Sandridge Tells Senate that University's Finances are Comparatively Healthy

November 24, 2008

November 25, 2008 — The University of Virginia is faring better than many others in the current economic downturn, Leonard W. Sandridge, U.Va.'s executive vice president and chief operating officer, told the Faculty Senate Thursday.

"I've never seen anything like it. It is far-reaching enough that has touched every consumer," Sandridge said at the meeting, held in the auditorium of the Mary and David Harrison Institute for American History, Language and Culture and the Albert and Shirley Small Special Collections Library.

Sandridge said his main areas of focus are the University's ability to pay its bills and issue debt, its dependence on the state budget and its investments.

There is adequate cash on hand for the University to pay its daily bills, Sandridge said, with about 80 percent of the University's cash reserve invested in treasury and agency securities, up from 20 percent in May. The University is carrying about 2 1/2  times its maximum expected daily cash needs.

Some of the University-related foundations are invested in less liquid funds, he noted, adding that the University is willing to work with foundations supporting schools or other University operations to resolve cash-flow issues.

Sandridge said the University is managing its debt well. Only 14.5 percent, or $107.3 million, of U.Va.'s debt is held at a variable rate; all of these debts are in the hands of investors, and the University remarkets, or re-underwrites, its existing debt load on a weekly basis. Sandridge said the University recently closed a deal with J.P. Morgan asset managers to handle the remarketing. He said U.Va. is only one of two public universities with a triple-A bond rating.

"Our triple-A bond rating really helps," Sandridge said. "People come to us looking for a safe investment."

Sandridge outlined the reduction in state support to date, which he said was not as bad as it could have been. While the University prepared for a 15 percent cut in the current fiscal year budget, it suffered only a 7 percent reduction earlier this fall. Still, the reduction sliced about $10.6 million from the budget — on top of $9.2 million cut last year.

He noted that the state has postponed the 2 percent pay increases for faculty and staff originally slated for this month until at least July. However, the state released on Nov. 10 about $109 million in the Higher Education Equipment Trust Fund that was frozen for two months; the University's share is $10 million. There have been no cuts affecting financial aid, safety and security and internal audit, he said.

Sandridge said he anticipates additional budget cuts in the next fiscal year, and he has advised department heads to carefully examine each vacant position before deciding whether to hire.

"We are far from out of the woods yet," he warned. "The state budget will get more cuts, because the state has a $3 billion shortfall in revenues."

Despite the cuts and revenue problems, Sandridge said the University should continue to invest in areas where it can move ahead and make only carefully targeted budget cuts.

On the investment front, Sandridge said the University's endowment had lost about 18 percent of its value, from $5.1 billion at the end of June to $4.2 billion at the end of October. He noted that the Standard and Poor's 500 Index, which measures the performance of 500 widely held common stocks, was down 24 percent over the same period.

The University of Virginia Investment Management Company has $100 million in cash, $250 million in bonds and around $2 billion invested in funds with liquid securities, so the University is not suffering a liquidity crisis, he said.

"These are the times when we remind ourselves we are long-term investors," Sandridge said, predicting that it will take the economy a long time to bounce back.

In other business:

• University President John T. Casteen III outlined for the senate the plans of an international consortium of university and government leaders organized jointly by U.Va. and by the St. George's House Trust at Windsor Castle for the purposes of improving access to higher education for low-income but high-achieving students, creating digital archives and building additional programs in Africa.

Casteen said Higher Education for Development, which works closely with the United States Agency for International Development and the nation's six presidential higher education associations to support higher education in development issues worldwide, is offering 20 awards of $50,000 each to faculty to foster relationships with African institutions.

Casteen pledged matching money to any faculty member who secures one of the HED awards.

• Casteen also updated the senate on the University's $3 billion capital campaign, saying about $1.8 billion had been raised so far, and that the campaign was close to maintaining its timeline.

• Casteen discussed creating two new Thomas Jefferson Awards, one for teaching and one for research. The current Jefferson Award is supported by an endowment established in 1955 by the Robert Earll McConnell Foundation. The award, presented at Fall Convocation, goes to a member of the faculty who has exemplified in character, work, and influence the principles and ideals of Thomas Jefferson.

• Executive Vice President and Provost Dr. Arthur Garson Jr. said the searches for a dean at the Batten School of Leadership and Public Policy and for a new dean of admission are each down to two finalists. He hopes to announce the two new deans in January.

• Dorrie Fontaine, who recently became dean of the School of Nursing, updated the senate on her plans.

She said nursing students are looking at a strong job market, with a million-nurse shortage anticipated by 2016 and a shortage of 20,000 nurses in Virginia by 2020.

"Virginia is ranked 39th out of 50 for nurses per 100,000 people," she said, adding that she wants to "increase student capacity and increase faculty."

Fontaine said she wants to maintain a healthy work environment at the school, where students and faculty can grow and flourish. If the school respects the faculty, she said, that encourages students to feel valued, which encourages communication with faculty, respecting and supporting them. She also stressed the need for "balance in life."

She also plans to promote inter-professional education, teaching doctors and nurses together "to create a health care team for the 21st century." She said this would also include interdisciplinary work with the Law School, business majors and engineers.

Fontaine also stressed diversity, so nurses may better mirror the patient populations they serve, including bringing more men into nursing.

• Faculty Senate chairman Edmund Kitch outlined for the senators the different subcommittees and their agendas for this year.

He said a Task Force will examine intellectual property rights in University faculty scholarship and the terms of contracts between faculty and academic journals. The Task Force will make recommendations to the Senate in the spring. The Planning and Development Committee will continue to work on involving University faculty in planning and fundraising. The Faculty Recruitment, Retention and Welfare Committee will distribute copies of last year's faculty survey to the new deans and department chairs, and the Policy Committee will continue to review and make comments on new University policies.