created by aggregating discrete reserves of money plus the investment returns on that money. By moving the money from miscellaneous pots where they were generating little income, the university consolidated them into a pool that could be invested more profitably in longer-term holdings by the University of Virginia Investment Management Company (UVIMCO).

Sandridge provided the first detailed breakdown of those money sources:

  • Capital Renewal program. UVA bills university departments on a regular basis to cover future lump-sum bond payments rather than bill them at the last minute when the payments come due. This source added up to $545 million in 2015.
  • Health plan reserves. The university sets aside a multimillion-dollar reserve as part of its health care self-insurance program. This amounted to $45 million in 2015.
  • Internal bank. The university maintains a fund to balance the daily cash flow needs of all its operations. In 2015 this amounted to $916 million.
  • Ivy Foundation. This money, a $45 million gift, was set aside for three major building projects. Upon completion of the projects, any remaining monies will be used to set up an endowment and moved out of the Strategic Investment Fund.
  • Aramark Dining Services. In a 20-year contract with Aramark Dining Services, the university received a $74 million grant to use at its discretion. However, the university must repay an unamortized balance should the agreement terminate before 2034.

None of these funds came from cost-cutting initiatives as I had improperly deduced from a reference that Rector William H. Goodwin made to “efficiencies in operations.” Rather, it appears that the university administration identified funds that were sitting around collecting dust and pooled them in such a way as to create a large, investable pool of capital. Over nine years, the university has earned $575 million through this strategy.

Where does the $100-a-year number come from? University officials have said that they expect the Strategic Investment Fund to generate about $100 million a year that could be spent on university advancement. Sandbridge explained how that number was devised. UVIMCO’s long-term investment pool has returned more than 10% annually over five-, ten- and twenty-year periods. Assuming a comparable return on investment on $2.2 billion in the future, UVIMCO could earn more than $200 million a year. Using the same policy as the university endowment of spending no more than 4.6% a year, that would provide $100 million to spend while retaining a somewhat larger amount in order to grow the investment pool.

Bacon’s bottom line: University officials deserve praise for devising a way to maximize the value of more than a billion dollars in under-utilized cash. The financial engineering, which entailed lining up $300 million lines of credit from four banks, is a genuine financial innovation that other universities may be able to emulate.

Two issues remain. The first is transparency. It has taken two months and a state audit to provide a full explanation to the public. What took so long? As Dragas asked in the testimony she submitted:

As the board took actions to restructure debt, authorize lines of credit, and modify liquidity policies — all of which were typical governance activities in large, financially complex institutions — never were we told that these actions were related to directing $2.3 billion to rankings pursuit or given the alternative of considering them in the service of tuition reduction. … The University has yet to produce documentation or recordings showing otherwise.

The second question is how the $100 million a year should be used. The Board approved using the funds to advance the strategic goals outlined in the Cornerstone Plan, essentially a strategic plan to bolster the prestige of the university. Dragas suggests that the money could have been used to offset aggressive tuition increases. Many legislators and members of the public would agree.

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42 responses to “UVa Fund Is Legal and Proper, State Auditor Finds

  1. Jim, I think your suffer from the same blinkered vision that afflicts the auditors. They have better cause. One start on your road to recovery would be for you to read the letter found at:


    Virginia citizens and the Commonwealth, thanks to the strong actions of members of the General Assembly and Helen Dragas, have stopped a train that was roaring fast down the wrong tract. Hopefully now further steps will be taken to insure that this sort of thing does not happen again. And that costs now and in the future will be redirected and brought under control at UVA.

    • Reed, Please explain what I overlooked. The auditor’s report makes sense. If someone shows me tangible evidence to suggest otherwise, I’ll change my tune. The big issue, as you and I agree, is the university’s spending priorities. The auditor didn’t give them a pass on that one!

  2. ” Del. James P. Massie III, R-Henrico, said the auditors’ findings showed the reserves existed when Dragas was rector.

    He asked Patrick D. Hogan — the university’s chief operating officer — whether Dragas ever inquired about the reserves that eventually became the Strategic Investment Fund.

    Hogan said she did not.

    “In my four years, she never has,” Hogan said. “But I will tell you, she was well aware of those balances because those were reviewed by the Finance Committee.”

    Dragas, who was out of state on family business, was not at the meeting. In a statement read to the legislators, she said the money had been deceptively labeled “operating funds” in regular reports from the University Investment Company (UVIMCO), which manages the endowment.

    She said she had assumed those funds were being used for operations and was never told otherwise.

    “Surely, had I known, I would have been even more vocal in my objection to recent tuition increases,” she said.

    Dragas’ statement criticized the university for hiking tuition and, in 2013, cutting financial aid when it had large reserves on tap.

    She also repeated accusations that the board had illegally discussed the fund in private and that Goodwin ordered the other members not to talk about it — accusations Goodwin has repeatedly denied.

    She called on legislators to freeze tuition and conduct a “thorough, objective review of non-classroom spending” in the interests of keeping college costs as low as possible.

    “While the University deserves to pat itself on the back for its exceptional investment acumen, opportunities to quickly create a more level and diverse playing field are equally rare,” the statement reads.

    Lawmakers — drawn from both the House of Representatives and the Senate — were more sympathetic to UVa’s account.

    Sen. Janet D. Howell, D-Fairfax, said the university has done a good job managing its finances in the face of declining state funding. The state has not adequately supported UVa, Howell said, and has a “miniscule part in what goes on there.”

    “I hope those who have damaged you will apologize,” she said.

    Del. S. Chris Jones, R-Suffolk, said it was “irresponsible” to assert that the university could just take these reserves and “wave a magic wand to make these tuition increases go away.”


  3. Gee, it sure was convenient that former Rector Dragas, whose “slush fund” characterization kicked off this witch hunt, apparently to embarrass her successor, found it necessary to be absent when questions might have been addressed to her. This whole episode convinces me, and I imagine many other University alumni, that the only way for UVA to be free of GA interference is to be free of all GA funding.

    • Any alum with the most basic reasoning skills would draw this conclusion. Privatization is the only path at this point. The General Assembly put on this dog and pony show over the ranting of ONE single person and then that person doesn’t even show up to be questioned.

  4. ….. and so ends the Dragas “era”…. as she has pretty much blown up her own cause!!!

    There’s still opportunity for redemption” though.

    Chap Petersen and Desteph could convince their fellow GA guys to form a Study Commission on Tuition Affordability in Va and appoint her as Chair… though… a bit of a risky strategy with her track record… of working with others…. snort….

  5. Good to see they are providing information, but there are still questions.

    There is $916M described as “BOV Strategic Fund” in 2015. It appears to have been relabeled from “Internal Bank” in 2014. Where did that money come from and why was it renamed? A bank is quite different from a strategic fund in purpose. A bank also holds funds on behalf of its customers, who can make withdrawals. Who are the “customers” that provided the funds? Without that is visibility, it is difficult to evaluate if projects funded from it are really appropriate uses of the funds.

    Also, how does the fund get $51M from “buildings” in 2010? (Cancer Center, Children’s Hospital, Research Building.) Did that money go back into those projects?

    What are the sources of the $108M Medical Center Strategic Fund that appeared in $2016. Does it originate from patient fees? What types of projects can it be used for?

    It has also been asserted that UVA deserves praise for investing operating funds. I don’t think they’ve invented that. You can look at other funds, like the UTIMCO, the similar University of Texas fund and see that they have done it for years (in addition to investing endowment funds). (And note that UTIMCO keeps operating and endowment clearly separated.) Perhaps UVA has been more aggressive in operational investments, but keep in mind that entails higher risk.

    Perhaps UVA got the latitude to create funds like this with the restructuring act from a few years ago, which is why it was cleared by the state auditor. But be that as it may, it still appears to me that funds could be effectively moved from one purpose (e.g. patient fees) to another purpose by this Strategic Fund mechanism. This gives me an uneasy feeling.

    If I am reading this wrong, please point out where.

  6. I am surprised at all these attacks on the University of Virginia. U.Va. has long been recognized as the best financially managed institution in Virginia. Part of their positive evaluation was and is their significant sources of private funds to deal with a crisis or to invest in future opportunities.
    While I was Virginia Secretary of Education from, 1978 to 1982, we were focused on challenging our higher education institutions to be more efficient and effective. We would develop a set of criteria and ask each and every institution to produce evaluation data for our measurement. Every time U. Va. measured as a very well managed while not many other institutions did.
    U. Va. has always had a private component that has irritated other institutions and some politicians. I feel certain that at the end of the day others will not be successful in attacking the university.
    It seems just yesterday that Dragas and others almost fired the new President but it backfired and Sullivan is still there. One of the reasons given was that U. Va. was not moving fast enough to utilize new technology such as the on-line MOOC courses. Now does anyone remember any recent discussion of MOOC anytime, anywhere recently?
    U. Va. needs to be encouraged to invest some of these strategic funds in expanding their research which would be very positive for the Commonwealth’s long term economic growth. Virginia’s economy is already experiencing difficulty wiith federal spending slowing. And that will worsen in the decade ahead and Virginia has to have aggressive alternative economic development strategies for the 21 Century.
    Right now Virginia universities spend about half as much on research as universities in North Carolina, Tennessee or Maryland. Of course, we do not have any private universities like Duke, Wake Forest, Vanderbilt or Johns Hopkins.
    But with research being more of a driving force in economic development the University of Virginia needs to be encouraged to invest more in strategic research initiatives. We ought to match those private funds targeted toward new research initiatives. U. Va. tried several new initiatives under the former president Frank Hereford but the commonwealth threw up road blocks back then. I hope this latest flap is not another road block.

  7. I don’t think they are commingling the funds per se – but they are investing them in less liquid things and using the proceeds that accrue from all the funds to pay back to accounts that require timely expenditures. They could not get there by trying to invest the individual funds… in less liquid assets.

    this is probably why they had to get a letter of credit to be able to cover temporary delays in moving money at times.

    so basically they’re earning interest on money that normally they could not…. without risk of cash flow shortages.

    I don’t know if this is considered “kosher” in GAAP and would be curious to find out… but I suspect as long as each fund is kept separate from the others and accounted for without shortfalls, that it’s “legal”.

    I’d also like to know how many Colleges and Universities have these types of “investment” mechanisms.. probably for endowments … and behests…. Mary Washington actively seeks people to put UMW “in their wills”… and such money is probably not restricted like endowments might be – and fully investable…

    But I don’t think higher ed in general is going to use these funds to buy down tuition – rather than use them to make the University more competitive and attractive to not only students but more donors and more who would endow…

    it’s a normal endeavor to improve and empower an institution with a mission… make it better.. make it able to do even more and better.

    They really don’t need to buy down tuition anyhow, with the super easy availability of college loans… and students/parents seem little repulsed by the debt these days… ” congratulations, you have been ‘approved’… ” are magical words!

    they just set their tuition at the level they know will yield sufficient enrollment demand… and all the rest is tending to the things that make them even more attractive and appealing as a preferred choice. It’s truly a business in that sense. They aint your Daddy’s college no mo.

    I don’t think the way the State funds Universities lends itself to keeping tuition low as long as the money provided is not restricted to that purpose. You leave that up to the Universities -at their discretion and they’ll exercise that discretion… to THEIR vision not others. One can disagree but if you really want to impose specific purposes – you have to actually do that – not hope for it.

    We do this for K-12 – we provide State SOQ money and it’s restricted out the wazoo… right down to what specific staff positions!

  8. I’m usually praising this blog, but I am disappointed that I and other commenters have made the point that this all goes back to 2005/6. The state, both the General Assembly and the Warner and Kaine Admins, made a conscious choice to allow U.Va., W&M, and VT a lot of autonomy in exchange for basically no longer funding them like public universities had been funded by the Commonwealth. Everything that those 3 schools have done financially in the past decade is legal because there’s almost nothing they’re prohibited from doing with this autonomy.

    If this blog wants to continually bring up U.Va. issues as they relate to its relationship to the state, it needs to give a fair accounting of the historical record. U.Va. and this fund are EXACTLY what the state wanted. When the state “set them free” in 2005/6, it basically said you can act like a private university if you want, we’re not going to fund you like we have in the past. In exchange for lower state appropriations, you get to operate as you wish. This is the under reported aspect to this story. This is all part of a state policy.

    The state said, “Fend for yourselves financially, be as financially innovative as you like, because we’re not going to fund you like the past.” Then when these schools actually do innovate and become financially self-sufficient and all of a sudden, “NO WAY, you’ve been successful at implementing THE EXACT POLICY WE SET FOR YOU, you’ll now lower tuition costs and admit more in-state kids even though we’ve continually cut your funding for the past decade.”

    In any other situation, this blog would be blasting away at the General Assembly for this type of behavior. But for some reason, it’s taking the side of the General Assembly. I don’t get it.

    • sorta ironic funny that some commenters here have specifically hammered Warner and Kaine for tax increases for higher ed….

      danged if you do….yadda yadda

    • I’m not sure who’s “taking the side of the General Assembly.” I just wanted to know where the $2.2 billion came from, and the university never provided a good explanation. The state auditor seemed to give a good explanation, so the question of where the money came from seems to have been solved — although I’m still wondering why we had to get the full story from the auditor, not the university itself.

      How the investment income should be spent is a very different question. That’s a policy question. When we’re talking about determining the fundamental direction of the university, that’s not a decision for the Board of Visitors alone to make.

      • As Tommy Norment explains, this is a decision solely for the U.Va. community. If the state wants to fund U.Va. like NC funds UNC-Chapel Hill (17% of total academic funding), it might deserve a voice. But there’s a bipartisan consensus that if you give U.Va. 8% of its total academic funding, the state shouldn’t say a word about the university’s governance except to appoint the BOV.:


      • The money most likely by and large came from philanthropy, although the auditors reports never makes that clear, nor does it make clear the original source of all funds, rather it focus on their way station instead.

        In any case, in my view, this is by and large irrelevant, save for someones quest to find a way to some folks in jail, which has never been at serious issue. But for some years now UVA has considered philanthropy a major way to fill the gap created by the Commonwealth dwindling contributions. And have had good success in this quest, and expect to launch another even larger fund raising campaign around 2018. One danger here is there obvious spendthrift ways of late, despite the propaganda. Had I donated to the $50 million Rotunda renovation job, I would have been a total fool, by the way I look after my money.

        • PS – Next up is another $150 million to renovate Mr. Jefferson’s original academic village to bring it up to the standards of the $50 million Rotunda renovation job.

          One wonders if any bright lights there on The Grounds might ask themselves if the $200 Million projections to “restore” the “original Jefferson Academic Village” is a bit excessive.

          Or whether some business school wizard there might wonder what is it exactly that those $200,000,000 in plans entail for UVA’s future, given the price tag. And who exactly gets all the goodies, and for what? The students? Faculty? Administrators? Or maybe its for the rafts of high profile circuit riders on the DC, China, Singapore, London, Zurich, Davos and Aspen Circuit.

    • “When the state “set them free” in 2005/6 –

      C’Ville – that did not happen – they ain’t totally free yet, but they think they were put on the road that should lead them there to the land of freedom, milk and honey given the states continued parsimony. I would agree with them if the Commonwealth continues on its current neglectful course.

      But my biggest fear at this point is the Federal Government. Namely that the Federal Government will end up owning UVA lock stock and barrel unless the Commonwealth steps back up into a more responsible roll. Although at the rate we have been moving of late, it may already be too late. UVA might well jump into the Federal Government’s lap before they take full control on their own, and do so without objection from the State, given the state’s ongoing progressive drift to the left.

  9. There were several different releases of info from UVA about the funds… here is one from July 12th:


    A combination of distrust and a lack of understanding as to what “operating” meant with some folks thinking it was state-provided and not earnings from their operations….

    I think it was not like UVA would not provide the info -they did -several times in several different venues but those release were not clear enough in the eyes of those who were skeptical to settle the issue.

    The fact that these funds did not come from the State did not dissuade Dragas or others from believing, insisting that they be used to buy down tuition – and truth be known – if you listen to Petersen and DeSteph that seemed to be in their motives for further inquiry also.

    As you say – there are two issues – and you did not conflate them as the others did.

    We’re going to find out now whether the main complainers supposed interests in tuition cost – have legs. Are Dragas, Petersen, DeSteph and others going to coalesce to further pursue that part?

    or is this a dead donkey thoroughly beat to death and now ready to be buried?

    I still find it ironic that Dragas wanted Sullivan fired originally – not for tuitions but not being “strategic”… “fast enough” for her likings and in the short time between that and this kerfuffle – everything changed for Dragas and it became about the University “lying” and not using their strategic money to keep tuitions low.

    It sounded to me that Dragas was and is a bit of a troublemaker and loose cannon who does not play well with others.. not UVA nor the BOV. I do not think the woman had truly pure motives – it was more about her than the “issues” themselves but one thing you do have to credit her for – she did sit quietly and follow along meekly!!!

    • “Not”

      I agree with you both about the ‘dead donkey’ and Dragas’ lack of pure motives. Cville Res has the history right; the problem in the GA is that some delegates consciously want to revisit the 2006 compromise, and others are conveniently forgetful. Seems to me the only final solution is to achieve a clean, effectively 100% break of it. My old undergraduate haven is considered a “private” university today, yet it was founded with State as well as private funds — in fact the Governor of Connecticut remain a member of the board (the ‘Corporation’) ex officio (if he chooses to attend, which is rare). The University of Virginia should press the GA for a similar symbolic solution when the opportunity arises.

  10. As a taxpayer, it’s nice to know the state auditor found the accounting to be compliant. There remains, however, a question as to whether the amounts in question are appropriate and reasonable. I make no argument either way, but believe the investigation should be continued.

    Why do I raise this point? Both Fairfax County and FCPS have often carried considerable balances in funds from fiscal year to fiscal year. Of course, local government must take in at least as much as it spends. And reserves are often quite prudent, especially if set aside to pay bond costs and for a “rainy day.”

    But at some point, other fund balances and reserves can reach levels that can mean the entity has over-taxed its residents and businesses (charged excess tuition, in case of a college). It can also allow managers to spend money in ways that may not have been completely vetted by elected or appointed officials with oversight responsibility.

    It’s sort of like Christmas in September as Fairfax County and School officials use fund balances to pay for things that didn’t get funded in the Spring budget process. Again, if done modestly, this is not likely a problem. But every $22 M spent by the County or the Schools equals a penny on Fairfax County’s real estate tax rate. If, for example, total 3Q new appropriations equals $50 M, one can make a good argument that the tax rate was excessive by two cents on the thousand.

    I would hope the state auditor, legislators, the Governor and the University doesn’t stop and looks at the appropriateness of the balances of the reserves. Another report is due the citizens of Virginia.

    • @TMT – if the strategic fund monies did not come from the state nor tuition – do you still feel there needs to be further investigation?

      Do you think that monies that are accrued from sources other than tuition and state funds should be used to subsidize tuition?

      who should decide for what uses money that dd not come from the state nor tuition should be spent or not?

      • I think any dollars in the hands of a public institution should be subject to disclosure and review. As far as a private gift is concerned, it should be used for only the purpose(s) specified by the grantor. If the grantor has designated the gift solely for research on peanuts, that should be the only purpose for which the gift is used. Public disclosure could identify violations.

        For earned revenues (say bookstore earnings or a payment for sports arena naming rights), I assume that there are provisions in state law that controls how such revenues are accounted for and for what purposes they can be used. But for accounting reports open to the public, how would we know the rules/conditions are being followed.

        When you are in the public sector, you are subject to more public exposure. My wife is a career federal employee. Every year, I have to give her a list of any stocks I own beyond a specific level and a list of any clients for whom I bill any amounts beyond another specific level. She has to turn in that list to keep her job. I presume it’s secure.

        • Oh I think they should certainly account for the money – no question The question is are they free to spend it as they please if it has no specified instructions or the instructions are fairly general?

          should they be forced to use that money to buy down tuition?

          And if that money has specific purposes -can it be invested and the proceeds from the investment – at their discretion?

          there’s all kinds of permutations that are possible depending on the limitations put on things like endowments, donations, and behests or wider freedom.

          but beyond having to account for the funds – is it their responsibility and discretion rather than someone outside the University?

          by the way – not all Federal employees have to do what your wife does. She must have a clearance and/or is in a high-grade position where a higher level of disclosure is required – and that disclosure is not public – it’s internal – right?

          maybe not the same as the UVA thing

    • Your right on target – excellent point and illustration –

      Now lets add to your circumstances a complication or two – the movers and shakers in Fairfax County, for reasons good or ill-founded, want to bring about transformational change in Fairfax. Their plans to accomplish that transformation change (its timing, its means, its methods, its tactics, and its ends) will cost far the Fairfax County taxpayer far more money that would a plan to maintain, refine and improve onto the status quo in the already successful county. Indeed this transformation change will likely cost so much more than today’s real estate taxes and sales, personal property and road taxes, that the cumulative cost of those taxes likely will drive the middle class out of Fairfax county. How then do county movers and shakers confront the public with that news? What tactics do these leaders deploy to achieve their goals?

      The means and possibilities here and their consequences (seen and unforeseen) are literally endless. This will be the case irrespective of whether such transformational change is the work of heroes who are going about the task of saving the county, or who are crooks and/or fools on their way to ruining or destroying the county.

      Big truly transformational change is ALWAYS horrible complex, chock full of expected and unexpected risk, and always creates big winners and big losers. Thus it is always highly dangerous. Always has been, and always will be, no exception, never, unless it is not transformational change.

      So too, however is “stuck in status quo.”

      So, for example, there is much hidden and going on under the surface of both transformtional change and stuck in the status quo, and this includes that hearing yesterday in Richmond. Surely it was in large part staged, and perhaps properly so, unless of course we’d become a nation of accountants.

      Either way the light that had cut into the fog and its surrounding darkness over the past few weeks appears to have some positive consequences. And given all a chance for more positive outcomes, however speculative they remain.

  11. There’s an excellent, relevant op-ed in today’s WaPo by Charles R. Pruitt, entitled “Partisan politics is undermining the ‘Public Ivies.'” He speaks from personal experience in Wisconsin. Virginia is not alone. https://www.washingtonpost.com/opinions/politics-is-cutting-the-heart-out-of-public-ivies/2016/08/26/7fa0b338-6af6-11e6-ba32-5a4bf5aad4fa_story.html?utm_term=.07efa367aae3

    • the article did not snap my socks – in part because of this statement: ” McCrory said the state should only subsidize university classes that would “get someone a job.” as if this is a partisan issue.

      Not sure where to start – but certainly I think most folks would agree that we cannot afford to subsidize any and all for any higher education they aspire to. we simply don’t have enough dollars to do that.

      so that drives us to what we can afford and I am dismayed that the next step is not across-the-board equity for ALL who would seek a college education – not different kinds of funding for different kinds of folks and different schools.

      If we prioritize funding to the middle class for public Ivy’s and it comes at a cost to helping lower class folks just being able to get basic college degree or occupational certificate -then we’re messing up in my view.

      I recognize the public Ivy’s are different and special but I can’t handle making them the primary focus of “affordable” tuition and especially so if it ends up making non-ivy college less affordable and out of reach of others who are not middle class…

      We will never have all the resources we want for higher ed. It will always be about priorities and the priorities should be equitable access to college to all who seek college – not targeted to some at the expense to others.

      I’d even make the argument that those in high school that seek 2yr occupational certificates deserve full funding because such certificates are going to lead to direct and real jobs – and one less person who needs govt help ..who then pays taxes and can take care of their own needs.

      That’s far better than the idea that UVA folks will graduate with higher salaries and therefore better able to pay the taxes that pay for entitlements. I’d rather see two community college grads with occupational certs and real jobs that one UVA grad seeking their dream job.

  12. Perhaps Cville Resident was responding to my comments, so let me clarify. I supported and continue to support the restructuring that gave UVA more independence. If I recall, there were 11 or so objectives that were attached (which is quite a lot and they were wide ranging) and UVA appears to have worked toward the objectives through its plan and initiatives like AccessUVA. I think William and Mary has as well.

    My comments about wanting to know more about the sources and uses of funds in the SIF really came from wanting to know if there are some holes in the restructuring agreement that should be addressed. There are almost always issues with complex legislation (think Virginia ethics laws). UVA has good lawyers and accountants and I felt pretty certain that they were complying with Virginia law. UVA is probably clear on what funds are discretionary and not discretionary.

    The scenarios that cause me the most concern is if medical center fees are being rerouted to other purposes. That is why I’d like to see some more forensic detail.

    To reach its objective of being top 10 in a USNews type ranking, UVA will have to go private or quasi-private, and that is clearly where they are headed based on what Reed Fawell has shown. The SIF is probably necessary but not sufficient to reach that goal. The funding gap with private universities is far too large. The gap between UVA’s rank in USNews and its financial resources is 41 places (UVA is 67 in financial resources).

    Let me say again here that the USNews rankings, particularly in the current incarnation that is based on resources and manipulatable metrics, has done a tremendous damage to affordable higher education. USNews creates the impetus for a funding arms race. That arms race is accelerated by Federal policy (financial aid, research grants, the tax exempt status of endowment and other institutional income). A study on the Bennett Effect, the postulation that increases in financial aid result in in higher tuition, showed that a a $100 increase in Pell Grant aid at selective institutions resulted in a $66 increase in tuition.

    So I have regrets when I hear UVA wants to pursue rankings, but I fully understand it. While I think UVA probably already spends enough to provide a very good education, Alumni and students expect prestige from their degree, and maintaining or increasing that prestige requires ever increasing sums of money. As Acbar has pointed out, individual institutions have to play the game — they can’t define the game or the rules. It is a systemic issue that the U.S. can’t find the political means to address.

    • you said that well… agree but JSNWR are not the only rankings – and it’s people that decide which things are important (or they think are).

      and totally agree – the all-you-can-eat loans are terrible policy that not only escalates costs but ensnares people, especially those not experienced in finances , in decades long debt that eats up money that would have gone for home ownership and retirement savings.

  13. Izzo – that is a very fine post indeed. And it very much jives with what I have read, material written by the leaders of UVa. themselves.

    I would add that that Terry Sullivan’s strength is also her weakness in my view. As you say, “USNews rankings, particularly in the current incarnation that is based on resources and manipulatable metrics”, is a game that plays right into her great strengths and her stated ambitions. So I suggest that if both remain unbridled she might win the “Rating Game” while Virginia’s kids lost their educations, that is their current ability to attend UVA and get the kind of education they need. (As you said those rating games have done “a tremendous damage to affordable higher education.”)

    Secondly, as best I can tell, this current Sullivan Administration has proven themselves very good to great is raising and managing large sums of money. This was in doubt in 2012, but now facts have resolved the question in their favor.

    BUT another big questions now looms. Does this crew have the ability to wisely control costs and deploy those costs and manage their operational performance in the field so as to successfully lead UVA though an era of “Transformational Forces at work in Higher Education, particularly higher public education?”

    As Sullivan has outlined her plans to date, and as I judge her performance there to date, I very much doubt it.

    However, if she is properly constrained and managed by others, there are , in my view, off-ramps along the way that may lead to UVA’s success, given its inherent strengths, if they not be harmed, diluted, or destroyed along the way.

  14. Izzo and Reid,

    Very good points. As to the U.S. News rankings, any objective observer would understand U.Va.’s quality as an academic institution has not really declined. It’s just simply the methodology changed to emphasize student and faculty resources as well as “student selectivity” which simply means take the highest SAT scores…again, a metric that kills public universities which have to take kids from poorer parts of each state whose kids usually don’t have the SAT scores that would help the “student selectivity” category. Imagine Berkeley w/o Central Valley kids or U.Va. w/o Southside/SWVA kids…they would certainly increase in the USNWR rankings, but the legislatures would go ballistic.

    Academics have put out a lot of proposals, but they are all contingent on the media (like this blog). If you don’t want universities to compete in the arms race, then most proposals state that the media needs to not report on the rankings and also needs to delete comments about the rankings from their sites. I think that really is the most sensible proposal. Until the media takes a role by deleting comments and not writing articles about those rankings, people will rely on them and every university will play the U.S. News rankings game. And, as demonstrated, those rankings tilt so heavily to money nowadays that they require universities to continue to amp up spending and tuition. So, if Mr. Bacon will stop reporting on rankings and also delete any comment that references the USNWR rankings, he can take a small step towards stopping the tuition arms race.

  15. re: ” So, if Mr. Bacon will stop reporting on rankings and also delete any comment that references the USNWR rankings, he can take a small step towards stopping the tuition arms race.”

    geezy peezy CR – where would that kind of censorship stop? what other “bad things said” would be erased?

    I was struck in the JLARC report that HCJ provided in the other thread the average tuition of each state – that to me, clearly shows, that not all states are involved in that “arms” race and/or do fund Higher ed enough for reasonable affordable access to it’s colleges:

    1 New Hampshire 14,712
    2 Vermont 14,419
    3 Pennsylvania 13,246
    4 New Jersey 13,002
    5 Illinois 12,770
    6 Michigan 11,909
    7 South Carolina 11,449
    8 Delaware 11,448
    9 Massachusetts 10,951
    10 Rhode Island 10,934
    11 Virginia 10,899 <– up 24% since 2009
    12 Washington 10,846
    13 Connecticut 10,620
    14 Minnesota 10,527
    15 Arizona 10,398
    16 Ohio 10,100
    17 Hawaii 9,740
    18 Colorado 9,487
    19 Alabama 9,470
    20 Maine 9,422
    21 Kentucky 9,188
    22 California 9,173
    23 Indiana 9,023
    50-state average 9,012 <– 50 state ave
    24 Oregon 8,932
    25 Texas 8,830
    26 Wisconsin 8,781
    27 Maryland 8,724
    28 Tennessee 8,541
    29 Missouri 8,383
    30 Georgia 8,094
    31 Kansas 8,086
    32 Iowa 7,857
    33 South Dakota 7,653
    34 Arkansas 7,567
    35 North Dakota 7,513
    36 Nebraska 7,404
    37 Louisiana 7,314
    38 New York 7,292 <– expensive NY!
    39 Oklahoma 6,895
    40 Mississippi 6,861
    41 North Carolina 6,677 <– 61% of Virginia AVG
    42 West Virginia 6,661
    43 Idaho 6,602
    44 Nevada 6,418
    45 Florida 6,351
    46 Montana 6,279
    47 New Mexico 6,190
    48 Utah 6,177
    49 Alaska 6,138
    50 Wyoming 4,646

  16. the other thing I would ask – is this

    are some folks using the “fund” and “FOIA” as proxies
    for obstacles to UVA going down the path it seems to
    be headed?

    If you believe the list provided above – Virginia taxpayers would have to kick in another 4,000 per student to equalize to what NC does.

    If Virginia chooses to not do that – then where does that really leave UVA in terms of the cost of it’s tuition?

    Essentially – it SOUNDS like that some would argue that if the State is not going to step up -that UVA should and use it’s endowments and behests to buy down tuition or else be viewed as bad guys – and we’ll dig up dirt on your strategic funds and your public disclosure behaviors?

    I don’t think such tactics are productive and lead to any good result.

    It’s almost as if people are not happy, frustrated and just want to toss stones …

    that’s why I have advocated that Dragas and others who support her including the GA guys – get together and develop a constructive plan to do something different than where things are headed now.

    there is no question in my mind at all – and Izzo said it also -this era of letting people assume debt to the levels they are now – is not only harming them – it’s enabling the so-called “arms war”.

    I fully expect Congress at some point to realize just how dangerous this has become … it is actually contributing to the deficit and debt now.

  17. A good summation, and well said, LG. Yes, I think the “fund” and FOIA side-shows are misguided attempts to block what UVA feels it has to do (and has the right to do) given the decline in State support.

    As for censoring the reporting of data used in the USN&WR rankings — CR, that strikes me as both counterproductive and futile. When has denying consumers the information they seek about the relative and absolute value of goods and services ever helped in the long run? Criticize the magazine’s ranking criteria, its weightings or its data sources, yes, even criticise consumers for valuing the wrong strengths, yes; but the magazine did not create the market for its rankings. Those published rankings satisfy an obvious desire, a perceived need, that others simply will fill with inaccurate opinions if we deny them the data to work with. Transparency over opacity!

  18. LarrytheG, I think your list understates the extreme disadvantage UVA faces. According to UVA’s site (which is now dated), UNC Chapel Hill got $22,105 from the state per student in 2011-12. UVA got $8,566. So Virginia taxpayers would have to kick in an extra $13,500 per student to match what North Carolina does.

    If you have to cover the $13,500 per student with endowments and other invested funds, it amounts to $300,000 per student at a 4.5% payout rate. UVA’s undergraduate enrollment alone is about 16,500, so that would total nearly $5B in investments to match what the state chips in in North Carolina.

    Here is the UVA Site: http://staging.virginia.edu/finance101/funding.html

  19. Wow Izzo! I think I can extract the chart and put it here:

    we’d come up with this much tax money for folks going to college but not a penny for folks working full time without health insurance and who rely on taxpayer-funded ERs?

    geezy peezy

    I’m not opposed to money that provides true equitable access to “A” college education to all kids in Virginia who are academically qualified.

    what I oppose is inequitably funding of higher ed to favor certain demographic groups and certain higher ed institutions.

    Right now – the data shows that lower income kids/parents in Va carry more debt that higher income for college. Why is that?

    I’d support means-tested vouchers for each and every kid who qualifies and a stipulation in the voucher than caps borrowed money as a direct condition of the voucher.

    something along these lines -equitable access – rules for debt.

    • LarrytheG, I am not suggesting the Commonwealth should match what North Carolina contributes to UNC. I was just trying to show the comparable numbers and explain why UVA is working so hard to be creative. I think North Carolina has had to make some cuts in the past couple of years, but I’m pretty certain they are still providing a lot more support than Virginia.

      Cville, I think the restructuring was essentially a needed step toward privatization if the Commonwealth didn’t change course, so I’m not sure I understand your position. President Sullivan at William and Mary and President Casteen at UVA could read the writing on the wall even back then. Also, I think UVA and William and Mary still get the most money per FTE from the state, so I think it was more of a general defunding of the entire system. UVA, William and Mary, and Virginia Tech were in line to get big cuts anyway because they were in the best position to absorb it.

  20. Yes – I agree with the idea that the Commonwealth cannot have its cake and eat it too. It cannot starve UVA for funds and then complaint that UVA is going to out of state students to make up the short-falls that the state imposes on UVA.

    Instead of that course, now is the time for the General Assembly to rethink its state support, just as now is the time for UVA to rethink its future. One decision depends on the other. Surely there is a better way for concerned. And one way to start that process is to speak straight and plainly about what is going on, something that has rarely been done in the past.

    • 100% agree. I opposed the “charter” (not they call it restructuring act) movement in 2005. I called my legislators and predicted that U.Va. and William and Mary would both be private before I died if the state decided to effectively “defund” both schools in exchange for more autonomy.

      That’s why I now favor privatization. You can’t let the 3 schools (U.Va., VT, W&M) act like semi-private schools for a decade and reorient almost everything they do in that direction and then come in and pull the mat out from under them. That’s what’s happening.

      If the state wants to fund U.Va. like NC funds Chapel Hill, that’s a conversation worth having. However, if the state wants to continue to treat U.Va. (and VT and W&M) like semi-private schools with significantly less funding, it really shouldn’t be micromanaging tuition, admissions, etc.

    • Thank you, RF. And thank you JB for hosting this “speak straight and plainly” conversation about the real issue, the future of higher education in Virginia.

  21. well geeze – how can we be starving UVA for funds if we are running a deficit ? 😉

    hard to believe that NC is providing 22K a year for college at UNC Chapel Hill… why am I skeptical?

    • NC has funded its State schools well for years as part of THEIR bargain that in exchange, the ratio of in-state versus out- of state undergrads is skewed steeply towards in-state. That’s a political and cultural bargain that most alumni and faculty rightly resist.

  22. A reasonable blog post. I think much ado about little here. The big issue is what UVA really wants to be. Ya gotta love the General Assembly. They skimp on funding public universities and then bitch when one does well handling its finances.

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