September 13, 2009 — The endowment smooths over the rough spots in financing the University of Virginia, providing a stable source of funding even during economic downturns and state budget cuts. Each year, a portion of the endowment is paid out to support U.Va.'s operating budget and programs designated by donors.
As it turned out this year, the University was somewhat inoculated – but not entirely. The recession shrank the long-term pool portion of the total endowment, from $3.2 billion in June 2008 to about $2.5 billion one year later.
The payout rate is determined by a formula that takes the previous year's per-share payout and adjusts it by an inflation factor – but only as long as the resulting payout falls between 4 percent and 6 percent of the endowment's market value.
This year – because of the smaller endowment pool – the formula would have resulted in a 6.6 percent payout. When that happens, it falls to the Board of Visitors to set the payout.
"We saved for a rainy day, and today that rainy day has come," Yoke San Reynolds, vice president and chief financial officer, told the Board of Visitors at its quarterly meeting last week,
On Thursday, Reynolds presented the board's Finance Committee with five options, including one recommended choice, a 5.5 percent payout. The payout rate has increased each year since 2006, from 3.7 percent to last year's 5 percent.
The board ultimately endorsed the recommended plan, which represents a payout of $137.5 million, or $220 per share.
Reynolds stressed that it will be the second-largest distribution in University history. The amount is smaller than last year's $163 million payout, or $253 per share, but an increase in the amount that deans and other unit heads had been advised to build into their budgets in April.
"The anomaly is that the fiscal year 2009 payout was unusually high," she said.
Board member Austin Ligon questioned why the administration did not endorse a 6 percent payout, the maximum that would normally be allowed under the board's spending policy.
Noting that the recession has been described as a once-in-50-years event, Ligon said, "If this is not the year you pay the maximum, when would you?"
Other board members, not convinced that the recession is over, said they feared that a maximum payout would leave little wiggle room next year, and Ligon joined the unanimous vote for the 5.5 percent rate.
New Buildings Advance
The board's Buildings & Grounds Committee on Friday advanced two high-profile projects: a new rehearsal hall and an expansion of the University Bookstore.
The board approved the schematic of the rehearsal hall in the Arts Grounds precinct. The $12.7-million project will be built across from Ruffin Hall, between Culbreth Lane and the railroad tracks.
After its first look at the project in the spring, the committee had asked for some revisions, and the design came back with additional windows and a new roof cornice. This time, board members approved the design with little comment.
The building will serve as the home of the University's marching band – with a large, naturally lit rehearsal space to accommodate 275 musicians – and also will be available to other musical ensembles. Six groups will be able to rehearse at once without disturbing one another, University Architect David J. Neuman said.
The project is supported by a gift from longtime University benefactor Hunter J. Smith.
The committee also got its first look at plans for the $10.6 million bookstore expansion.
The design calls for adding approximately 16,000 square feet to the western side of the existing retail space, atop what is now the open third level of the Central Parking Garage, fronting Emmet Street.
Due to building code changes since the original structure was built 15 years ago, additional structural reinforcements will be required, Neuman said.
The bookstore will remain open during construction, and the garage will be open for most of it, he said. The addition may consume six or seven parking spaces, but it is possible that restriping the parking facility to provide for compact-car-only spaces could lead to a net gain, he added.
Gymnasium Named for Fletcher
The gymnasium at the Aquatic and Fitness Center has been named the "Mark E. Fletcher Gymnasium" in memory of the University's longtime head of Intramural and Recreational Sports.
Fletcher – associate director of athletics and executive director of Intramural and Recreational Sports – died June 10 at the age of 57 after a morning jog.
"This is so bittersweet," said Robert D. Sweeney, senior vice president for development, in announcing the naming. He noted that Fletcher, a former college basketball player, was a frequent participant in lunchtime basketball games in the gym that now bears his name.
Gifts on the Rebound?
In his progress report on the Campaign for the University of Virginia, Sweeney said that giving seems to be rebounding in recent months.
The campaign brought in $248 million in gifts – not including future commitments – during the recession-plagued fiscal year that ended June 30, well behind the two previous years.
Things have been looking up since then. Sweeney noted that giving in July and August, two traditionally slow months, ran about 5 percent ahead of the previous year, bringing in around $29 million. The normal expectations for those months would be about $25 million, he said.
"All of philanthropy right now seems to be on a better trajectory," he said.
While the recession threw the campaign approximately eight weeks behind its timeline, Sweeney said he remains committed to reaching the $3 billion goal by the drive's scheduled end date, Dec. 31, 2011.
Gains in Student Body Diversity
The official University census is still a month away, but Greg Roberts, dean of admission, appeared Friday before the board's Special Committee on Diversity to tout the makeup of the incoming class.
Students from minority backgrounds make up nearly 35 percent of the first-year class, he reported, with gains across the spectrum of demographic classifications.
The 3,295-member entering class includes:
• 287 African-American students, 6 percent more than last year and 8.7 percent of the class.
• 440 Asian-American students, 18 percent more than last year and 13.3 percent of the class.
• 185 Hispanic students, 54 percent more than last year and 5.6 percent of the class.
• 207 international students, 10 percent more than last year and 6.3 percent of the class.
• 27 Native American students, up 280 percent from last year and 0.8 percent of the class.
• 2,049 white students, up 2 percent from last year and 65.3 percent of the class.
In addition, approximately 203 first-year students are categorized as being from low-income backgrounds.
Committee chairman Warren Thompson lauded Roberts' work in assembling the most diverse class in University history.
"I'm very encouraged," he said. "I commend you on your results this year, and I challenge you to continue."
• In reviewing the latest round of state budget cuts announced by Gov. Timothy M. Kaine on Sept. 8, Leonard W. Sandridge, executive vice president and chief operating officer, said schools and libraries will be asked to reduce their overall budgets by 2.5 percent, while administrative units would be asked to take a 3 percent reduction.
Sandridge said that the state's share of the overall University funding has dropped to 6 percent, and just 10 percent of the academic division budget.
The percentage of students qualifying for aid has increased from 23.8 percent in fall 2004 to 32.1 percent this fall. The total outlay has jumped from $39 million to $75 million in that span, and the share paid from University sources, unrestricted funds and state grants has increased from $22.5 million to more than $40 million.
"The acuity of need, the seriousness of need, is more than we have ever seen," said Casteen, who added that early response to his fundraising appeal has been "fairly good."