Where Did UVa’s $2.3 Billion “Slush Fund” Come From?


Here is the University of Virginia’s explanation of where the infamous $2.3 billion “Strategic Investment Fund” came from:

The reserves have been accumulated through sound financial management from the following sources:

– In June 2009, the University held approximately $620 million in unrestricted funds and related earnings that had accumulated in its history and were invested with the University of Virginia Investment Management Company, or UVIMCO;

– The University’s operating reserves of approximately $385 million for the Academic and Health System divisions, principally set aside since 2009 for working capital, future capital needs for major maintenance, requirements of its self-insured health plan and other operating needs, which also were invested with UVIMCO;

– Since 2009, investment earnings realized on University operating funds held at UVIMCO were approximately $700 million, a result of robust average annual returns.

– In November 2015, the Board of Visitors approved a new liquidity policy permitting the establishment of bank operating lines of credit that enabled UVA to transfer approximately $480 million of operating cash for investment with UVIMCO in early 2016. This action was taken in consultation with major ratings agencies to preserve the University’s AAA ratings.


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10 responses to “Where Did UVa’s $2.3 Billion “Slush Fund” Come From?”

  1. LarrytheG Avatar

    re: ” Since 2009, investment earnings realized on University operating funds held at UVIMCO were approximately $700 million, a result of robust average annual returns.”

    hmmm.. sounds like the UVA folks should be advising VRS, eh?


  2. Give part of that to ODU. They’d actually help more people all the way around than UVA would.
    No offense to any UVA’ers.

  3. “$620 million in unrestricted funds and related earnings ”

    “The University’s operating reserves of approximately $385 million for the Academic and Health System divisions, principally set aside since 2009 for working capital, future capital needs for major maintenance, requirements of its self-insured health plan and other operating needs”

    These sources of cash, along with the $700M in proceeds from investing these monies, were all listed as Operating Funds until the BOV was presented with the March report, which showed something new called Strategic Funds. The BOV didn’t vote explicitly on changing the status of these funds, what they were labelled, the size of the funds, nor how to use them.

    UVIMCO does great work, the best in the country, no one is critical of its investment management. The administration can’t make autocratic decisions to amass money which belongs to the public because some of them want to become a market force in the ratings games. This philosophical choice needs to be aired, vetted, and consented by the broader BOV and the General Assembly.

  4. LarrytheG Avatar

    Here’s a question – Are endowment funds restricted? I can see the issue with using state funds for purposes for which they were not intended especially if they are excess to what was appropriated. Those funds should be reappropriated with concurrence on what to spent the on instead.

    but the endowment? what about that?

    Second – whether it’s money to be re-appropriated or endowment – using those monies to “buy down” tuition is really a separate issue that is being conflated in my view.

    What to do with the endowment – certainly could be used to build and strengthen the University to move it towards a higher tier status – that could reap huge economic development benefits for Va. To direct it to some other use – is certainly a discussion and a choice but using that money to buy down college costs at UVA – only – in Va seems punitive and really not addressing the underlying problem of costs.

    For the operating fund – again – what was it intended to do ? Was any of it or any surplus intended to be automatically re-directed to buying down costs?

    Again – worthy of discussion and debate – at the BOV level.

    but when one person characterizes operating funds as a slush fund that is being wrongly spent on things other than buying down costs – that’s a serious charge and if the entire BOV feels that way then UVA needs to respond and the State needs to consider rules to keep that from happening.

    HOWEVER, if that is the CLAIM of ONE BOV member and the others are not convinced and then the one member goes and writes an editorial – that does not sound like a consensus at all…

    but even if it were true – what that excess money should be spent on – again – is not what one member of the BOV thinks…

    Finally – if UVA costs are out of line compared to others then that does need to be addressed on it’s own without involving other issues

    If UVA costs are NOT out of line – then what should UVA be targeted in the first place?

    If college costs across the board are out of line – then deal with that on a systemic basis without targeting individual colleges because of what individual people think ….

  5. “Using state funds for purposes for which they were not intended”: LarryG, that’s an interesting choice of words. “not intended” suggests there was an appropriation with an “intended use” linked to it and this use is something else. “State funds” also suggests there was a specific appropriation. But the University of Virginia is mixed bag as I understand it, structurally more private corporation than governmental entity at its core, provided, the State government has for many years now appropriated specific funds for specific capital projects and specific expenditures, and along with those, enacted specific limitations or conditions on their use. My point is this: when we talk about “State funds” and “intended use” we are using termin0logy that does not fit the University of Virginia model very well. Those funds belonging to the University that are not specific appropriations for specific purposes are, in effect, the funds of a private entity run by the BOV. Is this correct?

  6. LarrytheG Avatar

    @Acbar – You’re probably familiar with how the Federal govt works when it funds things.

    Say – Head start/Title 1 , Handicap Vans, crop subsidies, highway projects, etc.

    they don’t just give that money unrestricted.

    If fact Virginia does similar things with some funding – like grants from DOE to schools for specific things or DEQ to municipalities for improvements to wastewater, etc.

    So this is not a foreign concept from a different planet.

    I presume that the General Assembly INTENDS for this funding to be discretionary if UVA is using it that way and breaking no laws.

    That means that ALL colleges in Va work the same way.

    so why is Dragas ragging just on UVA about this if the problem is that UVA is merely doing what it is allowed to do and all colleges are?

    If what Dragas is saying is true about UVA why is it not true also for other Va colleges?

  7. LarrytheG Avatar

    The papers are now saying that Dragas is saying that a closed meeting was held to discuss the fund -in violation of Va law.

    Unless it is different for BOV – when governing bodies like BOS/PC come out of a closed session – they must certify by roll call vote on an individual basis that they spoke only of what the law allowed and nothing else.

    Now – if that’s true for BOVs and Dragas can prove her accusation – then it IS a scandal – and every one of those BOV that voted that they did not discuss that fund but did – they should be thrown off the BOV – forthwith.

    period. end of story. A far, far worse problem in Va these days than this slush fund is the continuing erosion of the FOIA law with explicit and suspected violations of the law and if anyone here really cares about Va beyond UVA – they should care about this trend that is becoming almost rampant across the state.

    If the UVA BOV did violate the law – then I’m on Dragas side…now – and if UVA administration is part of the claimed subterfuge – all bets are off and they probably ARE guilty of playing games with funding.

    that’s how serious I take the FOIA law how alarmed I have become with the abuses of late.

  8. A blast from the past. I’m sure this old Bacon’s Rebellion story on where the Strategic Investment Fund came from is related to the current story below on huge furloughs at UVA Medical Center furloughs and low levels of financial reserves. I would bet 80% of the Strategic Investment Fund originated from transferring health center reserves to the Strategic Investment Fund.

    “When asked why the health system’s reserves were low compared to other institutions, Kent said he was still trying to figure that out, as he had only been at UVa since February. He said there is a fair amount of funds flowing from the clinical side to the academic side, which means less to put away in the bank. . .”


  9. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    Yes, I agree, Izzo. That fits with all the suspicions, collateral facts and mysteries going back to events of 2012 and 2013 forward. It also fits with this testimony by the former Rector Dragas found here:


    Note the frequent use of the word “secret” when describing the nature of these events.

    Do you agree on how these fact patterns seemingly fall into place, Izzo?

  10. Reed, it troubles me for a several reasons. I’m not that comfortable that money that was accumulated from non-profit hospital operations, which I believe is the likely source of most of these funds (and hence the “operations” designation Dragas might have seen) can get renamed and packaged and used for other purposes outside of healthcare at the administration and the board’s discretion. The Memorial to Enslaved Laborers at UVA is a good cause, no doubt, but I do not think that it is an appropriate use of funds that likely largely came from patient fees at a non-profit hospital. That money should have been used, in my view, to lower healthcare costs, improve community health, or remained in hospital reserves to buffer it against inevitable downturns like the medical center is now experiencing. That was its original purpose. As it is, the hospital seems to have insufficient reserves and is furloughing hundreds of staff, which increases the load on unemployment insurance and may have other healthcare delivery implications down the road.

    I wonder what Dragas and other board members actually knew. Did the administration give an accounting of where funds originated? Did anyone on the board ask specifically where the funds originated? Who actually knew other than finance staff? Did the President know? (I suspect was something similar — monetize the hospital system to benefit research — was done at the University of Michigan.)

    Dragas was concerned that 1) these funds were previously labeled as operating funds for the board review so they did not 2) discuss using the funds to improve affordability.

    My concerns, again, are a bit different. I think non-profit hospital operating funds should not be used this way. (I think the non-profit status of hospitals is being abused in a number of ways.) I think the administration should have been forthcoming about how the SIF was funded (actual percentages rather than a footnote on a slide saying one source of funds was hospital operations). The board should have asked these questions. Money doesn’t appear from nowhere.

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