State of the University Address, 2001

President John T. Casteen III
April 18, 2001

Let me, if I may, work through the annual report on the State of the University. Where it's possible, I will be referring to documents that I hope you received coming in: a pamphlet and then a set of pages containing information (General Fund Appropriation Per Student of Peer Institutions | Chart of Average Faculty Salaries | Campaign for U.Va. (Charts) | Campaign Totals for Schools and ProgramsFact Brochure). The tabular material, we think, has some durable value. But we also think that there may be some value in dealing with ideas somewhat more than simply with the tabular report that is part of an event such as this. So I will refer to the material that is in these things without reading the entire text.

I had a conversation the other night with one of our colleagues about the notion that the entire landscape in which we work has changed in recent times. The ways in which the University is financed, its relationship to the state that sponsors it, its relationship to its own future as we attempt to devise different ways of planning and committing resources, and so on. All of those variables make this a very different institution from what it was ten or fifteen years ago. My friend reminded me that in the fifth chapter of Portrait of the Artist as a Young Man, James Joyce satirized William Butler Yeats' cultural antiquarianism, his desire for things to be the way he imagined they used to be, by having Yeats take a walk out in the west of Ireland and meet an old man. And Joyce set this section up, as you may recall, as a series of news items. This is the news item about William Butler Yeats' walk to the west: "14 April: John Alphonsus Mulrennan [that's the figure Joyce uses as his type of Yeats] has just returned from the west of Ireland. (European and Asiatic papers please copy.) He told us he met an old man there in a mountain cabin. Old man had red eyes and short pipe. Old man spoke Irish. Mulrennan spoke Irish. Then old man and Mulrennan spoke English. Mulrennan spoke to him about universe and stars. Old man sat, listened, smoked, spat. Then said, Ah, there must be terrible queer creatures at the latter end of the world."

Forgive my attempt to read the man's speech as he should have said it, but I've thought about that because mine is really not a speech about imponderables or about unreachables. It's not a speech about queer creatures at the latter end of the world. It's a speech about something else. It's a speech about the development of a genuinely self-sufficient model of public excellence in American higher education, an attempt to become, in our time and on into the next era, the foremost university of our kind in the world. Goals that lie beyond us at this moment, but goals that all of us know are attainable by a combination of rigorous determination and collaborative effort, of constant exercises in self-definition, and perpetual engagement with the external world by which our work can be supported, will be assessed, measured, compared, and in the end validated or rejected.

We have in the last decade lived through a revolution whose end differs so starkly from its beginning that simply to read the 1989 report of the Virginia State Commission on the University of the 21st Century, the report called "The Case for Change," is to digress toward a different and somehow more innocent time in which the common good justified investing in universities capable of sustaining human capacity, arguments made with an odd absence of frequency in the course of the last decade.

Ours has been a strange time for many reasons, not least among them the continuing paradox of Virginia's distinguished past as a leader in providing for public higher education and its less distinguished and sometimes quixotic present, one perhaps best symbolized today by the unprecedented budget stalemate that our elected leaders are, even as we meet, attempting once more to resolve.

We have completed a decade that began with a period in which most states, including Virginia (Virginia to the most dramatic degree of all), cut tax support for their universities, but then (by 1996) returned to the table with the largest increases ever reported in state support for the universities. These increases were driven in almost every case by political determination to prepare the people for new economies not yet imagined but inevitably built on human intellectual capacity and not on traditional industrial or agricultural or service occupations. Such a motive was not articulated in Virginia in the last decade, despite a string of fiscal years in which Virginia's governors built their budgets on the largest General Fund surpluses ever recorded in the state-surplus reported to be at $1.6 billion at the end of the 1998 fiscal year-but without investing as others did in human issues of building universities. Virginia faces now growing evidence that its economy is headed downward as state revenues decline. Plant closures come once again to Tidewater and to south Richmond and to the southside and indeed, closer at hand, to Greene County and even to some parts of the region that carries the state's economy in our time, Northern Virginia, with jobs once again disappearing in ways that predict further declines in state revenues from both corporate and personal taxes. At the same time, the state faces growing costs to pay for health care, the inevitable need for increased public support, at least for job training but (if history is any guide) also for medical care, for unemployment payments, for the other expenses that arise as people lose their traditional occupations.

You have one handout that shows the effects of this failure to support higher education in the form of a comparison between General Fund, that is tax dollar per in-state student, support for our enrolled students and those of other states. I won't read the list but you will find that above our entry are all of our major peer institutions in the public sector and that in the top tier of public higher education, below our entry there is no one. It is, I think, sufficient to note the difference between the appropriation of $11,149 for a Virginia student here and the appropriation at number 6, the University of North Carolina at $23,089 per in-state North Carolina student at Chapel Hill. I think that illustrates the point that those documents begin to make. [See also Chart of Average Faculty Salaries at AAU Institutions.]

How do we put this in context? We learned in 1991 and 1992 and 1993 to think in new ways about how to sustain a great university in hard times. The planning and disciplines that we adopted in that time became the conceptual base for the Capital Campaign just concluded and for the ongoing efforts to build an adequate support-base for the College, the McIntire School, and a half dozen other University entities whose capacity to raise money was first demonstrated in the course of this Campaign, entities that at this time face remarkably bright futures if one looks simply at the base of state support as the gauge of their capacities.

In similar terms, the Virginia 2020 planning exercises of 1998 and 1999 and 2000, which were efforts to understand and describe strategies appropriate to advancing to the top ranks among all universities, American and other, private and public, are now teaching us the harder discipline of planning for the University's next revolution. This will come after the e-economy has come and gone the way of the tulip frenzy in Holland and the nation has learned once more that there is no magical alternative to investing in human capital and in university research - points made, in ways that now seem especially poignant, by NASDAQ head Alfred Berkeley when he spoke to our graduates at last year's Final Exercises.

This leads us, I think, to look more inward than outward as we begin to gauge how we go about achieving the University's purposes. That's not bad. We learned in the early '90s that looking inward we can find a great deal. But it also tells us that we have to be very careful in the way that we develop our plans for the next period. I want to start this year by saluting leaders who have carried the University through the planning, through the Campaign, through the growth in academic stature, and through the managerial reforms that we have effected since 1990 in dealing with the reduced level of state support. I am going to focus on those who are leaving office this year, but I want to underscore the reality that the faculty and administrators committed to this effort are really the heroes of the period that brings us to this point.

Dean Scott of Law and Dean Leffler of the College and Graduate School are in the process this spring of leaving positions in which their work has been distinguished and will be durable. Ernest Ern has retired from both the faculty and the position of Senior Vice President in which he began amassing our first endowment ever for scholarship funds to support the dependent children of faculty members in post-secondary education. Peter Low and Robert Cantrell are retiring this year from their duties as provosts, both leaving behind ample evidence of their capacities, their dedication, and their commitment to excellence in faculty and student work. In an altogether different but critical area of University life, Michael Sheffield retires this spring as our Chief of Police. He leaves distinctive marks and we will miss Mike for his good sense, his gentle temperament, and his profound commitment to students' well-being and indeed to the well-being of the entire community.

At the same time, new structures are evolving as faculty and administrators and a remarkably diligent, and, at this point, focused Board of Visitors rethink the structures by which academic and clinical work is sustained. The new structure of the hospital and clinics, the recent appointment of Yoke San Reynolds as vice president for finance, the realignment of the academic schools under a single provost, and the creation of a new position combining the functions of the dean of medicine and the vice president for health affairs, designated as our chief medical officer -- these and other changes reflect the values and aspirations that are being built into the University as we complete this exercise in planning the long-range future.

Your handouts cover a number of essential topics. [ See Fact Brochure.] I want to acknowledge before discussing finance briefly that in the course of the last day [Executive Vice President and Chief Operating Officer] Leonard Sandridge received word that Fitch, one of the rating agencies that examines financial capacity, has upgraded the University's paper to AAA. In light of the extraordinary reduction in state support and the way in which we have had to refinance the institution, that document and the others that have preceded it, as others have reexamined the financial paper, I think say a great deal about why we can, at this point, look forward to the future with optimism and not with a sense of panic. We all owe Leonard and his colleagues a debt of gratitude for that work.

Our total revenues (including the College at Wise) support a budget of about $1.3 billion, and 13.7 percent of that comes from the state of Virginia. The revenues for the Academic Division, which is where virtually all of us work, came to some $752.6 million, of that 22.1 percent from state appropriations. You will see that the endowment at this point totals, putting together that held by the Board and that held by the related foundations, about $2.3 billion. I am told that the number may well be above $2.5 billion, but the market is so unstable at this point that there is some variation from day to day.

I want to call your attention to something else that is important, and that is the returns achieved on the endowment. As you know from newspaper articles, the one-year return was something like 43.7 percent; the five-year annualized return, about 21.4 percent. This reflects an extraordinary financial strategy pursued by the Board with great success. I think there were altogether five large endowments that achieved results of this kind in the time that we are talking about. Treasurer Alice Handy and the Board members who put together the University of Virginia Investment Management Company, which now oversees the endowment, have done the ultimate service for all of us.

Sponsored research over the course of ten years has grown by $102 million to a total of $209 million this year and philanthropic support this year totaled $195 million, more or less. And I should say that, counterintuitively enough, receipts for the current year suggest that we are just about equaling that number, and by one line of reasoning we may be surpassing that number.

The final total reported in the handouts for the Capital Campaign is in the neighborhood of $1.43 billion. There may be some minor adjustments as additional commitments turn up, but my guess is that that is about the figure that we will see. I guess also that we will probably not do very much to adjust that number as the adjustments come. I think we sort of want to live with the record and build on that rather than constantly adjusting the past numbers.

There are some more sober ways to look at the budget and I want to remind you of a couple. One, to be fair with history, is that in the course of the Campaign the total sum raised for unrestricted funds is only about $50 million out of about $1.4 billion. To put that in different ways (all of the money is restricted by donors, of course), you can't use this sum to cover the decrease in state spending that is currently pending as a result of the impasse in Richmond. You can't use it to deal with the shortcomings in regard to capital construction. That sum becomes the core sum to support faculty salaries, to support scholarship aid to students, aid to graduate students, and other central expenditures that we know we have to meet to be a great institution. So for all the good done, we should not sit back and say, "That does it." The message from Richmond that I hear is very different from inability to resolve the budget. It's a message about the integrity of public purpose, and it says that we have a job to do to sustain this institution that is quite different from what well-intended leaders may or may not be able to accomplish in Richmond. I don't attack them for the impasse. I do feel deep concern about their capacity to resolve it in the right way at this time.

You will find in the handouts also, Campaign results for the various schools and programs. This is an attempt to create a public record also and will be in the final version of these remarks.

Seventy-one percent of the total went to our schools. You will see also that the school results were almost universally well above the anticipated results at the beginning of the Campaign. If you add in the library's share of the Capital Campaign, and the Health System library's, the percentage that went to academic purposes comes to 75 percent. I don't have the percentage calculated but the number received for athletics is $117 or $118 million. I think you can calculate a percentage from that, if that is of interest, and then you will see that other smaller objects received lesser sums. We did not fold into the numbers such things as the Miller Center and the fact that part of the historic preservation budget is actually for education.

Notice also that the College at Wise, which began this Campaign with a sense that it would be a long stretch to raise as much as $2.5 or $3 million, has actually raised about $21 million in the course of the Campaign. I think the extraordinary success there, in a way, is equivalent to what's been done here, and we owe them a vote of gratitude just as we owe those who have done the work here a vote of gratitude.

I need to talk about how we deal with the problem of the state's irresolution about this budget but also with a longer-term problem. It has been now over ten years since the state had a formal capital outlay budget; the old method of financing capital has simply collapsed. The budget changes were made in the fall of 1990. We have looked very carefully at how Yale, Berkeley, and Michigan have financed their announced programs to upgrade laboratories dramatically. Those of you in the sciences will know that each of those institutions has announced the intention to spend about $2 billion on science laboratories over the next ten years. What we have learned is that the mechanism used in each case is a combination of early fund raising (Yale actually announced for how long the fund raising would extend-I think the period was three years) to be followed by the calculation of the necessary funds to begin construction, and then a type of financing in which a set-aside within the tuition cash flow account is used to amortize the annual cost of the bonds that are sold to build those facilities. That is a very, very different approach to financing from most of what we have done, except in the new Darden School, and except looking at clinical revenues to a secondary extent in the replacement hospital, and except with regard to financing from fee money and other kinds of income in the new stadium. On the other hand, it is an extremely commonplace way to sustain expenditure levels in areas of this kind. The problem that we face, if we cannot persuade the state and the Board of Visitors and financial markets to accept this approach for us, is simply that we do not have the ten years that would be implied by falling behind by $2 billion and the commitments to advance laboratory structures that are called for either in the Virginia 2020 plans or on the other side in the expenditure plans already announced by our peer institutions. I am struck by the fact that, while in Virginia we had good success in 1992 with what now seems a fairly modest general obligation bond bill, the overwhelming support in North Carolina of a $3.1 billion project intended primarily to enhance the capacities of the state's universities says that in the very recent months a similar population has found that kind of expenditure to be a top public priority. So I am optimistic that either we will see a major bond initiative from the state, or that we will gain the capacity to do business as business is done in our sector, or both. And for that reason, we do not face the prospect of failure with regard to the science initiatives. Instead, I think what we face is the need to figure out as we did a decade ago, another way to do what has to be done.

I think that it becomes necessary also to gauge the need for future philanthropic giving. If you look at the expenditures of our peer institutions, that is not a great gauge for this institution because of the fact that we are the most efficient by a painfully long margin of any of the nation's top universities. We are ranked something like 21st in the overall list and something like 66th in resources to expend per student at this point. But if you look at the efficiencies that we have in comparison to others, you can begin to get a sense of what the spread might be between the necessary increased expenditure and the available funds. If, for example, you assume that what we would do is become self-sufficient at the level of expenditure of Chapel Hill or Michigan or Berkeley, and do so using only private giving as the financing source, we would face the need to increase this past year's annual giving or annual cash receipts level of $195 million to a total of $420 million in the years 2004-05. So we anticipate using our efficiency in part as a way to cut that cost, but we recognize also that there are tremendous needs. You may be interested to note that the General Assembly has calculated the unmet cost of simply meeting the public's share of supporting Virginia's colleges each year. By the General Assembly's calculations the figure this year is $200 million putting together all the colleges. The University of Virginia's share of that number is $17.5 million. So when we begin to be interested in where the problems actually start, a good place to start is by going to the sustaining partner and realizing the extent to which the absence of those funds creates a kind of crisis on every campus in Virginia every day.

So the question becomes, how do we put together strategies to proceed, to succeed if we take seriously the University's founder's sense of what the University ought to do and indeed his formulations of what education ought to do in a free society? If you will, let me talk through a strategy that we will be discussing very carefully over the next several months, but let me begin by simply explaining what we are thinking.

The first step is to use existing means that we learned to master in the course of this Capital Campaign, plus the enhanced state appropriations that have to flow as the state begins to meet its unmet obligations in order to finance continuous improvements (and that is a term I have taken from management literature; and I mean it in the sense in which it is used by management consultants) in areas of traditional strengths. That is to say, we will apply this to individual schools and programs, task our deans and our department heads to use allocations from our central funds and their growing capacity to raise endowment and annual income, task development officers and the General Assembly with sustaining these core fields.

Second, with regard to new initiatives, those that are necessary to move the University forward, we will use central budgeting to deal with the cross-cutting of University-wide initiatives, initiatives like those described in the 2020 Science report or the 2020 report on international programs. Use creative financing with identified revenue streams, such as the one I just described that is in use at Berkeley, at Yale, at Michigan. And use special state support built on future governors' and legislators' own priorities, priorities that will inevitably have to do with developing human capital if indeed the state is headed into another recession. And use their priorities as a way of financing strategic improvements in areas of emphasis like the sciences, the arts, and others for which we have developed and published (and that have stood the test of public scrutiny) plans that are built such as those now on the table from the 2020 commissions on academic improvement. The point, I think, is to use planning as the basis for each of these approaches to funding and to build the funding approach on a demonstration of both efficiency and relevance, usefulness, and inevitability as we talk to those who provide the financing.

In all of this, I am assuming we can make commitments that will let us continue to build our capacity to make choices, to plan, and to make commitments. The deans and the new provost will take the lead as the plans progress from long range, as they are now, to strategic. I should make the distinction because I notice that we still jumble the terms.

The long-range plan is a specification of a vision. What are the characteristics of a great university? Where do we differ from those characteristics? How are we getting those characteristics? The strategic plan is bound in terms of time -- the five-year plan to accomplish construction on the sciences. It is bound in terms of resources --dollars available to build the studio art building within the time frame that was set. And the strategic plan is constrained by the ways in which we can make dollars do more than one thing at a time. That's the concept of the strategic plan that will build the fine arts buildings in the arts precinct area.

As the strategic plans take shape (and a good example of how they take shape is the plan for the arts precinct that Mr. Low and Clo Phillips and others have developed), as those take shape we begin to pay special attention to recommendations that cut across the lines between schools and departments and disciplines. Likewise, the new provost will need to develop a broad vision of improvement across the University, and strategies to meet the goals we set as a community, and a way to allocate resources in order to support the deans' work.

All this calls for some new structures that we will be putting together in the fall as the new provost begins to take control of this process. First, an entity to be called the University Planning Council, chaired by the provost and reporting to me and in certain situations to the Board of Visitors, made up of members chosen from within the University and also outside the University, with faculty and others who have the capacity to contribute to this type of planning and working together. The first task is to establish the guidelines for building school-based strategic plans on the longer range plans that have developed over time, beginning with the long-range academic plan that we published in 1991. All of our schools and all of our centers will be required, as we develop this process, to develop, to arbitrate within their faculties, and then to publish strategic plans for the development of their academic programs, for their school budgets, for their plans and accomplishments in fund raising, and for joint ventures. My assumption is that the provost will find it necessary to stagger the due dates for these plans, so that if there is a three-year plan for, say, the School of Engineering and Applied Science and the School of Education, one is due in the year that ends in 2, one is due in the year that ends in 3, and so on. Under this scheme, about every third year all of our faculty should be engaged in working with the deans on formulation of plans for the following three-year cycle. Frankly, what we are trying to do is find a way to build capacity in which we will be able to plan and finance futures without waiting endlessly for the state's budget impasses to be resolved.

Second, we plan to recreate the Deans' Council (some of you may recall it as the old Deans' Conference) charged to report to the provost and to work with the provost and Chief Operating Officer, Mr. Sandridge, on both longer range and multidisciplinary academic planning, including schemes to develop planning capacity within schools, to foster collaborative planning between and among schools, and to sustain the overall commitment to planning as the basis for both fund raising and appeals for state support. The first task will be linking the "sustaining excellence" part of the 2020 initiative to the four academic commission proposals in order to give us a fleshed-out and full proposal for the University's academic directions.

Finally, a standing Virginia 2020 commission that, at the moment, we are calling tentatively the Ways and Means Commission, to function as a resource generator for both the Virginia 2020 (and eventually other) projects or initiatives that are of interest to the University and to monitor the financing and the ongoing excellence of the University's programs. The simplest way to explain the functions of this entity is simply to make reference to the fact that in major private universities there is always a little board, sometimes as small as the corporation that owns and runs Harvard, and then there is a big board, a big Board of Visitors or Overseers or others who actually provide the base for fund raising for academic development and support throughout the institution. The concept here is that this would be the big Board. Our governing board is the Board of Visitors. That is a matter of law, but this new entity is committed specifically to seeing that our fund-raising purposes and accomplishments are tightly tied to the academic vision that we try to build with these strategic plans that we develop. My assumption about this is that the membership would include distinguished alumni and others from throughout this country and abroad and a handful of inside members, certainly including the provost and the chief operating officer. I expect that I would sit with this group. And my guess is that over time this group is going to work out some strategic alliances with faculty. So we are going to ask the Faculty Senate to take a role in putting together this organization. The best analogy I can give you in recent times is the Capital Campaign Executive Committee. So those of you who have had dealings with that committee will have some sense as to how this entity will begin to work to everybody's benefit.

Next we are going to see to it that budgeting moves from a one-year process to a multi-year model built on the strategic plans. The model will include both revenue and expenditure budgets, and it will address both public and private revenues available for the deans to operate the schools. The point there is simply to see to it that we are in fact accountable for achieving results we say we will achieve, that the strategic plans are tied to reality in the most basic of ways -- that is the reality that is involved in financing the activities that we undertake.

I need to report very quickly on some recent Virginia 2020 initiatives because many of them have not received public notice. You may be interested to know that Ed Ayers is working now on the funding for an entity to be called the Center for American Studies. This is under the International Programs Commission. Its goal is to make the University of Virginia the worldwide center for American Studies and to bring to this institution scholars from abroad to work with American scholars on issues of common interest having to do with the development, the role, the culture of the United States as we function on the world stage. The initial programs would be summer conferences with foreign scholars who study America --reviewing the state of the field, exploring its limits and its possibilities, and so on.

I am moving through a list of examples here. There is not much continuity, but I thought it was important to try to demonstrate the ways in which faculty have responded to the call for effective proposals. The second is based primarily in the School of Medicine. This is the new Center for Global Health. This is Dr. Dick Guerrant's proposal. Dr. Guerrant is the head of the Division of Geographic and International Medicine, and the purpose of this entity is to study diseases that are common to countries in which poverty is a major driver of disease. The initiative builds on existing strength. It competes with Harvard, Johns Hopkins, and others that have public health schools, but it also competes with programs in geographic medicine that exist at Stanford, Cornell, and Duke. The approach is somewhat different in that it is interdisciplinary. It recognizes that health care in poor countries frequently involves not only medical training, but also political, economic, and ethical choices. The Center's funding will provide scholarships and training for international researchers who, with continuing support from the Center, will be able to return to their home countries in order to tackle the diseases that continue to afflict the vast majority of the world's population. [Senior Vice President for Development and Public Affairs] Bob Sweeney has already assembled a fund-raising team charged with acquiring private support for this initiative. I am told that the early approaches are very positive.

Also under the International Commission, I need to report to you that Bill Quandt is at this point examining sites outside Europe, specifically in Asia, the Middle East, and Africa, with the goal of enlarging current programs and forming new associations. He is also moving to establish a number of new ventures. The model that we are using as a kind of base-model is that of the successful program established fourteen years ago by Spanish faculty in Valencia. I want to mention some of the things that Bill has been working on in recent days. One is a multi-disciplinary academic center to be based in Lyons. The purpose is to serve a number of different academic fields and to build on a model in which both classroom work and focused research in which students collaborate with faculty is the model of instruction.

He is working on a similar model in St. Petersburg, also to be called an Academic Center, that is intended to strengthen affiliations with the university in St. Petersburg, but also with the universities of Moscow and Helsinki, at Tallinn, at Tartu, and at Riga. The purpose there is to accommodate both long- and short-term work with research programs and to see to it that undergraduate and graduate students have essentially equal opportunities to work with our faculty and with indigenous faculty on those sites. There is already in place, as you may know, a contract for a new exchange program between the School of Architecture and the Brandenburg University of Technology-Cotbus in East Germany. Bill is working with two African universities to put together a set of educational exchanges that are intended to address environmental and social issues in sub-Saharan Africa. The emphasis in these programs will be modern technology, especially as it facilitates academic exchange. Lectures are to be simultaneously linked by satellite to classrooms there and here. Speakers from all three universities will work on environmental issues in Africa and will be able to interact "live" and simultaneously with students from all three countries.

Then there are a number of international consortia having to do with distance learning. Mr. Low has been exploring three that seem to be especially interesting. I should say that in some sense all three have invited us to join. These are different conceptually from anything that we have ever done. They are primarily entities intended to offer virtual degrees on a global basis. Some are for profit; others are not for profit. But I want to report to you, as I think I previously reported to the Senate, that three we believe show particular promise -- the Universitas 21 program, which is an outgrowth of the British Commonwealth University's distance learning collaboration and is at this point a global entity; the entity that began in New York and New England called Unext; and Fathom, which has been most closely associated in the press with Columbia University but is, in fact, a much larger enterprise.

All of these, I think, push us toward figuring out how to sustain basic academic values while doing business in a field that is increasingly a business, a field in which most vendors are there for profit. The challenges are not insurmountable, and we are not alone in trying to deal with them. Our partners in several of these entities are likely to be Ivy League institutions already committed. In other cases, Michigan and Chapel Hill and universities abroad that have distinguished academic traditions, have committed already and are asking us to join them in the work done by these groups.

The Public Service Commission, you may recall, looked very carefully at how to link the University more closely to its regional community. I wanted to report to you that the partnership initiative called the Connected Community, with PVCC and the local governments, is alive and well. It's a public/private partnership that is led by the Virginia Piedmont Technology Council, of which we are a key member. Its first accomplishment was the opening of the Connected Community Technology Center, which is located between our Grounds and the Fifeville neighborhood just east and south of Main Street. It opened last fall. Current tenants include Computers4Kids and the Biotechnology Training Center, the latter a partnership involving UVA, PVCC, and the City of Charlottesville. It is to be the future home, incidentally, of our robotics community outreach program, which is now being developed to serve middle and high school students. Robin Felder, who is a professor of pathology and director of the Medical Automation Research Center, working with community partners, has put together a plan to use this robotics outreach program as a way of teaching applied principles of engineering, science, and mathematics to students in the local schools. We think that the project has tremendous demonstration value for schools elsewhere.

There is also Outreach Virginia, to which many of you have contributed. This is a searchable database, maintained and updated regularly by people who work in the Office of the Vice President for Research and Public Service, Gene Block. It provides consistent information on, at this point, about 300 programs, which are drawing altogether about 800 to 900 hits per month. It includes contact information, information on fees, information on availability of programs away from Charlottesville as well as here, and links directly to the University center or department that is responsible for whatever is offered on the particular site. The programs are offered for children and teachers. They include electronic resources, part-time educational opportunities, health care screenings, seminars, and increasingly they reach out beyond the community of education and the clientele they try to reach.

There are a number of initiatives to report under the science and technology rubric, but I want to acknowledge initially that the fundamental issue we have to address is how to finance major new laboratory facilities. It is difficult to say that we have a strategy when we do not have a statutory capacity to do what everyone else does and does successfully, but I do want to report some extraordinary interim steps.

Many of you know William Battle, a retired member of the Board of Visitors, chair of the Capital Campaign that we conducted in the early '80s. Bill has worked with others who were involved with the Adirondack Biomedical Research Institute in Lake Placid, N.Y., to create an entity called The Ivy Foundation. The foundation receives 30 percent of the profits from a local biotech firm called Argonex. The foundation has established a Biomedical Sciences Enhancement Fund to support innovative research initiatives intended to carry out the 2020 Science and Technology priorities. The funds available will depend each year on the success of the portfolio held by the Foundation obviously, but the anticipation is that in the first year the distribution will be between $250,000 and $300,000.

The Center for Nanoscopic Materials Design, which has already received a $5 million grant from the National Science Foundation, was created in September 2000 to define broad new directions in nanoscale design. I should remark that one of the pending proposals in the governor's budget bill is for the state to provide the entire cost of a nanoscale design building for the School of Engineering and Applied Science. We have found substantial support for that in the legislature, so if they are able to resolve their issues, then we believe that structure may move either through a general fund appropriation or through inclusion in one of the bond proposals that the state is looking at.

There has been a great deal of work in the field of biodifferentiation since we determined that that would be a University-wide project. But one that I want to mention particularly is that scholars, physicians, physiologists, and others working in the University's cancer centers have begun now to receive grant support that has to do with the ways that healthy cells transform themselves into the many varieties of cancer. So the fundamental issue that is posed in biodifferentiation takes a concrete shape in work that is now underway in the medical faculty.

And I wanted to speak about an extraordinary proposal that Mel Leffler and others have been developing for a creation that is currently being called, I think, using language from the Science and Technology Task Force, the Digital Academical Village. There is a great deal to be done with the proposal, but the gifts from Halsey Minor (who provided both construction money and start-up operational funds), from Bert Ellis (who many of you met last year at the e-Summit), and others add up in the end to a way to create an environment in which technology becomes ubiquitous and fully integrated into teaching, research, and student life. The purpose is to foster development of novel applications of digital technology in the arts, the humanities, the social sciences, and so on, and to find ways to make the extraordinary work already done, through the Electronic Text Centers and other centers associated with the library, to make that a hallmark of the way the University offers its programs in the humanities and similar fields.

We see this as bridge program of the kind recommended by the 2020 Science and Technology Commission. It's intended to promote collaboration among the College, the School of Engineering, the School of Education, the libraries, and other areas as we find new ways to develop and apply technologies. In the end, the purpose is to generate solutions and new ideas together rather than simply use off-the-shelf applications. We believe that the kinds of work that can be done here are best predicted by what's already been done in centers such as the E-Text Center.

There was a gift from Greg Olsen named after Heinz and Doris Wilsdorf, whom many of you know, intended to support at the level of $15 million, construction of a new materials science building and programs related to it with a particular focus on nanoscale technologies and also in Computation and Information Science and Engineering (CISE). The gift funds a new building. It funds extraordinary commitments to equipment. It shows promise of beginning to heal some of the deficits that we addressed by way of the commission's work.

I should mention finally in this regard that in the first-round distribution of the estate of the late Paul Mellon, the University received a grant of some $20 million to support research having to do with prostate cancer. The estate has acknowledged that there will be additional residual distributions. Needless to say, scientists who work on prostate cancer are very eager to see additional support flow, and we are working with them now on appropriate contacts that it may be possible to make.

I think there has been substantial discussion of the proposal for a Fine Arts Precinct. I want to report that in addition to the public dollars that are currently tied up in the Richmond process, we have seen $14 million and a bit more in commitments from private sources for the Arts Precinct, and that includes some gifts designated for planning. So even without the state money we can move ahead with the planning part of it. The Studio Art Building is now in the middle stages of design, so that by the time the money is freed up in Richmond it will be ready to go. Feasibility studies have been completed for the Art Museum, for the Music Building, for the Performing Arts Center, for the Arts Library, for additions to the Drama and Architecture buildings, and for restoration of Fayerweather Hall as a new home for art history. I should say too that Leonard Sandridge is hard at work on the development of a new strategy for parking garages. We believe that with discussion going on about the prospect of a new arena at some point in the not too distant future, we may well be able to finance and justify adequate parking for both the arts facilities and the proposed expansion in the athletic side of things and have one dollar serve two purposes in the process. Except on the rare occasions when a performance sponsored by the music department conflicts with a performance sponsored by the Dave Matthews Band, we don't expect major conflict over access to the parking. I should say too that I think Leonard and I feel that we owe the music department an apology about the scheduling of that event. On the other hand, I should tell you that it feels kind of like the mouse sleeping next to the elephant, and I don't know quite how to deal with that sort of competing demand for access to University facilities.

The Campaign generated altogether about $45 million, about three times the original goal, for the arts. I think that's promising. Many of the gifts come in the form of gifts in kind. I think that's challenging, because gifts in kind, such as the gift of the Kluge-Ruhe Collection of Aboriginal Art or gifts of artwork to the museum, carry with them the implied expense in the future of adequate preservation, curatorial services, interpretation, and so on. On the other hand, as I think many of us realize, the extraordinary special collections of the Alderman Library were built in large measure on accepting collections with no clue as to where to house them. The development that has followed because of those early decisions to commit to the collection seems to me an adequate justification for that.

We are working on other projects that I need to mention very quickly. We have begun now to place the older buildings occupied by the College of Arts and Sciences in the appropriate categories in the six-year capital program required by the state, specifically New Cabell Hall, Rouss Hall, Cocke Hall, Cobb Hall are now on the list. We actually have had support from the governor for the complete construction cost of Cocke Hall, and if his version of the budget prevails, we believe that that building will come intact with the planning money attached to the construction money. The first phase of Cabell is in the top priority category in the six-year plan that [Vice President for Management and Budget] Colette Sheehy transmitted to Richmond on Monday of this week.

I thought it might be useful to you to have a sense of the scale of construction programs on the Grounds. I really don't know to what to compare the number because I can't find any normative information on construction activity. But you'll see, if you can find the right reference, that in 1996 the total expended was $33.6 million, in '97, $28.5 million, in '98, $22.1 million, in '99, $46.1 million, in the year 2000, $65.3 million. As you know, we have all together about $132.5 million in private money tied up in the impasse in Richmond. At the point when the legislature and the governor move on the projects funded by those dollars, they will release the dollars because there is no expense to the state involved in expending the monies. The technical reason for the tie-up, by the way, is not anybody's malevolence; it's that the law requires the legislature and the governor to approve the expenditure of private money for buildings, and the impasse they have is not over the merit of the projects. It's simply a procedural matter having to do with how they get the budget put together and passed.

A few remarks about the Health System. I want to urge faculty who are not on the faculties in medicine or nursing to undertake a kind of self-education venture, because with the reintegration of the two provostships, it is going to be increasingly important that we understand issues on both sides of Hospital Drive. One of the motives for separating the two positions in the early '90s was the conviction that we really had to deal with unmet needs in the Medical Center at a time when it appeared that we simply could not address the needs through the old structure. We think that's been done. I think one of Dr. Cantrell's great accomplishments was enabling the deans on that side of Hospital Drive to address those issues.

But to talk about the system in a more general way: for the fourth consecutive year, the hospital was described as one of the nation's top 100 hospitals. It's important to recognize that the hospital deals with sicker patients and shorter hospital stays than do virtually all other hospitals. Our problem is not to increase the number of beds. Rather, it's to increase the capacity for the new kinds of technologies that make the kind of work done in that hospital more effective. So it's a special kind of problem. It's not the usual problem of needing to build. It's a problem of constantly needing to improve the quality of what we do.

Leonard Sandridge and others have adopted a management model called Six Sigma, which some of you may know from descriptions of the engineering and management at the General Electric company. Our adaptation of it is focused on practitioner error, and it's designed to provide a larger number of positive outcomes for patients. We think that it's a very positive application from one sector into another, and the early results make it a very good step in a process that began years ago with focus on these issues. Dr. Detmer and Dr. Cantrell have both been very much involved in the project.

We are nearing completion on MR5. MR6 is planned at this point and partially funded. There are two versions of the state budget that provide the necessary additional money. I think at this point Dr.Carey, who has had primary responsibility for the fund raising, would tell you that we know where the money will come from eventually. We do feel a sense of urgency about it because, especially in medicine, it is demonstrable that space is the chief restriction on improvement and enhancement of the research program. So we believe that that is something on which we want to move in the next year or so. MR5, by the way, is pretty spectacular. If you have not walked over to the Nursing School recently, walk down the road and look off to your left. You will get a sense of the way in which that side of the Medical Center is becoming a very important part of the larger strategy for research in the University, not to mention being the largest part of the strategy. It has been a banner year for medical research -- in cancer, diabetes, Alzheimer's disease, Parkinson's, Crohn's disease, breast and prostate cancers, mentioning only a few notable advances made by our faculty, recognized in the press, building blocks for the future of that kind of research within the University.

I would like for you to think with me for a few minutes about financial aid issues. There is no particular sequence to this item, but I know that as a faculty we are concerned about financial aid and I would like to tell you some strategies that we are putting into place. As you may know, we do not receive substantial amounts of support for financial aid from the state. We finance it largely internally. We do it in various ways, but I need to report to you that a couple of recent developments are letting us move to a different way of packaging student financial aid in the fall. This has to do primarily with undergraduate students and is the result of a combination of the scholarship gifts made to the Capital Campaign and a 30 percent increase in endowment distribution, a one-time increase intended to increase the base. I should tell you that we were dealing there with the effects of the windfall increases from the management that the Board brought to the endowment. The two effects allow us, for the first time in my knowledge since the mid '80s, to say that beginning with first-year students admitted this coming fall, we will be able to offer 100 percent of need and that we will be able over the course of the next two or three years to extend the same packaging to upperclass students. Finally, we are in a position at this point to begin replacing more loans with grants than we were in the past. So I think the combination of those factors has the effect of opening the University up to families whose children were historically persuaded to go elsewhere because of the cost of attendance. That's especially an issue for the blue-collar families and often the minority families in Virginia. So I think that's a major step in the right direction.

As you know also, we are proposing to the Board of Visitors that the Board create for the first time a program of health insurance subsidy for graduate students. The proposal costs about $1.8 million coming from unrestricted endowment distributions. This also is partly a consequence of the way in which Alice and Leonard were able to readjust the distribution base with a 30 percent increase. The funds themselves over time support primarily faculty salary increases (you'll recall that about six or seven years ago we adjusted funding for that) and student scholarships. In any event, the proposal to the Board is that they allow a distribution of $900 annually to teaching and research assistants who earn or have fellowships of $5,000 or more per year. That covers about 60 percent of the eligible graduate student population. The subsidy is key to the cost of the basic single student plan offered by QualChoice. Let me say that none of us sees this as the absolute and ultimate solution to what we all acknowledge is a major issue. It's an issue both with regard to individual students' economies and with regard to the competitive marketplace in which we seek to attract graduate students. We still have to put additional flesh on the bones. We don't fully understand all the issues that are being raised at this point in connection with the program. As you know, there is a substantial voice in the graduate student community for a program that would finance both spousal and dependents' health insurance, something that we are still studying. We don't know exactly what the cost might be or how we might finance that cost. But I think it is important to say that the issues with the Board are most likely to have to do with any financing, rather than with the merits of the program itself. I have not heard resistance or objections on the face of the issue. I was not able to stop and visit with the protesters out front. I will tell you that when they asked me last week if I would sign their petition, I did so and say simply that I believe they have raised an issue that it's time to address. So with the Board's concurrence, we will do so on the model that I just described to you, with the possibility of dealing with other issues as they arise in the future.

I have a few remarks to make about diversity within the student body and the faculty and staff. I think all of us understand that the concept of an institution that is and intends to be America's foremost public institution is tied very directly to its capacity to engage the broad cross-section of our people. We have become, in the course of the last 20 or so years, a far more diverse community -- in terms of who comes here, who studies here, who teaches here -- than we were in the past. But I think it's fair to say that we still have many pockets of the kind of homogeneity that simply doesn't look like we are building the America that we imagine. In particular, let me say that I intend this year to charge the new provost and to work with the new provost and the deans on attracting larger numbers of African Americans and women to the faculty, and especially to work in fields such as science and technology, where representation is simply too low to be defensible.

All of that leads to some closing observations, and I should say that those of you who sent notes suggesting topics for the speech will perhaps forgive me for plagiarizing your words, but I thought that the collaborative effort that went into the making of this year's report was an extraordinary thing. We didn't ask for the help so far as I know, but I received in one case an 18-page essay, a good essay, which I would like to publish as a separate piece, from a faculty member attempting to talk about the issues of how we finance the sciences and what we do about that.

The paradigm that I want to use to close these remarks is one that [Chief Planning Officer] Laurie Kelsh sent as a way of summarizing how we begin to develop this model of excellence in traditional fields and also in emerging fields as we move forward through the next five years. I am grateful to Laurie for this part. The model is simply this: if you envision the University in the year 2020, it has to be the following things:

It has to be, first of all, interdisciplinary. Boundaries between our disciplines, barriers to collaboration, whether they are physical, financial, organizational, or indeed philosophical, have to be broken down, and they have to be broken down in fundamental ways if the University is going to lead in an era of increasingly diffuse or altered distinctions among people and among its environments.

Second, this institution has to be entrepreneurial. I think it's fair to say that when we hit the wall financially in the fall of 1990, we were anything but entrepreneurial. If you want to see an entrepreneur in the year 2001, talk to Bob Sweeney, or talk to Leonard Sandridge, or talk to [Dean of the College] Mel Leffler. Bob Sweeney will tell you that we have become entrepreneurial in a way that has been extraordinarily healthy for the academic enterprise. Innovations in our programs are driven in part by competition. The competition has to do with ideas that are judged on their merits, and the competition is in part informed by failures. Indeed it may be that failing at a grand effort is every bit as important as succeeding sometimes. I don't think many people believed in those days in the early '90s, when we talked about whether we could raise $250 million and at least avoid closing a school or two, that we would stand and talk about $1.42 billion at this point. It happened because of the fact that Bob Sweeney and others brought to us this vision of an entrepreneurial way of developing the institution in which the academic core became the fundamental selling point.

Third, the institution has to be accountable. I think one of the hardest parts of the four commission reports that we did over the last couple of years was the realization that to measure ourselves against others is to begin by acknowledging certain weaknesses, and that the test of accountability is not the discovery that we aren't as good as somebody else at something, but instead the capacity to act and to do it decisively in time to address the issues. One of my reasons for including those remarks about faculty work already in progress on the commissions was simply to show ways in which people have already begun to act because of the realization that weaknesses imply opportunities.

Fourth, the institution has to be aspiring. We must always have a long-range vision in front of us. We intend to take our place among the top universities in the world. We are very close to that at this point, but we are not there. We intend to attract, to develop, to sustain world-class faculty and students and in the process to take them away from other institutions of equal or similar strength. We intend to design and construct facilities and landscapes to reflect the highest and best use of resources. We intend this as a place to be in the daily lives of those who are here -- the academical village that its founder imagined.

Next we intend it to be open. In this institution of all institutions, barriers that are financial or physical or based on gender, ethnicity, or race do not fit. The University has an obligation to sustain full participation in its programs. That our Grounds will be filled with persons of diverse talents, opinions, and cultures, living and learning together -- that's the vision of the village.

Next it has to be self-sufficient and self-governing. We learned self-sufficiency with a vengeance in the middle part of the '90s. We need to be capable of developing a course and willing to sustain that course. We need to use change as a means of reinvigorating the life of the mind. We need to possess the capacity to generate resources sufficient to weather difficult times without compromising our standards. And we need to see to it that access to those resources is fairly and equitably distributed. We need to see to it that plans and expressed public purposes justify the expenditures that we make.

I think it's fair to say that one characteristic of this institution in the year 2020, if we succeed, is that it will be highly ranked. I don't know in the end whether the popular rankings mean much of anything. I will tell you that I have found their methodology extremely useful as it has become somewhat better in the last two or three years. But the goal is to see to it that in the year 2020 the University is and remains the top public institution in the country and that it ranks within the top 10 or 15 overall in the country. The goal is not to say foolishly that we intend to displace Cal Tech or we intend to displace Harvard. It is to say that we intend to be in the neighborhood, in a competitive position, sharing faculty and student resources, building the body of knowledge and building the kind of nation that we are intended to build. We will cultivate, within the confines of the larger institution, areas of unparalleled eminence. That is, we intend to dominate in fields that are selected as being our key fields. We intend to remain relatively small by comparison to other major institutions and residential because we believe that in the life of students on these Grounds lies part of the essential value of education here. And we will in the end, if we succeed, fulfill Jefferson's assertion that this institution would become the bulwark of the human mind in this hemisphere.

When all is said and done, and we've looked at the numbers and considered the progress and talked about the challenges and so on, the University's most important investment is not in its buildings, not in its history, or its Grounds, or its tradition, or its Darden School, or its Law School, or its stadium. The investment is in students and in faculty and in staff. The buildings are important. They help to define a culture, and we intend not to lose sight of the fact, as for about ten years the state has lost sight of the fact, that time acts on buildings just as it acts on each and every one of us, that there are constant and necessary investments in the facilities to sustain the human environment. What endures through all of this is the human spirit. The human spirit is the generative possibility of educated minds, and that ought to motivate all of the planning and all of the work that we do together.

There is a Chinese proverb that speaks to what we do. It goes: "If you are planning for one year, grow rice. If you are planning for twenty years, grow trees. If you are planning for centuries, grow people."

This planning effort, in which we have been engaged and that we now begin to wrap up, is called 2020. As you know that was an allusion both to vision and to a timeline, to a date. But there is more to it. The commitments which bind us together as a faculty, and most of us in this room are faculty, are commitments that for most of us extend across a lifetime. They define our lives. For those of you who are students, let me say that your experience here is likely to define your lives also. Some of you may leave after four years, or whatever the duration of your program, and go away. But let me tell you that if we do our job right, we will keep a piece of you here and you will take a piece of us with you. We commit ourselves to one another in this peculiar experiment. And I think the commitment made is that what has been done in the last decade is simply the foundation for what we will do in the next three or four decades, that the purpose is large and understanding the obstacles is serious, but the obstacles are simply not going to stop what we have begun. So the state of the University in this year 2001 is that it is not baffled by the queer things that lie off at the end of the world, but instead that it understands that its job is to grow people.

Thank you.