Ah, the Old “Percentage of Operating Budget” Trick

SOURCE: UVIMCO 2019 annual report

by James A. Bacon

Part of the University of Virginia’s fund-raising pitch to alumni and friends is to emphasize how donations help make up for cutbacks in state support for higher education. Here’s how the University of Virginia Investment Management Co. (UVIMCO) 2019 annual report frames the issue:

The University of Virginia’s endowment strength also provides the financial support and flexibility necessary when other revenue sources decline. Historically, the University relied heavily on appropriations from the Commonwealth of Virginia. however, in Virginia and many other states, macroeconomic changes and constrained state budgets in recent years have resulted in less revenue available for public education. Steadily declining state support means the University must rely on past and continued donor generosity to sustain its margin of excellence.

The graph above shows how state support, expressed as a percentage of the academic division operating budget (excluding the UVa hospital) has declined steadily over the years. However, as Samuel Clemons famously said, there are three kinds of lies: lies, damn lies, and statistics.

Here’s another graph, based on numbers pulled from the University of Virginia’s annual financial reports:

Believe it or not, state support for UVa, expressed in absolute dollars, increased 15.8% between FY 2012 and FY 2018. Yet state support declined as a percentage of academic expenditures. How can that be? Because academic expenditures surged 40.3% over the same period!

Let’s look at the numbers a different way. In terms of absolute dollars, state support increased by $20 million per year between FY 2014 and FY 2018. Academic spending increased by $511 million! The Commonwealth of Virginia literally could have doubled state support in FY 2018 and it would have offset only one third of the five-year spending increases.

UVa’s runaway spending is not the fault of the General Assembly. It’s the fault of the UVa administration and Board of Visitors whose grandiose ambitions outstrip the fiscal capacity of the state. Philanthropists and UVa alumni would do well to bear that in mind next time they get the sales pitch to donate mo’ money.

(Full disclosure regarding lies, damn lies, and statistics. I selected a period of time for purposes of comparison that would vividly illustrate my point. There is no disputing the fact that over a multi-decadal period, state support has declined as a percentage of academic expenditures because of actual funding cutbacks as well as spending increases. Still, the larger truth holds: Spending increases have dwarfed cutbacks in state funding.)

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13 responses to “Ah, the Old “Percentage of Operating Budget” Trick

  1. They also always ignore state spending on their capital requests. That never gets into the equation….nor do the figures usually include state spending on need-based financial aid, in effect a state incentive for higher and higher pricing.

  2. At the rate of its theft so far, the University of Virginia should be in a position to buy the Commonwealth of Virginia all cash on or about 2030.

  3. Spending has gone up. Has enrollment also or they’re just adding more programs, instructors and administrators with no increase in enrollment?

  4. “As Samuel Clemons famously said, there are three kinds of lies: lies, damn lies, and statistics.”

    Yes, and as Samuel Clemons also could have said, in addition to what he famously said:

    “there are lies wrapped in lies wrapped in more lies, all of which compound into more and more into damn lies and highly bogus and misleading statistics.

    Hence, for example, much of what universities call “academic support” has nothing to do with educating students, and now also more than half of what universities call the Costs of Instruction have nothing to do with instructing kids, and instead have everything to do with funding otherwise unfunded faculty research that is often hobby, fetish, and/or bogus research and its attendant collateral costs, all done to promote the status of the individual facility within the Academy at the great and reimbursed expense of students.

    And, in addition all of those lies are more lies wrapped into an even bigger damn lie within much university research whether it is otherwise funded of not, namely “research” that produces fictional or faux knowledge that is untethered to reality, and thus it is either useless and/or harmful to students and anyone else outside the bubble of the academy.

    For a timely, informative, and wonderful exposition of this garbage scholarship and its resultant garbage knowledge being produced in our universities at our great expense and harm to society see following Nov. 24, 2019 commentary in Wall Street Journal at:

    https://www.wsj.com/articles/idea-laundering-in-academia

    More on this later as it is responsible for much of today’s explosive costs of universities that are sapping the strength and wealth of our society, culture, and youth.

    • Here is corrected link to WSJ article:

      https://www.wsj.com/articles/idea-laundering-in-academia-11574634492

      Here is corrected 4th paragraph:

      Hence, for example, much of what universities call “academic support” has nothing to do with educating students. And now also more than half of what universities call the Costs of Instruction have nothing to do with instructing kids. Instead those “costs of instruction” have everything to do with funding otherwise unfunded faculty research that is often hobby, fetish, and/or bogus research and its attendant collateral costs, all done to promote the status of the individual facility within the Academy at the great and un-reimbursed expense of students.

  5. If I did the math correctly, UVA increased enrollment by 4.5% and degree output by 10.5% since 2012. In the same period, average state agency health contributions increased by over 30%, and academic-related salaries/bonuses probably also increased. DHRM sets health costs and the GA sometimes mandates COLA and merit pay increases. I can’t explain a 40% hike, but believe a portion may be (legitimately) linked to education and to non-UVA forces.

    https://ira.virginia.edu/university-stats-facts
    https://www.dhrm.virginia.gov/reports
    http://www.dhrm.virginia.gov/docs/default-source/benefitsdocuments/ohb/employee-premiums-2019.pdf?sfvrsn=4

  6. How much has tuition gone up at UVA since 2012?

    Isn’t the State aid tied to some metric like enrollment number?

  7. Dear President Ryan:

    Either keep the costs of attending the University of Virginia in line with inflation or we will terminate your employment.

    Thank you,

    The Virginia General Assembly

    • That is how a competent management organization would operate. However, The Imperial Clown Show in Richmond … maybe not so much.

      James Ryan makes $750,000 per year. It’s about time he started earning it.

      • What I read a while on Ryan’s contract was that it was hard to tote up James Ryan’s total salary, given the contract’s great complexity, and add on benefits, payments and perks, for example extra hazardous duty pay for the unexpected crisis at UVA, of which UVA suffers roughly at least one every year or two. But by any accounting, the guy contract was speculated to be well over a million bucks a year, perhaps far higher, all in. And why does president get paid for creating yet another “crisis” at UVA.

  8. Larry, from what I’ve found, UVA’s T&F sticker price went from $12K in 2012 to $16.5K in 2019. Double those figures to include books, housing, insurance, and food. The tricky bit is that UVA offers some people individual-based aid to help offset the increases. Who really pays what is a mystery.

    I suspect state funding is more political than scientific. NSF pegs Virginia’s 2018 per-capita, full time equivalent contribution at $6,319. That amount is $1,500 below the national average. Here’s a graph plotting contributions over time: https://bit.ly/2DiqdUJ

    https://news.virginia.edu/content/uva-tuition-increase-37-percent-state-students-smallest-10-years
    https://sfs.virginia.edu/tuition

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