The Finance Committee of the Board of Visitors met Friday morning and voted in favor of submitting budget amendment requests to the Virginia General Assembly seeking the allocation of an additional $75 million for the University’s forthcoming Institute of Biotechnology. The Committee met in-person at the Rotunda Boardroom at 8:30 a.m. with a live stream option for public viewing.
This $75 million is intended specifically for incentive packages to hire “high-performing” researchers that have a track-record of producing translational research. Translational research means it has a meaningful, direct application to humans. In January, the University submitted an amendment requesting financial support from the state’s General Assembly in order to establish the institute. In total, it will require a $500 million one-time investment — $350 million will go towards construction while the remaining $150 will be for recruiting new faculty researchers.
The Board additionally voted to authorize the transfer of land bequeathed by Shirley McIvor from the University to the University of Virginia Foundation. The foundation manages, maintains, leases and sells properties for the benefit of the University. It also voted to authorize the acceptance of the title from McIvor’s estate and sell the property if transfer to UVAF is not feasible. The property — a 1.83-acre vacant commercial lot in Lynchburg — has an appraisal value of $755,000 as of Aug. 2019.
Members of the Committee were updated on key legislation by Chief Operating Officer J.J. Davis, as well as provisions of interest to the University, the Medical Center and the College at Wise in the 2022-24 biennial budget that is being negotiated in the current session of the Virginia General Assembly.
Highlights of the presentation included a comparison of proposed increases in funding for the University in the budget under former Gov. Ralph Northam with the proposals as they currently stand in the House and Senate.
The House budget proposal provides a four percent salary increase each year and a one percent bonus on Dec. 1 each year for all state employees including classified staff, University staff, faculty, adjunct faculty and graduate assistants, effective June 10. The Senate’s proposal provides a five percent salary increase effective Jun. 10 each year as well as a $1,000 bonus on June 1 of 2022.
According to Davis, tuition is the “primary lever” through which the University would be able to pay these salary increases to faculty and staff, which could create complications for the Board, which has already increased tuition in recent years.
“The General Assembly gets the credit, and we pay the bill,” one Committee member said off-camera, noting that the cost of the raise for employees would still have to be covered by the University. Others, also off-camera, expressed support for the measure, especially given record-high inflation that can dilute wage gains.
Davis responded that it was a complicated matter, with many factors to consider once the final budget is passed.
“We’re also deeply sensitive that our workforce is our number one asset, so we obviously want to recruit and retain the best faculty and staff,” Davis said.
At the previous Finance Committee meeting in December, members approved increases in tuition and fees for the 2022-23 and 2023-24 academic years to 4.7 percent for 2022-23 and an additional 3.7 percent for 2023-24 for undergraduate tuition. This constitutes an increase of 8.4 percent over two years. These funds are supposed to go towards costs the University is facing with inflation, merit increases for faculty and staff, utilities and library collections and minimum wage and pay for front-line worker increases.
The current proposed House budget includes $21.1 million in one-time funds for unreimbursed expenses that the University took on during the COVID-19 pandemic. Davis presented a table showing that the pandemic’s financial impact on the University totaled $127.7 million through the end of fiscal year 2021.
Of that $127.7 million, $56.4 was covered by federal relief payments and $60.6 was financed by institutional funds—including “internal debt deferral, budget cut reserves, auxiliary and other reserves, financial mitigation strategies and one-time savings,” per the slide. The projected impact in fiscal year 2022 is estimated by the University to be $35.1 million.
It also provides $2.5 million in affordable access funding that is designated to support in-state undergraduate students, but is conditioned on the ability to limit tuition increase for in-state undergraduate students to no more than 3 percent in 2022-23 over that of the 2021-22 academic year.
Robert Durden, chief executive officer of University of Virginia Investment Management Company, gave the committee an overview of the current market environment and the asset allocation, performance and liquidity position of the Long Term Pool as of 2021. UVIMCO is a private company which provides investment management services to the Rector and the Board. The Long Term Pool is a group of investments that include the endowment and other long-term funds of the University and associated organizations.
“We do need to generate a required return, consisting of spending plus inflation plus fees,” Durden said. “That has historically been long-hand for an eight percent return [and] that’s still the case.” Durden reported that the company “largely” met its objectives.
Assets deposited in UVIMCO are held in the custody and control of UVIMCO on behalf of the University and Foundations within a long-term investment pool. UVIMCO’s primary objective is to maximize long-term inflation adjusted return commensurate with the risk tolerance of the University, according to its website.
The Committee was also briefed on the implementation of the Finance Strategic Transformation project by the Vice President for Finance Melody Bianchetto and Vice Provost for Planning Adam Daniel. The project first began in 2019 and seeks to “strategically evaluate and improve current finance processes, implement modern technology and improve the delivery of financial functions to the University community,” per meeting notes.
“This is going to transform our financial management capability,” Bianchetto said. “[We’re] going to really create a strong foundation of financial expertise, processes, systems so that we can provide better service—so that our faculty and staff can do their very best work.”
The Finance Committee will convene again during the next meeting of the Board of Visitors in June.