Written for Bacon’s Rebellion by James A. Bacon

Responding to a Youngkin administration request for Virginia’s public colleges and universities to curb tuition increases, the University of Virginia Board of Visitors voted this morning to reduce a scheduled 3.7% tuition hike next year to 3.0%.

As explained by Chief Operating Officer J.J. Davis, the shaving of $5.5 million from the budget represents a “good faith” effort to comply with the administration’s request. But in response to a question, she acknowledged that it only “partially” complied.

“This is very late in the budgetary cycle,” which closes June 30, said former Rector and the board’s financial guru James Murray. “We’re supposed to have a budget number in March. It’s very difficult in this point the year to say, ‘Go find millions of dollars.'” He described the partial rollback as “a concession to political reality.”

In other business, the Board also approved a $5.4 billion operating budget for Fiscal 2023-24, which begins July 1. The budget encompasses the academic divisions of the University of Virginia main campus, the campus in Wise, and the UVa Health System. The UVa main campus operating budget amounts to nearly $2.3 billion.

To an outside observer, the proceedings were remarkable — for the lack of oversight. Board input into what is arguably the most important vote of the year was inconsequential. Aside from praise for the UVa financial staff and a few requests for clarifications, board members had little to say. They offered no substantive questions. They provided zero pushback.

Davis made the argument — not an unreasonable one — that UVa is facing major financial pressures this year after two years of high inflation, the necessity of increasing salaries to offset the higher cost of living, and rebuilding financial reserves tapped to tide the university through the COVID crisis. At the top of mind was the need to achieve the goal of reaching “top 20” status in the American Association of Universities tally of top-pay for faculty. UVa, which aspires to the No. 20 spot, is only 27.

She assured board members that UVa met the challenge in part by “continually cutting costs.” Savings through contract renegotiations, consolidation of units, optimizing physical space, outsourcing gift processing, optimizing transit schedules, building efficiencies, and other measures amounted to $8 million, she said.

No one bothered to observe that the stated savings and efficiencies amount to about .0034% of the operating budget — about one thirtieth of one percent. No one asked what other efficiencies might be in the works. And in light of a factoid mentioned by Murray — that two-thirds of the academic division’s cost structure consisted of payroll expenses — no one asked what the university head count was or how it compares to previous years.

That information appeared in none of the university’s presentation materials. Indeed, the presentation materials did not even compare next year’s budget with this year’s.

For the edification of readers, the academic-division budget approved by the board in 2022 was $2,095 million. Next year’s budget is $2,265.7 million. That’s an 8.1% increase.

The vast bulk of the budget work is undertaken by the university’s financial staff. By the standards of the higher-ed system, UVa’s financial team is top-drawer. Paying close attention to various risk vulnerabilities, UVa has assiduously maintained a AAA bond rating — a recent financial raise recorded the lowest interest rate ever charged an institution of higher education. However, it appears that the board has largely relinquished the “power of the purse” to set university priorities.

The main board input into university finances occurs in the Finance Committee, comprised of ten of the board’s 17 voting members. The committee is chaired by Robert M. Blue (CEO of Dominion Energy) and vice-chaired by Murray, a veteran board member who, to my observation, has the keenest understanding of university finances of any currently serving board member. The minutes of the December and March meetings indicate that no substantive discussion of the 2023-24 budget occurred at that time. In other words, today’s action was the only crack the board had at influencing the budget, and it responded with a resounding thump of the rubber stamp.

Two board members did offer pro forma observations about the need to restrain tuition increases and preserve affordability for the middle class. If board members want to help the middle class, though, they’re going to have to dig a lot deeper, ask much tougher questions, and reclaim authority from the university administration. For now, there is zero accountability.