Seeking to find answers to funding gaps and pending state budget cuts, the Board of Visitors Finance Committee met yesterday to discuss the University’s fiscal future in light of current economic conditions.
“There is a genuine problem in Virginia for higher education,” President John T. Casteen. III said, adding that the “combination of state support [and] in-state tuition leaves us at a loss.”
The University recently sent out a record number of appeals for additional financial support, Casteen added. So far, the University has received “gifts of every size imaginable,” including $4.7 million for unrestricted use in graduate schools and a new $3.1 million pledge from the Focused Ultrasound Surgery Foundation.
Casteen cautioned, though, that he does not anticipate the increased pace of giving seen toward the end of 2008 to continue at the same rate during the new year.
The Board, especially its Finance Committee, is currently re-evaluating financial plans for all levels and divisions of the University. This year, the Committee held its biannual update of the Major Capital Projects program.
The program will evaluate three possible scenarios for near-term proposed projects, explained Colette Sheehy, vice president for management and budget. These include a growth scenario, which includes all needed and desired projects; a standard scenario, which is a “reasonable representation of what might be expected to happen;” and a pessimistic scenario, the bleakest and most serious situation of the three. The University’s academic division, for example, is projected to secure $482,000 in the growth scenario, less than $400,000 in the standard scenario and $200,000 in the alternate scenario.
Sheehy suggested that the Board use sensitivity analysis during its retreat this summer to provide a “more realistic look at what is possible given current economic conditions.”
In addition to evaluating the University’s future funding scenarios, the Finance Committee also determined the amount of debt the University could incur in the future. The committee concluded that the University could amass up to $18 million in debt by the end of the year, said Yoke San Reynolds, vice president and chief financial officer.
“If the economy doesn’t turn around, we are going to be more disciplined in [looking at] what projects we can put debt into,” she said.
Reynolds, however, said she believes that the University’s debt situation is temporary, and “over the long haul, we’re fine.”
Chris Brightman, chief executive officer of the University of Virginia Management Company, presented about the University’s gains and losses during the fiscal year. Because the University’s endowment experienced a “truly remarkable and disturbing” market value loss in the long-term pool, he said the University should consider taking an even more conservative investment approach until the markets bounce back.
“Given the uncertainty and turmoil of the market [it would] not be appropriate to have as much market exposure and risk,” he said.
Moving forward, the University will have to carefully manage its assets and invest wisely, balancing a need to grow and improve with a need to remain financially secure and stable, presenters and Board members said.
2009 “could be the trickiest year in history of determining where we are,” Casteen said.
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