Q&A: The Impact of the State Budget Cuts on the University of Virginia

October 15, 2008 -- Last Friday, President Casteen wrote to all members of the University community to update them on the impact of state budget cuts.

A day earlier, the state reduced its funding of the University by $10.6 million for the remainder of the current fiscal year. These recent cuts are on top of reductions of more than $9 million last year that continued into this year.

This week, President Casteen said he wanted to remind employees that the University places a high priority on protecting the jobs of our faculty and staff during tough times, and that no layoffs will be part of budget cuts. Other high priorities that will be protected include commitments to: meeting 100 percent of financial need of our students under AccessUVa; ensuring the safety and security of the community; protecting the class offerings available to students; and preserving the excellence of care we provide to patients in the Medical Center.

Ed Howell, vice president and CEO of the Medical Center, also sent an e-mail to all Medical Center employees on Friday explaining the impact of budget cuts on them. The full text of Mr. Howell’s message is included below.

Following are questions from University employees about the budget cuts, with responses from University administrators. We will continue to add Q&A's as we receive new questions. Send questions to: uva.today@virginia.edu



Q: What percentage of University’s budget comes from state funds?

A: The state contribution to the University’s overall budget is 8.2 percent. If you pull the Medical Center out of the equation, the state contributes 13.6 percent to the annual academic budget.


Q: Are there any plans to tap the University's endowment to help cope with current economic downturn?

A: The University regularly uses its endowment to support University operations. Roughly 70 percent of the University’s endowment, however, is restricted to the purposes set by donors. For example, some endowment payouts can be used only for specific scholarships, programs or professorships. Earlier this year, the Board of Visitors increased the payout from the endowment to 5 percent for the current fiscal year, which will help schools and departments in a time of state cutbacks.


Q: What about salary increases? Is there any guarantee that anyone will get raises in July?

A: When the state announced budget cuts last week it also deferred until at least July 2009 the 2 percent salary increases that many of our faculty and staff were scheduled to receive in November. We will not know whether this salary increase will go into effect in July until after the General Assembly concludes its next session and after the governor’s budget for 2009-2010 has been approved.

If the raise is implemented, it will apply to classified staff as well as University staff.


Q: Can you give some specifics of where cuts will be made and describe how cuts will hurt the University, our students and the public?

A: Overall, the University is looking closely at administrative cuts, holding vacant positions open and deferring maintenance on buildings. Individual schools and units will decide where best they can take cuts – while at the same time minimizing the impact on essential academic operations.

Holding vacant positions open means that existing University employees will be faced with doing more. We depend on our excellent faculty and staff to help us get through tough times and they have never let us down.


Q: What are some of the new health care benefits?

Susan Carkeek, vice president and chief human resources officer, recently reported to the BOV that there would be no cost increases in the University’s low premium program. Monthly costs will remain at $12 for a single, $47 for employee plus child, $54 for employee plus spouse, $116 for family and $80 for double state. There will, however, be increases in the high-premium plan.

In the coming year new benefits also will include coverage for acupuncture, pain management and dental implants. In the area of wellness benefits, Weight Watchers and smoking cessation programs will now be included.

(Note: To learn more visit the Human Resources Web site at http://www.hrs.virginia.edu/ and plan to attend the Employee Resource Fair on Nov. 13 from 9 a.m. to 2 p.m. in Newcomb Hall Ballroom.)


Q: Will the $2,000 a year education benefit for employees take a hit?

A: The educational benefit will not be reduced. It will remain for all employees at $2,000 a year.


Q: Will hourly wageworkers be put in a vulnerable position?

A: Wageworkers are subject to the budgets in individual departments. It is possible that a department will have to reduce hours of a wageworker in order to address required budget cuts.


Q: Any plans for early retirement incentives to help reduce staffing levels?

A: There are no plans for early retirement incentives at this time.


Q: What will be the impact on tuition and financial aid in terms of both AccessUVa grants and student loans?

A: We will continue to meet 100 percent of the financial need of all our students under the AccessUVa program. The state did not cut its financial aid contribution to higher education.


Q: In view of the financial stress currently experienced by everyone in the country, why not freeze tuitions until the economic situation improves?

A: The University uses tuition revenue and state funds for the basic needs of the institution – expenses such as utilities, benefits, maintenance and security for buildings, for example. Costs for these basics are rising for the University just as they are for households. With a decrease in state general funds, we will need to rely on increases in tuition to meet unavoidable increases in these basic costs. If we were to freeze tuition, we would need to make even deeper cuts in the overall budget to make ends meet. Tuition also provides some of the funding for need-based financial aid; demand for financial aid can be expected to increase as well in the current economic climate.


Q: In the past, the belief that U.Va. should become a private school has surfaced due to the lack of state funding. With this year's cuts, has this become a point of discussion?

A: No. The University intends to remain a state institution with a public mandate to serve the citizens of the Commonwealth, despite increased reliance on private philanthropy and reduced reliance on state funding. The higher education restructuring legislation of 2005 granted all public institutions of higher education in the state greater financial and administrative autonomy. This allows us to more effectively and efficiently manage day-to-day operations.

The University has, in fact, realized numerous cost savings and revenue enhancement (from investment of balances) from this new partnership with the state, especially in the area of construction, financial management and procurement.

The University also has received financial incentives for meeting state performance objectives under restructuring.


Q: Why is the University spending money to renovate Lawn and Range rooms?

A: The Academical Village is both a World Heritage site and a National Landmark. It is central not only to the history of the University, but also to the history of architecture and education in the United States and around the world.

The work on the East Range is part of a larger program of renovations, which began with the Lawn Rooms 10 years ago. The work is more than cosmetic. For example, over the summer we discovered that numerous joists had lost their bearing capacity and needed to be reinforced. All of these actions – from structural repair to recreation of significant features – are part of the University’s institutional obligation as the steward of this historic site.

This work continues to be supported through private philanthropy from gifts by individuals who are committed to preserving the University’s history.


Q: Why are we spending money on South Lawn project?

A: This project was conceived to address much needed space for the College of Arts and Sciences, the core of the University’s undergraduate academic life. The first phase of the South Lawn Project, which began construction in 2007, will add more than 100,000 square feet of academic space and will be the home of the departments of history, politics and religious studies.

The College Foundation, an independent organization created by Arts & Sciences alumni to manage philanthropic gifts in support of the school and its programs, has so far raised $60 million in cash and pledges toward the $61.2 million in private support required for the project’s total cost of $105 million.


Q: What is the overall impact on building projects?

A: As far as those projects funded by the state bond bill, we have received no indication from the Governor that those projects will be held up.

The short answer is: No impact on projects scheduled to start in the near future and projects currently under construction will be completed on schedule.


Q: Will top administrators be asked to take a salary cut?

A: Top administrators will take neither increases nor cuts.


Q: Will Al Groh, U.Va. head football coach, be asked to take a cut in his salary?

A: Coach Groh will be paid in accordance with his contract.


Q: What will be the impact of this financial crisis on Medical Center employees?

A: Here is the full text of the letter from Ed Howell to Medical Center employees on Friday, Oct. 10.


To Medical Center Employees:
In the last day, you may have seen news accounts about the state budget shortfall and impending layoffs and salary freezes for state employees. Like most of us, I am sure you also have concerns about the current financial situation unfolding in our nation and the world. I want you to know that despite all of the turbulence, your Medical Center remains on solid financial footing and we are not planning lay offs, implementing hiring freezes, or halting planned salary increases due to the Commonwealth’s budget shortfall.

It is true that the Commonwealth is experiencing a significant budget shortfall and actions at the state level are necessary. However, because we do not receive state funding (other than reimbursement for care covered by Medicaid), we are not directly affected by state budget shortfalls, hiring freezes, or layoffs.

As we have reiterated throughout the Employee Engagement process, we recognize that pay is an important issue, and that a strong, stable work environment is vital in supporting the work that you do every day to provide outstanding care for our patients. I want you to know that Senior Leadership is strongly committed to remaining performance-driven and market-based. We have budgeted for and will distribute performance increases as scheduled in January 2009.

We all need to be vigilant in assessing the unfolding financial picture and I pledge to keep you apprised of any anticipated impact on our organization. In the meantime, we all need to do our part by watching supply costs and by maximizing throughput so that we can serve all the patients who seek our care.

I would ask that you be sensitive to our colleagues in the University, the School of Medicine, and throughout the community as we weather this difficult time together.

Thank you again for all you do for the Medical Center.

Sincerely,
R. Edward Howell
Vice President and Chief Executive Officer
University of Virginia Medical Center

Media Contact