On Aug. 1, 2010, President John T. Casteen, III will step down from his place at the helm of this University. During the past 20 years, his administration has left its mark on almost every aspect of University life, from the buildings we enter every day to the diversity we see on Grounds. Casteen has overseen major improvements to academic programs and the reconstruction of the University's administrative structure. He helped to create AccessUVa, the expansion of the University's College at Wise and the Batten School of Leadership and Public Policy.
The undergraduate population has grown by almost 2,500 students since 1990, when Casteen became president. Total dollars awarded for undergraduate financial aid has grown from $17.2 million to more than $100 million for the 2008-09 academic year. Since 1990, the University has constructed 98 buildings, purchased 11 and completed major renovations or additions on 16.
Despite an extensive list of accomplishments, President Casteen's most significant contribution will likely be his bold vision for the financial future of public higher education. Indeed, the University's remarkable growth during the past two decades has occurred during a period of state budget cuts. State support comprised 29.9 percent of the academic division budget when Casteen became president in 1990, compared to its 10 percent of the academic budget today. As recently as Sept. 8, Virginia Gov. Timothy Kaine announced a reduction of another $19.3 million in state funding, bringing total state cuts to $40 million during the past three years.
With tremendous foresight, Casteen used the state's cutbacks as an opportunity to bargain for greater autonomy from state regulators. To relieve dependence on state financial support, he committed resources to growing the University's endowment. As the state's support continued to decline, this commitment paid off. The endowment grew from $488 million in 1990 to $2.5 billion as of June 30.\nEndowments, by definition, are funds given to an institution by a donor. The institution invests the funds to generate income for itself.
Every year, a portion of the University's endowment is spent on supporting its operations. Although endowments are typically thought of as a single account, they are comprised of many accounts established by donors who would like to restrict their contributions to certain areas of the University. For example, endowment accounts can be restricted to support a particular school, professorship or scholarship. Currently, 70 percent of U.Va.'s endowment has such restrictions, while the remaining thirty percent can be spent at the discretion of the Board of Visitors. Generally, at universities, the typical distribution rate is 4 to 6 percent of the endowment's market value. Recently the University's Board of Visitors approved a distribution rate of 5.5 percent for 2009, a .5 percent increase from percent last year. The ability of the Board of Visitors to increase the distribution rate gives the University a cushion against state budget cuts. Although the University will have to look for opportunities to reduce spending by roughly 3 percent this year, it has effectively avoided layoffs and suspension of major construction projects.
While large endowments were once reserved for elite private institutions, the University has been a trailblazer among public universities.
And why not? President Casteen has led two of the most ambitious fundraising campaigns in history. During the 1990s, the University launched a $750 million campaign. The two-year effort surpassed expectations, ultimately raising $1.5 billion. In 2004, the University launched another capital campaign with an astonishing target of $3 billion. President Casteen remarked, "This campaign was noteworthy from the beginning. When we announced our $3 billion goal, it was the most ambitious campaign in the country - public or private. No one would have thought twice if Harvard or Yale or Columbia had announced a $3 billion campaign, but I imagine that many were surprise to learn that U.Va. had set such a bold target."
The University announced Sept. 2 that it has reached the $2 billion mark in the campaign only eight weeks later than originally projected amid one of the worst economic downturns since the Great Depression. As Bob Sweeney, senior vice president for development and public affairs explained, "For an institution like U.Va. - without a long history of philanthropy - to have the endowment in the billions, is transformational."
Although the Casteen administration has clearly left its physical legacy on the Grounds and in the minds of more than 100,000 students, its most lasting legacy may be in the University's financial freedom. For individuals and institutions alike, financial freedom offers greater opportunities to act with creativity and leadership. Other higher education institutions - both public and private - will likely take notice.
Rahul's column runs biweekly Thursdays. He can be reached at r.gorawara@cavalierdaily.com.
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