Cuts in state funds and decreases in the value of UVA’s endowment have led to some belt-tightening on Grounds during the current economic turmoil, but University officials say the situation will be weathered in the same manner as past downturns. “Public universities are subject to the same exaggerated up-cycles and down-cycles that have affected almost all public entities during the last half-century,” President John T. Casteen III wrote in a letter to alumni.
Gov. Timothy Kaine announced cuts in October and December—the first amounting to $10.6 million, the second $12.4 million—that the University would have to absorb as part of a larger effort to meet revenue shortfalls in Virginia. The total of the two cuts equals a reduction of 15 percent of the state’s $160 million allocation to UVA’s $2 billion budget.
Casteen says the cuts came as no surprise and will not affect the University’s essential functions.
“In bad times, we protect our core work of teaching, conducting research, providing best-practice care for patients and providing public service,” he says.
The state cuts meant that a 2 percent salary increase that was scheduled to go into effect on Nov. 25 was deferred. Casteen assured employees, however, that layoffs are not planned.
“Layoffs have never been a part of our strategies when faced with budget cuts,” he wrote in an e-mail to members of the University community. A Web site, virginia.edu/budgetimpact, has been set up to provide information about the effects of the cuts.
Leonard W. Sandridge, executive vice president and chief operating officer of the University, said UVA is doubling efforts to improve efficiency. “We are looking at the consolidation of units that have similar responsibilities. We are deferring our discretionary expenses, and we are managing [and reducing] our workforce through attrition.The loss in value of the University’s endowment coincides with the downturn in global equity markets. Managed by the University of Virginia Investment Management Co. (UVIMCO), the long-term pool decreased from $5.1 billion on June 30 to $3.9 billion on Dec. 31. That represents a 23.5 percent decrease, compared with a 29.5 percent decline in the S&P 500.
Sandridge said UVIMCO has sufficient liquid assets to cover its obligations and that UVA’s building program has not been curtailed.
“We benefit from a very diverse set of revenue sources that stabilizes our institution in times such as this,” Sandridge said in an open letter about the endowment.
Last June, University officials approved an increase in the annual distribution of the endowment from 4.5 to 5 percent. That action made $161 million available for operating expenses in the current fiscal year.
Sandridge says the University’s experience in previous downturns enables it to ensure long-term stability. “We have seen economic instability in the past, managed through it and emerged stronger,” he says.