In the coming year, the University will again absorb reductions in financial support from the Commonwealth of Virginia. Last spring's recession has left many states in trouble this year—an effect of last spring's recession. Sad to say, Virginia's trouble is deeper. Because it went into recession while increasing spending (albeit not for education or transportation, which are the hardest-hit functions just now), Virginia expects prolonged difficulty pulling out of the dive and restoring stability.

Faculty and staff here know from prior experience about state cuts, which generally come about once each decade. Until the late 1990's, when the state spent down its surpluses rather than restoring the 1990-92 cuts in the public schools, the colleges, and transportation, state cuts were generally restored as prosperity returned after a year or two. This time, however, most people know (and Governor Warner warns us) that the hole is deeper than ever and the process of digging out will take a long, long time.

The state's accumulated deficit by the end of 2004 is estimated at $3.8+ billion. The Governor has acknowledged that there are now very few places left to cut. He and other elected officials are taking the steps required by law when a deficit looms. In the current fiscal year, we have given back $4.8 million. In 2002-2003, the cut will be $25 million or 16 percent of our General Fund appropriation, and in 2003-4, we will lose more than $33 million or nearly 21 percent. So the total cut is $58 million for the biennium beginning July 1, 2002.

Students will replace about half of this lost money through a tuition increase--for undergraduates, 9 percent (in-state) and 8.5 percent (out-of state). Even so, prices here will remain a bargain by comparison to most of our competitors. In-state students will actually pay less than in 1993-94. Nevertheless, these increases are significant. Despite the Board's actions to increase financial aid, students and their families will feel them. Reductions in base academic budgets (4.35 percent) and administrative budgets (4.6 percent) will cover the rest of the loss.

Virginia's deteriorating position among the states in its tax spending per in-state student is perhaps the most troubling issue here. In 2001-02, our state tax appropriation per student totaled $13,000. Comparable figures were $24,000 at UNC-Chapel Hill, $22,000 at UC-Berkeley, and $17,000 at UM-Ann Arbor. While some of those states are reducing support for their universities, none is cutting as deeply as Virginia is. So these disparities will grow, even as demands for increased services grow. We already deliver a first-class education at bargain costs, as US News and others announce to the world each year. Yet, these new cuts call for even greater efficiencies.

I am asked these days whether conditions today are worse than in 1990-1992. The answer is, no. We are better organized to deal with adversity, we have greater capacity to manage functions that the General Assembly has specifically passed over to us, and we receive far more support now from alumni and friends than we used to. Yet the effects of Governor Wilder's budget cuts remain and are becoming amplified simply because the state never restored what it took away back then.

What about the future? Both political parties began working during the General Assembly's 2001 Session on more stable financing when once this crisis passes. This will take time. Locally, we are working toward even greater financial self-sufficiency. Our auxiliary enterprises are doing well and contributing dollars that flow to the academic budget. The foundations have generally held their ground despite losses in the markets. Bob Sweeney, alumni involved in the VA 2020 and Envision programs, and the Board of Visitors are hard at work on planning for the major capital campaign that will begin in about 2004. No one resource solves the problem, but each step forward is another step away from over-dependence on an unreliable fund source.

One bright spot in Richmond's financial picture: Capital projects will probably benefit this year from a $1.2 billion General Obligation Bond (GOB) package and long-range financing plan developed by the legislature and Governor Warner together. For most of its history, Virginia has counted on year-end surpluses to pay for most tax-supported buildings. (The new plan calls for the state to make long-term commitments, and to finance its share of them by way of surpluses when surpluses exist and bond issues when surpluses do not exist.)

Of the 122 projects in the GOB for all public colleges, most involve modernization of existing facilities. Deferred maintenance has turned into a massive problem for the state. The remaining projects are buildings--for classrooms, laboratories, libraries, and similar academic functions. We have nine projects in the GOB package. Some are infrastructure – electrical and HVAC systems and the like. Others are new construction or renovation of buildings for teaching and research, including space for the science programs proposed in the VA 2020 plans. The College's South Lawn project will be a major beneficiary.

Needless to say, I hope that Virginians vote for the GOB, and I hope you will help. By itself, the GOB will not solve all of Virginia's problems. Yet it is a promising step toward the rational, systematic state budgeting that used to occur. It goes a long way toward giving at least one part of the state's budget a solid policy basis. If you agree with me, this would be a great time to let your elected representatives know that we appreciate their efforts to develop rational ways to control and commit state tax spending.