In July, former Board of Visitors rector Helen Dragas wrote a Washington Post editorial which revealed that the University has $2.2 billion stashed away in a so-called “Strategic Investment Fund.”
The money is “20 percent more than the market value” of all of the University’s “200-year buildup of educational and general program buildings and facilities,” according to the editorial. The accumulated sum could also pay the tuition bills for 44,000 Virginia students. Meanwhile, since 2009, the board has voted to raise in-state tuition an average of 5.3 percent per year and out-of-state tuition by an average of 5.45 percent per year.
Dragas characterized the fund as a “slush fund,” a pejorative term for money allocated for dishonest uses.
The fund is projected to generate roughly $100 million a year for projects that faculty and advisory committees will vet and that are subject to approval from the BOV.
Reasons for the fund
University Deputy Spokesperson Matthew Charles said the fund created in February 2016 will finance future strategic investments that promote the highest levels of excellence in the University’s academic, research and healthcare missions while making educational opportunities more affordable and accessible.
“The fund exists for a different purpose and will not be used for normal ongoing operating costs,” Charles said in an email statement. “Proceeds from the fund will advance excellence and enhance the educational experience without passing along the costs of these investments in the form of tuition increases.”
Charles also said none of the money in the fund has been spent, and the board has yet to discuss how the funds will be used.
“With the board’s authorization, and in accordance with sound fiscal practice, the principal of the Strategic Investment Fund will continue to be held as reserve funds within the long term pool,” Charles said. “When the fund is used, investments of fund earnings will align with strategic priorities of the Academic Division’s Cornerstone Plan and the Medical Center Strategic Plan.”
Phoebe Willis, the University’s BOV student member and third-year Law student, said she thinks the fund is a forward-thinking solution by the BOV to ensure that the University maintains affordable excellence in the face of an overall historical decline in state support.
“The board is faced with the difficult task of balancing current student costs and the costs for future students,” Willis said in an email statement. “The push for strategic investment in the University today will help keep costs low for the students of tomorrow.”
Current Rector William Goodwin released an editorial in UVA Today defending the fund, saying the spirit behind the fund is in the best interest of future generations.
“So how did we get to a place where the University felt confident enough to pool resources for such a fund?” Goodwin wrote. “I can tell you it was not through hiding balances on the books or by having administrators who operated independently of our governing board.”
The fund was made possible only because of the sound stewardship at the University for more than 25 years, Goodwin said.
Graphic By Kriti Sehgal
Concerns about the fund
On August 12, the Freedom of Information Advisory Council issued a 5,000-word opinion in response to a letter sent by attorney Kevin Martingayle on Dragas’ behalf. The letter suggested the BOV may have violated public meetings law when it met during a closed session to discuss the fund.
Martingayle claimed the only personnel discussed during the closed meeting were two former employees who were “cited for having done a good job of accumulating and managing such a large sum of funds over time.”
In the letter, Martingayle also said correspondence between members prior to meeting indicated that the fund and spending plans were going to be topics of discussion during the closed session. Additionally, he accused the board of asking members to refrain from discussing the fund with legislators and the media.
The advisory council opinion primarily covered what the proper proceedings for a public board should look like and was solely based on the facts supplied by Martingayle. While the opinion does not come with a penalty, a finding against a public body could result in legal action being taken by a third party.
In addition to the FOIAC opinion, five state senators and six delegates sent a letter to President Teresa Sullivan and Goodwin requesting all existing information regarding the money in the strategic investment fund by August 12. This request was not a Freedom of Information Act request, but rather a legislative request in accordance with the Code of Virginia, which states that the board is at all times subject to the control of the General Assembly.
The letter expressed confusion over why the Senate’s questions regarding tuition hikes and excessive aid to out-of-state students went unanswered.
“We are also puzzled as to why … there were no public discussions about using the new ‘strategic funds’ to offset or hold the line on in-state student costs or immediately increase the number of in-state slots for Virginia students,” the letter said.
The University’s response
The University responded by saying that what has been characterized as “out-of-control tuition hikes and excessive aid to out-of-state students” is received and viewed differently by the public. The letter then referenced MONEY magazine’s July 2016 ranking of the University as a top-three Best Value College among the nation’s public universities.
“The University is not immune from pressures to increase tuition, nor is it insensitive to its obligation to minimize such increases when they are necessary,” the response read. “When tuition has been increased, the University has consistently and accurately reported that fact publicly. Respectfully, we do not see any disparity between the University’s press releases and tuition decisions.”
The response also addressed legislators’ concerns over the discussion which took place during the closed June session as well as accusations of discussion about the Strategic Investment Fund taking place before the meeting.
“In advance of the June board meeting, the board’s Secretary circulated a set of materials concerning the Strategic Investment Fund. This was done to ensure that the board members had easy access to background information about the Fund and to facilitate confidential discussion of personnel issues,” the response said. “The documents were not, however, the intended subject of discussion in the closed meeting. Moreover, none of these documents was confidential, and all have been publicly disclosed and are being included in our response.”
The response also recognized that some board members had asked questions about the fund that deviated from the designated personnel topic.
“It was entirely appropriate then, that once questions were asked which seemed to stray from the topic identified in the motion for closed session, the University Counsel called the deviation to the Rector’s attention,” the response read. “The Rector ended the discussion and moved on to another personnel matter without any Fund-related decisions being proposed, made or voted upon.”
The future of the fund
On Aug. 14 and 15, the BOV held a meeting and selected a committee to review how the fund was handled. The Strategic Investment Evaluation Committee, composed of five faculty members, will make recommendations to an advisory committee, which consists of the rector, vice rector, president, executive vice president and chief operating officer, executive vice president and provost, executive vice president for health affairs and two board-appointed representatives.
“The advisory committee will make recommendations to the full board, which will select and approve the investments to be made,” Charles said. “No funds can be spent without board approval.”
The Strategic Investment Fund will have its first legislative hearing on Aug. 26, when the joint subcommittee on the future of higher education is scheduled to meet.
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