State of the University

February 9, 2010


This is the 20th State of the University report that I have delivered and of course it will be the last one that I deliver. These special circumstances make today's remarks a bit different from prior years.

I will be focusing on the University's current condition, including the financial challenges that we face as a result of the ongoing national recession, as well as challenges related to the Commonwealth of Virginia's budget problems, and also at some issues that have to do with long-term evolution of University programs and activities over these last 20 years.

What I cannot responsibly do is provide more than a sense of general consensus about the future because that obviously is Terry Sullivan's territory and I will have to stay away from that to the extent that I can.

Typically in this speech we discuss student and faculty awards; graduation rates; rankings; and so on. By and large those topics are covered in the 2010 Fact Book that you will have received on your way in. They're also available online.

We also publish two annual reports. They are online but they're also available in paper form and we'll be happy to provide a copy if you would like to have it. The two are bound as one volume— my report on academic developments in the course of the year. Mr. Sandridge's report on the University's financial condition appears in that document.

I'm told also that if you'd like to review prior annual reports, there are 17 years worth of them online at virginia.edu/president and I'm told they're fairly easy to open. Let's begin with the University's current condition.

Obviously our current condition is tied to the general welfare of the economy. We continue to feel effects of the economic downturn, as also do the families of our students and obviously the Commonwealth of Virginia. Let me start with a discussion of the reductions made by Virginia's governor and to be made by the current governor as a result of the downturn.

At the beginning of this academic year, we had absorbed 3 reductions. The governor makes these reductions at the end of a fiscal quarter because Virginia law requires the governor to maintain a budget that is in balance at the end of each fiscal quarter. So the reason we get these recurring reductions is simply the requirement that the governor maintain the balanced budget on a quarterly basis moving through the year.

The 3 cuts that we absorbed prior to this academic year came to a total of $32 million, or about 20% of the state's contribution to the University.

In October of 2009, Governor Kaine announced additional cuts amounting to another $19 million, or 15% of what remained.

The budget proposal that went to the General Assembly on December the 18th and is now under debate in the assembly's money committees revised both the FY2010 and the FY2011 reductions to $4.6 M, or 3.6% of what remains.

The revision has to do with the requirement in federal law, the ARRA legislation, that the state maintain its effort to support its institutions that also receive stimulus monies, and we receive stimulus monies therefore the state has had to go back and adjust the reductions. The law prohibits the states from reducing appropriations to state supported colleges and universities below the level of 2006 so there is a bit of recovery related to the fact that the state's had to back up and try to repair some of the damage.

Resolution of the final budget reductions for 2009-10 and for 2010-11 will begin to appear as the budget bill is considered by the General Assembly. Governor McDonnell is obviously at the end of the session. Or let's put it differently, if you lived in Virginia long enough to have seen these legislative sessions, when they went home without a budget, you recall that sometimes the governor cannot begin to implement the budget immediately after the session. But assuming that a budget bill has been adopted, at the moment I will speculate one will be, the Governor will respond to it and 30 days after the session ends the GA will reconvene to consider the Governor's proposed changes to bills and also his vetoes.

Amendments to the current budget, technically fiscal '10, become effective as soon as the governor signs them. They're created as though they're emergency legislation. The fiscal years beginning with '11 and '12, ending in '12, goes into effect on July 1, so there are two different rounds of budget actions that have to do first of all with amendments to this year's budget and then with the adoption of the biannual budget.

The maintenance-of-effort requirements in the federal stimulus bills have caused a number of revisions to the proposed cuts that apply to the colleges and universities.

Governor Kaine offset some of the most recent rounds of cuts with some of the ARRA funds: $5.6 million in FY10 and $21.9 million in FY11. However, and this leads to a significant point that does have to do with the future, it's important to remember always that the stimulus funds end at the end of FY2011. Therefore 2012 is the point when the real reconciliation of means and activities has to occur. To put it differently, no matter what happens, by about 2012 both we and the state will have to have in a sense completely different plans about how to maintain activities. 2012 is the year in which the real cost of the recession will hit everyone because of the disappearance of the stimulus money.

The combination of the reduced budget reduction and the increased ARRA funds have helped us for FY11. FY12, if the current calculations are right, we will see another 15% of the remaining state money taken out, that's $19.3 million, and the ARRA money, that I just described, will disappear. So you began to get a sense of the dimensions of the problem if you realize what the deadlines actually are.

Under the current version of the budget, the one that Governor Kaine committed, submitted, the total reduction in funding between FY11 and FY12 would be about $36.6 million. I realize that a lot of numbers to absorb in a short time in oral form. They are available in the text, I'll be happy to provide as much detail as you would like to have.

Furlough Day

There has been an ongoing discussion of the proposal to use furlough days for University employees as one way to meet the state's problems. Theoretically the state would recover the salary dollars that are not paid because of a furlough day. This is the same general strategy that's been the cause of so much chaos in California in recent weeks.

The budget proposal that Governor Kaine submitted shows all the savings that would theoretically result from that day. That is tax funds; it would recapture one day's worth of tuition, one day's worth of the fees paid by students, one day's worth of theoretical revenues in housing and dining, and one day's worth of the cost of operating the University hospital providing care to patients.

If the state stays with that strategy, the one type of money that it cannot take, we believe, is federal money from grants and contracts, but we will still be required to place on furlough and not pay for that day persons who are paid from those sources. And the money related to that one day will theoretically go back to the federal government.

To put it a little differently, the furlough scheme doesn't actually make a lot of sense and it does a great deal of damage. In our visits with legislators in Richmond, we have asked that they eliminate the furlough and simply tell us how much money they need from us and let us send them a check rather than doing the kind of internal damage that the furlough would do.

The Medical Center has calculated that a one-day furlough would theoretically produce about $906,000 that could be reverted to the state. However, above the normal cost of operation, above the $906,000 for the day, it would cost the hospital an additional $978,000 to pay premium wages, time and a half, and that sort of thing, to staff essential services for patient and obviously it is not feasible to give patients the furlough.

Now, I think everyone understands that furloughs and similar schemes are short-term solutions to a structural problem in the state's budget. The state needs to develop permanent strategies to resolve the budget imbalance. The ongoing cost to the state of paying to the localities the monies that were lost from the localities budgets by the car tax reductions of the mid '90s plus a partial payment of the state's mandatory obligation under federal law for Medicaid essentially cover the entire reduction that has been made over the years in support for the public colleges and universities. To put it differently, out of our budgets, "our" being the entire system, we have paid for the car tax reductions and we have also paid for what the state has done in increasing its Medicaid payments.

Diverse Revenue Sources

 

Now, we began as you know in 1990-91, an attempt to develop a more diverse set of revenue sources because that was one of the lessons we learned in the almost random reductions that occurred in 1990-91, very disruptive reductions. One of the things that we learned was that we were overly dependent, from one perspective, on a single source of revenue which is to say the tax appropriation from the state. The fund sources in the current University budget are far more diverse and we are not as deeply dependent on any one source as we were in the early '90s. The result is, as you know, that to this point, we are seeing positions left vacant when people retire or transfer out or leave us. We're seeing other fund reductions but we are not seeing the kind of almost symbolic but painful reductions we saw in the early '90s. No paper in copy machines and that sort of thing. We've been able to deal with the ongoing cost of maintaining a functional university. The fund sources in the approved FY10 budget are from tuition and fees and I won't go through the dollars but just try to give a sense of proportion. Our dependence on tuition will inevitably go up as we, first of all absorb the state reductions and second, use AccessUVa to offset the effect on students and their families of escalating tuition which is inevitably the solution to the problem because that's the source of revenue to support teaching and research in the absence of adequate state support. The state appropriation appears to be about 6.9% of the current year's budget. It's been a moving number. There was a mid-year reduction. It's in the range of five point something percent in reality at this point. It was in FY09, for comparison, 8.2% of our University budget. Patient revenues are the largest single source, 43.9%. That has gone up from 42.9% in FY09. If you look at the whole budget, the medical center accounts for about $1 billion of the $2.25 billion of the University's total expenditure.

Sponsored programs, which faculty members themselves create through grant applications and so on, amount to 13.3%. In FY09, at the end of the year they amounted to 13.6%. I'm not concerned about that disparity because grants do not come on a fiscal year basis. They come throughout the year and I suspect that by the end of the year we will see first of all, a measurable impact of the stimulus funds and research, they're not in the current numbers. And we have a new indirect overhead rate, which I should acknowledge is in part a result of Yoke San Reynolds' superb work in justifying the rate that will add more funds to the research fund. Auxiliary enterprises produce about 7.1% and gifts and endowment income about 9.4%. Speculation as to what might happen in 2012, among other things produces fairly serious possibility that gift and endowment income will be double the proportion of state revenue in the budget. So there is a looming and quite serious issue.

Endowment

UVIMCO, in its long-term pool, which is what we call loosely the endowment, had a total return in 2009 of 19%. If you do as I have come to do, read your TIAA-CREF or related statements, I doubt that you see 19% in your return for the year. That's an extraordinary return. The managed fund UVIMCO, increased from $3.9 billion in January to $4.4 billion at the end of December. I'm told that a good current estimate is something like $4.75 billion. The UVIMCO is doing a superb job of restoring the equity value.

The endowment's high point, by the way, before the destructive losses of the third fiscal quarter of '08 was $5.25 billion. Its low point, February 28, 2009 was $3.76 billion. The good news is, first, that the loss was substantially less than was incurred in the other top 20 endowments. Second, that the recovery has been rapid and systematic and third, that the disturbance in the markets and so on has not appreciably damaged our efforts to raise additional funds to go into the endowment.

The University is a long-term investor; it expects ups and downs. No one expected the economy to blow apart as it did beginning in the third quarter of '08. But, that said, UVIMCO's reaction has been a model of how to do it right.

For the 10 years that ended in December 2009 - UVIMCO is only about 10 years old - the long-term pool earned over a little bit over 9% each year. On average in the same period, the S&P 500 lost 1% per year. So you have the contrast between UVIMCO's gain and the S&P 500 loss as on indication of what it's done.

As you know, just before the recession began, or at least just before it was acknowledged, by the prior administration, the Board had agreed to increase the spending rate because we had achieved our early goal of building an adequate base in the endowment to support activities and the increase went from something in the range of 3% to 5%. The Board approved an increase in the spending rate as the recession became more visible to bring it to 5.5% which is in the high range of distributions from endowments at this point and we intend to make the distribution as planned in the coming fiscal year. So the increase in the value and the steady draw down for operating purposes make that a basic resource for us. We received all together in FY09, I should say that fiscal years end on the last day of June and you are always dealing with, in a sense, a temptation to describe 09 as fiscal 08-09. To be exact about it, the number is the second number.

Federal Stimulus

The federal research awards in FY09, totaled $221 million and that was 67% of our funding from all external sources of research support.

The lion's share is obviously Health and Human Services through NIH, about 71% of what we received for research. NSF, about 12%, Dept. of Defense about 7%, Dept. of Energy about 2%, Dept. of Education about 2 %. So, to assemble the whole, you begin with the enormous chunk that is health sciences related and then you see the amounts contributed from all federal sources grading down as you move through various other federal priorities. The expenditures, by the way, here come very close to tracking dead on the averages of what the federal agencies provide nationwide. So there's nothing extraordinary there.

We have proposals pending under the ARRA program right now that total $363 million. Awards actually made so far but not in the numbers I gave you earlier come to $59 million for 130 different individual projects. Those of you who are faculty members have no doubt been involved in that work. I'm grateful for it. I think we will all be grateful for it and you can imagine the potential surge in research stature which is an important part in our identity as a University, if even half of what's been requested under the stimulus program comes to us, and we believe that more than half will.

These totals are by far the largest of any university in the Virginia. They reflect strengths in areas that matter to federal policymakers: medicine, nursing, astronomy, physics, engineering, education, biology. Again, tracking right on the federal priorities as they are described.

The state has also received new stimulus money for energy research and faculty members here have prepared and we have submitted four proposals for shares of those funds. This has to do with how energy is generated with the ongoing effort to find alternatives to carbon emitting sources of electricity and so on.

Best-Value Rankings

We're doing really well in the rankings that suggest that we're under pricing our product. Kiplinger's has ranked the University at 3rd among its "best values list of public colleges." The Princeton Review in the most recent publication which was a couple weeks ago, ranked us 1st among public or major Universities. I have to simply acknowledge that it is a dubious distinction to be ranked above what one might see is the value of one's educational program and that AccessUVa is the obvious way to deal with that disparity. There are other issues that will arise there too.

Economy's Impact on Financial Aid

The downturn in the economy has increased need for financial aid. Very simply, a family can go from having no need on one day to losing a job and having no income on the next day and suddenly qualify for complete financial aid, scholarship aid, under the AccessUVa program. Virginia's unemployment rate at the end of November 2009 was 6.4%, precisely double what it was in December of the prior year. So because 70 or so percent of our undergraduates are in-state, that reality has some bearing on the expense.

In the Class of 2013, the current first year class, we have 1,052 students who are supported by AccessUVa. That's compared to 882 in the prior class and the total number of AccessUVa students currently enrolled is 4,340. From the perspective of institutional policy and the intentions of Gordon Rainey and other members of the Board who determine that we would create this program, the program is providing an extraordinary amount of full need support through our students. It remains a very viable program from the financial point of view and it continues to do exactly what the Board intended in providing a level playing field so that family wealth would not be the criteria to determine who would come here and who would not.

In 2010, from the unrestricted endowment earnings, we will be contributing $29.7 million to the program.

This is beginning to be something to which alumni and friends of the University want to make contributions. Most of you, I think, will know about the group of scholarships named for Jack Blackburn but the story is a fairly simple one. When Jack died Gordon Burris got on the phone and started calling mutual friends and he raised something like $2 million on the telephone. And because students are eligible for different levels of aid and some are out of state and some are in-state, it's difficult to be absolutely precise about how many students are supported as Blackburn Scholars, but it's going to be somewhere between 4 and 9 students per year. That'll suggest, first, how determined our people are to support this kind of program. And second, the reality that while to build a fund of about $2 million is not easy, it can be done in relatively small segments if many people are committed to doing the work required to raise the money.

Endowing the program fully would cost about $900 million. Our current target for 2011 is to raise about $25 million. My guess is that we will make the target and continue to make it. The other sources include the required set aside in tuition that provides for financial aid as part of the normal tuition driven budget. It's now a federal law and we use other kinds of funds that are available properly for that purpose.

In-State Enrollment

This has been a year where the number of legislative proposals are attempting to cap out of state enrollment at the University. I wanted to summarize a couple of the issues even though the General Assembly made a decision the other day to one of its committees to table this issue for the year and to refer it to the governor's commission on higher education which is a couple of years out. The issue is not in-state/out of state. The issue is spaces for in-state students who want to come here. The solution to the problem is very frankly to develop a great deal of additional academic horsepower by increasing the enrollment of the University and by using the revenue and the activities generated by new students to expand, to extend, to deepen the curriculum to make the University a stronger University. If you look at peer institutions and realize that typically they are 35,000 to 40,000 students, and then realize that one doesn't need to go nearly to that number to meet the in-state need. The simply inherent or structural need to grow the University exists. We have been very careful over the last 20 years to do as little damage as possible to the surrounding neighborhoods. If you fly over the University, and look down and see where the new buildings are, you will see that basically the footprint is the same as it was 20 years ago but that we have filled in slopes such as the one where the parking garage is behind Newcomb Hall, vacant spaces such as the place where the parking garage is next to Drama, space that would not otherwise be usable space. We have used a strategy of filling in rather than of expanding. In order to increase the University to a scale that would be appropriate to its academic rank, and to the realities of in-state enrollment demand, we would have to make use of other kinds of space. If you'll look at the University's footprint map of where it owns property, one thing that becomes very clear is that it is possible to effect a major expansion of the University scale by crossing the bypass and getting into otherwise inaccessible open land that's behind the Birdwood golf course. So this is not a hopeless proposition. It would require a tremendous amount of planning and it would also require a strategy to get state bonding to provide the funds necessary for the bulk of the work but that's not an impossible target. It can be done and there are probably other places to do it but the fundamental strategy I think would be the same.

We have, since 1989, had a planned growth process that was required by the state and we are larger by 16.4% of our student body than we were in 1990. The growth, in total, of students here in Charlottesville is 1,588. They are students from Virginia. That's why, how we moved from 63% or 64% to about 70% in-state. And the proportion of Virginians in the class has increased by 14.5%. Let me observe that this growth was carried out despite the state's promises when it required the plan with no state support that we have financed the growth internally. And that it has been carried out despite repeated and sometimes massive reductions in state appropriations. So we can in fact grow and we can do it by strategically using resources that we can regenerate.

Continuing to Manage the Downturn

We've taken a number of preventive steps. We're trying to protect core services to students and core support for academic programs, and we're trying to provide a stable work environment for staff and faculty.

We have placed strict limits on spending regardless of fund sources. As you know, I have been attempting for, at this point, almost a decade to implement an all-funds budget model in which all discretionary funds that flow into all foundations are spendable become part of the University's larger budget. Donors give to the school foundations with the expectations that their gifts will benefit the students in the schools and we have not developed an all funds model of budgeting. I think this recession may force us to do it. But in any event, the restrictions are across the board.

We have cut employment. We have not laid people off; we will not lay people off. We don't need to lay people off. Albeit we have cut employment, faculty and staff by about 160 positions through attrition, routine turnovers, internal transfers. It is very difficult, as those of you who are managers of one kind or another know, to hire a new employee right now. That is going to be one of the fundamental strategies. I should say it has not been inevitably enforced in cases where there is a compelling reason. Leonard and others who work on the budget have found ways to support a limited number of hires. One consequence of that is about 150 courses that were offered two years ago are not offered today. As we have had to reduce the size of our faculty, we've had to let go courses that at one time were available. The College and the Graduate School of Arts & Sciences will have to eliminate this year about 7% of its 2,900 courses. The College is by far the largest element that we have to budget and it is deeply dependent on two fund sources, state appropriations; the constant reductions are a special problem in normal budget management for the college and second, tuition. The College would also be, I suspect, the principal beneficiary of an aggressive growth strategy over several years.

Campaign

Capital Campaign has continued to move forward. I have to tell you that Bob Sweeney frets a lot. He frets whether you're above target or below target. I suspect that that's what happens with first rate development officers. But in any event, at the end of December, the campaign had produced about $2.08 billion, a little over 69% of the goal, just under 75% of the time available lapsed.

I asked once for a calculation of the number of work days that we're behind our theoretical calendar and at the time when asked we were 9 days behind. To be 9 days behind on a $3 billion campaign in this environment is a success and as you happen to run into Bob and his colleagues, those who work in your schools, pat them on the back a little bit. They have been running themselves ragged and they have achieved extraordinary things.

The December gift total was $35.8 million, above target. The year-to-date giving as of December, this is six months of the year, was $99.4 million dollars. Our people are raising extraordinary amounts of money in the worst environment we've ever seen.

Private support, very frankly, is the fundament element that makes the University of Virginia a great institution rather than a hobbled and damaged institution.

I want to mention briefly what employees have done this year with the combined Virginia campaign that supports charitable activities and also at Madison house.

Commendation: CVC / Madison House

The gifts to the CVC came to $932,000. The goal that we'd been assigned was $675,000 and this year's giving almost equaled our all-time high which was 2008 of $934,000. So we were $2,000 off the prior highest year despite the environment in which employees were deciding whether to give or not.

U.Va. employees' gifts by the way, account for nearly 26% of the entire CVC funding raised in the entire state and that's despite an 8-10% reduction in the University's workforce and despite no raises at this point for what appears to be an infinite number of years.

I owe you thanks for that. I think the commitment to the public good that is made by that set of thousands of personal decisions about priorities is a major indicator of the quality of staff and faculty in the University but it is an extraordinary thing if you look at what's happened state wide. The University has become increasingly the anchor element of this effort to support CVC programs.

Madison House this year is celebrating its 40th anniversary. Over those 40 years our students have donated something above 3 million hours of volunteer service to the Charlottesville/Albemarle County area. This becomes a major shaping element in students' lives. It has a lot to do with the sense of public duty that our graduates constantly demonstrate and that is one of the earmarks of having attended this place. I think it's important to say that the students who have accomplished this have done it without University oversight, without University support. That the sale of, the purchase on our side, of Madison Hall that began Madison House was a significant step forward in terms of our vision of students governing themselves.

Morgan Harrington and Safety

All of us have been agonized first of all by the disappearance of Virginia Tech student Morgan Dana Harrington, who is by the way, a child of a faculty family. Her father is, has been for many years, the leader of our residency programs and undergraduate medical programs in Roanoke. And then the discovery of her body. Obviously, we had all hoped to see a different outcome. I think this issue has touched this community much more directly than any, in my memory since one of our students died while drunk in one of those last football game abuses of alcohol and her death triggered a major reform in alcohol education and control programs across the country.

We have been in touch with the Harrington family since we first learned of Morgan's disappearance. We remain in touch with them. I want to thank all of your who've been involved in providing support for them.

Let me say that I know nothing, in the end, can replace a child who's lost in that way. And that no matter what one can do, one has to realize that the common bond, the human bond with that family, has to become far more intense in order for us as a community to contribute to whatever recovery is possible for them.

There are some ironies here. The Charlottesville area is in general considered to be safe community. The statistics say that it is a safe community. Bad things can and do happen even in this safe community. I don't think that any element of support for students, for the young is more important than providing for their safety. And because of the fact that faculty and staff members share the conditions in which students live and so on, the safety of faculty and staff are similarly important to us.

We urge students and others to follow safety guidelines when traveling around the Grounds and in the surrounding community.

Pat Lampkin, the vice president and chief student affairs officer, sent email messages to all students following the discovery of Morgan's body. And she put in safety tips that I think we all understand are critical.

One very simply is, do not walk alone after dark. If you have to walk alone, stay in contact with a friend, use cell phones in a constructive way, before going out and make sure she or he knows what route you're taking.

Do not get into a car unless you know the driver. Do not get into a taxi unless you are sure that it is a registered taxi with a meter.

Get involved. This is the key element of both the story of Morgan Harrington's disappearance and the story years ago of the loss of the student because of the alcohol incident. If you see a person in need of help or intervention, offer it. Don't leave an incapacitated person alone. If you can't offer immediate assistance, regardless of whether you know the person or not, dial 911. It is amazing how quickly the police or other officials respond to 911 calls.

And rely on University Police if you yourself are in distress or believe you're in danger. If you've been drinking, are not able to travel on your own, or if you feel vulnerable or threatened, call 911 immediately. That is the basic advice that we have given to our students. Pat's email was direct, hard hitting and entirely appropriate. It does not bring back Morgan Harrington. Other gestures will preserve memory of her and of what happened to her. But in any event, that's the position we've taken with our students, that's the advice that we offer for our students.

The University's Evolution Over 20 Years

Obviously, the most dramatic thing is two decades plus of reductions in state support. The two handouts, the one sheet, charts that you have, show first of all, the pattern of appropriation from 1985, which is the last year in which the normal appropriation appeared in a way that let us compare it to other years. It goes from 1985 through 2010 separating out higher education and K-12 education. And then it provides corrections or the prison system as a separate line. The second chart shows the proportion of the general fund appropriation. That is the proportion of its tax dollars appropriated by the state to support its colleges and universities over the last two plus decades. Going from a high point of 16.7% in 1985, that is 16.7% of all the tax dollars the state collected, to a low point in 2010 of 10.7% and it is well below that number at this point because the reductions made in the recession.

The general fund appropriation to all of education in 1985 was 52.8% of the state's general fund. In 2010, 46.7%. And as I mentioned earlier, if you ask where did those dollars go, where was the state increasing spending, you find first of all that Medicaid expenditures have gone up. That the prison system has gone up although, frankly, not as dramatically as one might have thought given the building rage for prisons that began in the mid '90s. And for K-12 and mental health, the appropriation has stayed fairly constant although recall that last year the General Assembly did reduce its funding of the formula that runs the state's public school system. First time in my life that that has happened. The car tax, by the way, which didn't exist before 1995, this is the phase out of the car tax that was promised as part of the gubernatorial election and promised by both candidates. We are sometimes accused of having a partisan angle on this. It's hard to be partisan about something that everyone who is involved at the time favored. The car tax is costing 6% of the general fund. So if one wants to fix the problem, one way to fix it is to get rid of the car tax scheme and go back to spending the state's money on the state's business.

Reductions to the colleges in this biennium that we're describing, the current one, about $500 million. So a tremendous amount of money taken out if you look at the picture statewide.

For first time in history by the way, in-state students at the U are paying more of the cost of their education than the state is. That has never happened before. In-state students are paying $7,873 in tuition charges and the state is paying $7,566 per in-state student.

Second issue in these 20 years, the pursuit of autonomy and of private financing as an alternative to the heavily regulated scheme of safe financing that existed before. The restructuring legislation of 2005-2006 is the single most important element in terms of the relationship with the state of the condition that we enjoy today.

As state support has fallen, even in a recession, private giving has risen. So we have the irony that's very clear that those who can assess the value of the product, education, are prepared to give regardless of the surrounding economy.

In 1990-91, the University's operating budget was 22.3% state tax dollars. That proportion as you know has dropped to somewhere between 6 and 5 percent at this point and with the endowment and gifts now producing a percentage they are, we're in a very different situation.

I think the product of the work that we've done together over these 20 years is a robust and remarkably flexible University. I have not dug into the details behind what I will tell you now but I'm told that they're accurate.

We have built a total of 134 new buildings using new and innovative ways to finance buildings since building ceased to be a regular part of the state's general fund appropriation. The U.Va. Foundation buildings that they have built and have sold to us, other buildings purchased from other sources, existing buildings, have all been part of the steps we've taken to meet the need for space. These buildings all together representative of 42% of our total growth square feet. So we have an extraordinary expansion within the boundaries occurring in a period when the financing was increasingly a problem that we had to refer to Leonard, to Tim Rose, to those who manage funds in UVIMCO and their responses I think have been superb.

The most recent new buildings, I think, are useful as indicators of the quality that we see is necessary to building for the long term future. We're taking out buildings that were constructed in the late '60s and early '70s as student dormitories because frankly they're terrible buildings and replacing them with what I think are good buildings. The horizon before buildings are out of use is much longer with our people planning than it was years ago when the planning was done separately by an agency in Richmond. With the South Lawn Project, with now with Gibson Hall now open, go over there if you have not gone and take a look at even the incomplete phases of the project. History, Politics, and Religious Studies are now across the street. The Commons Building containing a 250-seat lecture hall opens in August. Other new buildings reflect, I think, the quality that we've tried to put into our buildings.

Wilsdorf Hall, named for Doris and Heinz Wilsdorf, in a sense symbolizes the beginning of nanoscale and advanced materials science as fundamental parts of what the University does, disciplines that account, in part, for the growth of academic research and the medical center. That building is a kind of monument as well as a working building.

Robertson and Rouss Hall is wonderful building of the McIntire School that Carl Zeithaml was able to conceive and see through to completion. I love the fact that if you stand by Homer's statue and try to find it, you can't find it. That the way in which that building was fitted into previously unused space represents, I think, a kind of triumph and I'm in a sense proud of Carl and his colleagues for having done that.

The Claude Moore Nursing Education Building, the Claude Moore Medical Education Building, the second to be completed in May are extraordinary new buildings that have been needed for 20 years.

Bavaro Hall accomplished something that I have hoped for for years. Privately financed, generally speaking. Beautifully designed structure that is not a traditionally University designed building. You can tell by studying that building that the primary donor is from Boston. There's a different architectural order in that building. It'll provide clinical space for new curriculum approaches that are being taken in the Curry School but it also hides Ruffner Hall. I once had a goal of getting rid of all of the socialist renaissance buildings that have been put up by the state in the '60s and '70s. We discovered that wrapping things around them as we did with the former Darden School building that was attached to the Law School, putting something in front of them, as we are with the Curry School, can sometimes let you live with even the worst of buildings.

A new Physical Life Sciences Building for the College's research programs and Rice Hall, the new research building for the School of Engineering, both located on the edges of the football parking lot up against the chemistry building and the engineering building are to be completed in August of 2011. Those buildings are products of the restructuring legislation and the fact that the University can now use its bond capacity in a way that lets us meet needs for academic space that one cannot get from donors or from the state.

And the renovation of McLeod Hall. And then, if you go and take a look at the buildings that have been either reformed, as is the case with Fayerweather, or built anew, Ruffin Hall for studio art. The additions to Campbell Hall, the School of Architecture's building of relatively low costs but very effective renovations. The University of Virginia's Art Museum in 2009. You can see the quality of design and construction that's going into the new buildings.

Extraordinary expansions of athletic space with the Scott Stadium, Carl Smith Center construction. The new John Paul Jones Arena, the Aquatic and Fitness Center, Klockner Stadium for soccer and lacrosse, the new baseball stadium and other facilities. Self-financed, created to provide the kinds of facilities that our students need. They've worked well. We spent a period of extraordinary construction of buildings for student life. The ones that I would point to as examples you may want to visit are the Observatory Hill Dining Hall. If you recall "God's Little Acre," that building was sort of "God's Little Dining Hall" because it kept changing location and shape. It was under construction for what seemed like a generation. What emerged finally was a splendid building for a number of different uses that benefit students. Of the new dormitories, the one that I think is the best example of where we're going is the one called Kellogg Hall, named after Bob. If you go into that building and talk to any student, you will be shown on the student's PC, how the student monitors the progress of her or his laundry as it moves through the washers and the dryers in the laundry.

In the Health System, a total of 130,000 square feet was added to the hospital in 2007. Other additions now under way totaling 40,000 square feet. The Emily Couric Clinical Cancer Center to be finished in April of 2011 and the Children's Hospital, the next project to follow after that. And I'm sure you've all done it but if you missed the Harrison Institute and the Small Library, the underground Special Collections Library, go do that. Scholarly facilities of the kind are very rare and it serve the Humanities, the Social Sciences, and many other disciplines extraordinarily well. We've even managed in a time of uncertainty about the future of the published book to use the need for a new Central Grounds parking garage as a way to expand the University's Bookstore, which I'm told is expanding again and it continues to pay the required tax to the University for its privilege of existing. One of the parts of Leonard's genius in financing has been taxing those who have surplus assets to benefit those who don't. So the parking garage, the bookstore, contribute to faculty salaries between the College and also to Student Financial Aid and other needs of that kind.

Expanded growth away from the University. You've seen the Research Parks. If you have not seen the Anheuser-Busch Coastal Research Center at Oyster, Virginia, it's a center for the study of marine life of estuaries. It's worth a visit. It's not far from the rich tunnel that crosses from Virginia Beach. Our College at Wise has added no fewer than 13 new buildings; 57% of that institution's space has come in since 1990.

The number of employees has gone from 3,028 to 5,835. Outpatient visits have increased from 308,800 to 705,000 as we realized that we could reduce cost to the patient and deliver medical care in many instances in a superior way and made the shift toward outpatient service.

Clinical staff has gone from 385 in 1991 to 910 in 2010.

The Continuum Home Health/Home Infusion Program began in 1995. No fewer than 50,000 visits per year to 4,000 patients in their homes.

In 2002, we had 505 active beds in the hospital; by 2015, that number will have increased to 665.

Increased Diversity

The University's population has changed in some extraordinary ways in human terms. In 1990, women comprised 50% of our enrollment. In 2010, 56%. There is an interesting article in the Sunday Times that alleges that students have a hard time having a social life at UNC because the proportion of women in the student body is about the same as it is here. I visit Chapel Hill every time I have a chance. I've not noticed the problem myself. And if you visit Rugby Road on any Thursday, Friday, or Saturday, I think you'll decide that we don't have the problem here either.

It is a fact that our nation and our culture are doing a wretched job of preparing young men for higher education that applies to all races, essentially all social classes; it's an especially serious problem in areas where girls and boys typically take different high school programs. By and large, boys do not take the more advanced college preparatory courses that girls take. The statistical comparison in a way, predicts what students will do in college. The state, the other entities that can carry this message to parents, to families, in my view, are not doing a great job.

On the other hand, the good news is that diversity here enriches teaching and learning across the state. The Office of Diversity and Equity created in 2005, has made the University a kind of rallying point for collaboration among institutions with the intention of carrying the message about what courses students need to take, about how to address the problems of the declining numbers of men taking the courses. At one time, it was said that the problem belonged primarily to the African-American community. The numbers don't support that anymore. The problem belongs to us as a nation and they have to do with how we raise our children.

Growth in Global Education

We've seen extraordinary grown in international study in this period. In 1990, we had fewer than 10 faculty-led study abroad programs. In 2010, we had something over 50 and we had 40 plus exchange relationships.

I should tell you also that the European Union, which about a decade ago decided to withdraw from engagements with American universities, has created a program called Atlantis and that we have been invited by the University of Amsterdam to take part in developing a program that would provide for fairly seamless movement as occurs in the Erasmus program within Europe. Needless to say we are going to apply with some vigor for admission into the Atlantis program and I think we should take some pride as a faculty in the fact that we are in the first small group of American universities invited to take part in developing the first Atlantis proposal.

The percentage of students studying abroad has gone up fairly dramatically. We had about 500 studying abroad in 1990. We're now in the top 20 among American universities. In the top 3 among public universities.

In 1990 we had 525 international students. This year we have 1,974.

We have no data for international faculty members in 1990 but the number in 2010 is 230.

The proportion of international undergraduate and graduate students in the College has gone from 3% to 7% of total enrollment.

The College's new Asia Institute and Peking Center at Peking University, the new major in Global Development Studies in the College; new minors in Asia Pacific American Studies, Latino Studies, African Studies, Global Culture and Commerce and so on and extraordinary programs created by the McIntire School including two fundamental programs in Peking University - these have all contributed to the growth and recognition of the University of Virginia in other places.

We have had by the way, a fairly good response to the request from the United Nations for projects to be funded under the UN's development goals project. We're working specifically here on reducing infant mortality and reducing the number of people who lack adequate water and sanitation in addressing HIV/AIDS and malaria and in reducing poverty with a focus on Sub-Saharan Africa which is the current focal point of a lot of that work.

The Semester-at-Sea program, of which we became the academic sponsor in 2006. In the Spring 2010 voyage, it has as its theme "Sustainability" and the destinations to Japan, China, Vietnam, India, South Africa, Ghana, Brazil.

I have a little private sense of the value of that program that has to do with the fact that when the mass murders occurred at Virginia Tech, six Virginia Tech students were on the ship and Archbishop Desmond Tutu was the counselor who sat with those students and told them what had happened and helped them to deal with it. He has on one occasion already served as academic dean. He will do it again at some point in the near future. So to have that kind of international and global significance in the faculty, to have the quality of our own people participating in the faculty, has been an enormous asset.

I think as we all know the College's January term has spread through the entire University. All of our undergraduate schools I think now have J-Term Programs. This year the Study Abroad component of that program is Belize, Berlin, Ireland, Italy, Nicaragua, London, India, South Asia, and St. Kitts and Nevis. Universities that do not in our time become leaders in the global work, that ignore the sciences, that fail to invest in the facilities, the equipment, and the people who can achieve great accomplishments in science, or that ignore the fine and performing arts, are dooming themselves as surely as their students. There are certain fields of activities that you certainly cannot ignore.

Hunter Rawlings, the former president of Cornell, who has a periodic appointment in classics here, when being asked by our Board to name the three major priorities for the future said "China, China, and China." The point he was trying to make is that there are vast opportunities that have vast human potential to do good as well as to enhance science that American universities have just barely tapped and China is one of the most visible of those.

We've seen a shift toward interdisciplinary academic work.We've seen more work in translational research partnerships, especially through the Coulter Foundation. We've seen practical ethics and public life built into the curriculum across the board and practical ethics has become one of our flagship programs as part of how the world identifies the University. Some 25 new programs were created since that center was created.

The public engagement through the Jefferson Public Citizen Program that our students have through their volunteer work, through projects that are both U.S. and international has become an earmark program. The growth in the curriculum, the new majors that have developed in this period in my view are an extraordinary list and at the same time a kind of indication that we are not as aggressive as we ought to be, but listen to the list. Media Studies; Cognitive Studies; Environmental Thought & Practice; Jewish Studies; Human Biology; American Studies; Neuroscience; Applied Statistics; Computer Science; Political Philosophy, Policy, and the Law. Those are extraordinary things to have been added in a period of continual reductions in state support. They reflect extraordinary collaborations between faculty members with an idea and donors or people Bob and his colleagues can find who are ready to support the idea. And there are other changes that I won't recite.

The Growth of our Library

The library has gone from 3.2 million volumes in 1990 to 5.1 million this year. It has actually expanded the number of hours its open in an economy when one would expect staff constraints there to reduce the number. The construction and implementation of the Special Collections Library, the underground library, is obviously an earmark accomplishment of the period for which Karen and her colleagues deserve tremendous applause.

Technology has been a fast moving target in this period. In 1990, a blackberry was something that you ate. Technology is with us in everything we do now.

The World Wide Web launched on August 6, 1991. Whoever started it, prior to that time there was no web, there was no virginia.edu, there was no digital library.

Email did exist in 1990. I used to use it. It was a constant adventure, it never worked. But in any event, it eventually did. The first commercial email service was connected to the internet in 1993 by AOL. There was no wireless network in 1990 to connect to a computer you plugged it into a wall and generally into a telephone socket.

In 1997, 75% of our students reported that they owned a computer. In 2008, 99.9%, they reported they owned a computer and the vast majority owned laptops. That is the computer as a tool that they took with them everywhere. The other indications of just how rapidly digitized material has become a part of our culture are known.

The Library of Congress now has 74 terabytes of digitized material available online. If you use the University's current connection and downloaded everything the LC has online, it would take 17 hours to download all of it. If you use the 1990 connection, it would have taken 13 YEARS.

Technology and scholarship have become so profoundly connected that it seems almost prosaic to summarize what's happened.

In 1992, two computer science professors, Bill Wulf and Alan Batson, were given a grant by IBM to "do something innovative," that was the language of the grant, in humanities scholarship. They went to Jerry McGann, Ed Ayers, and others, and created the Institute for Advanced Technology in the Humanities which as you know has become another of the flagship programs that distinguishes the University. It has found federal grant funding; funding from the national endowment, Mellon Foundation, J. Paul Getty Trust and so on.

Digitization has transformed the U.Va. Press. We had two online bibliographies published in 1994. No digital publishing until 2004. Rotunda, which is the Press's digital imprint, now publishes major literary editions; it has cross-searchable digital editions of the Founding Fathers' Papers, including Washington, Adams, Jefferson, Madison.

In all of this, let me say that we have missed opportunities. That as I reflect on my own life, I have to acknowledge that there are things that we have not done. We have not addressed the obvious need in this era for a general rethinking and reform of undergraduate education from beginning to end in every school. The curriculum needs to meet world's expectations and demands. Students nowadays talk to me about their desire to be competent in foreign languages, to write and read contracts, to carry on detailed and advanced conversations and they'll admit the fact that even though they take the courses, they generally feel as though they have not learned to use the language in that way. That's not the fault of faculty. It has to do instead with the ways in which the academy in general, American universities, are frankly sitting ducks on this issue of how they have contributed to the language capacities of their students. The academy needs to develop better methods. In many instances in other fields the academy has and the better methods may exist with regard to the modern languages for all I know but they have not been adopted systematically in the curriculum.

We need to build vigorous experience in mathematics. Advanced courses into every student's curriculum. Allowing a student to walk past a discipline in which she or he excelled in high school because of a high test score is assuring that student will not major in the sciences, that that student will not go to medical school, that student will not become a computer scientist. We've simply got to deal with the reality that when students drop out of the track that propels them towards choices that are broad, and can be very deep by, for example, not taking math in the first year, the cost to the student is dramatic and substantial. So is the cost to the nation. Our shortage of scientists, of engineers, and similarly trained persons is at this point old news and the way you build strength in those disciplines is through the keyhole course.

We have not built fundamental structures that we need to build. In some cases I think that we, and personally saying I, simply did not see possibilities. I will upset everybody here but imagine that instead of building as we did the new studio art building, redoing the museum, doing some major additions to the School of Architecture - imagine how it would have been if we had realized that we could adapt the building in which the School of Architecture exists to the needs of studio art and produced a larger structure than the one we built at a lower cost and then relocated using state bond funding the entire School of Architecture to a different site, for example, to the site at the intersection of Ivy Road and Emmet Street. The entrance to this kind of arts facility would be through the Bayly building. The Bayly building would become the symbol of the arts and students and visitors would of moved naturally through whatever might be in that building, let's call it a small museum, and eventually find themselves at a major concert hall. We're still the largest university in America without a concert hall, a major concert hall, attached to a major building for music in every sense, with even more rehearsal space and different kinds of rehearsal space than will be in the building that we are building now with funding from the original donors for the marching band.

We simply didn't see the possibilities. We didn't do the feasibility study. Not much keeps me awake at night, but there are missed opportunities. There's a kind of functional fix on "let's do something about this building," "let's fix this problem," that sometimes disguises the large opportunities that we ought to have seen.

We had no major construction in the sciences, other than the research parks, until after the restructuring legislation. So after 2005-2006 are landmark years for the sciences.

We are behind target on the Virginia 2020 science initiatives. We need to acknowledge that and as we plan for our next era, faculty members and our new president and others, need to focus on the reality that we have not made the targets that external and internal experts define for some of Virginia 2020 science plan was published.

We have new opportunities for foreign collaborations. We also have barriers to it. We will need a change either in the law or in our practices if we are in the end invited to take part in the EU's Atlantis program. On the other hand, what a terrible loss if we are admitted to that program and cannot solve the technical problems involved in the exchange of the students and the provisions for tuition and so on.

This momentum is built into the University's fiber and is part of your fiber as a member of the community. This momentum toward excelling is simply a characteristic of the place. It's one of dozens of things that have made my life and Betsy's life here such a tremendous thing of joy. We have found that external observers, alumni, faculty members from other institutions, the parents of our students and former students, support and want to assist, want to give life to the University in the form of various contributions.

The final observation that I'd make is that they and you have made these 20 years the high point of my own life and a time of constant pleasure and joy. I can look at something like my failure to see what could be done with the arts buildings, and then look over what's been done with the McIntire School's building, and feel that maybe I didn't get it but somebody else did get it at an appropriate point in time. I think the realization that human excellence becomes simply a characteristic of operation in a healthy university community is the most important takeaway that I have from this period.

Let me thank you for 20 wonderful years. Let me say that I look forward to returning to the faculty after I've appropriately gotten out of the way so that President Sullivan can do what she needs to do to begin her term. But the values that we've developed, plans that we've laid in place, to the quality of our people, our vice presidents, our deans - I simply believe you can carry that all the way down to the people who clear the snow on days like this one.

I happened to run into one of the crews that was attempting to get snow off a building. The roof was slanted and the snow was falling and making a great deal of noise and was dangerous and told him that I was sorry that they had to be out working in this particular climate. And the man who was talking to me, it was a group of five or six, simply said, "That's what we do here".

Thank you very much.