Calling Uncle: Is UVA seeking a federal bailout?
President John Casteen made a "smart move," says Larry Sabato.FILE PHOTO BY LINDSAY BARNES
The double-page ad in the Washington Post, New York Times, and Boston Globe December 16 is a lengthy letter to President-elect Barack Obama that starts with a high-toned "Statement by Public Higher Education Leaders Convened by Carnegie Corporation of New York." Way down at the bottom of 2,000-word epistle, the 54 signees get to the point: Public universities want a bailout, a cut of the new chief executive's stimulus package, and among them is the financially battered University of Virginia.
"I think it's totally unreasonable," says former city councilor/radio host Rob Schilling. "That means they're asking for money out of my pocket, and my wallet is a little thin right now."
Certainly it's tough times in the world of public education. UVA's endowment has lost around 20 percent– nearly $1 billion– and that's before the fourth quarter report. Governor Tim Kaine announced December 17 that his plan to keep the state from going broke from its nearly $3 billion shortfall includes taking $23 million out of the $160 million in state monies UVA normally would expect receive.
Schilling suggests belt tightening. "If they want more," he says, "they should ask delegates or legislators to carry a bill to get them an extra penny in sales tax. To funnel it through the feds hides this."
But George Soule with the Carnegie Corporation of New York, an Andrew Carnegie-founded philanthropic arm, defends the request to Uncle Sam, pointing out that increased innovation fuels job creation. "An investment in public education," says Soule, "is an investment in the economy."
And UVA says it's already been tightening its belt.
"We're feeling the effects of the national downturn," says chief operating officer Leonard Sandridge in a December 17 conference call. "The state reductions and general economic downturn have forced us to look at every aspect of our operation."
While the university has vowed that layoffs are not part of its effort to reduce costs, even Sandridge says he's never seen a period in the economy like this one since September 1. "We don't have layoffs in our plan," says Sandridge, "but we don't know what the next six months will bring."
Sandridge points out that the federal economic stimulus package targets infrastructure and capital expenditures, not any university's operating budget.
Will universities get some of the federal funds? UVA prognosticator Larry Sabato isn't sure. He is sure, however, that asking early is a smart move.
"You want to get that idea on the table," says Sabato. "There's a near 100 percent certainty that a large–- and I mean very large–- stimulus package will be passed."
30 comments
UVA has some real balls. They have 3 billion floating around? Seems to me they should have invested that money right here in Charlottesville which would have stabilized the economy and given them a decent low risk return. There are all kinds of municipal partnership deals that could have been struck. They could build new schools and lease them to the county. They could loan money for infrastrucure here which would free up taxpayer money to make Charlottesville a much better place for the students and allumni. It is too bad that the Darden school obviously teaches greed over substance.
I am just a handyman but I sold my rental house in 2006 at the top of the market and just bought one this week for 120k less 1 block away. If I could see the train coming down the track how come these geniuses couldn't figure it out?
Why would the county lease a school?
Do they currently lease any schools?
What's the point in worrying over it now? They obviously aren't going to listen to us rambling on and on about how they could have seccured it better.
What UVA doesn't see is that less and less people are going to school these days. Improve the outlook and affordibility of its schools and maybe people will start to flcok to it like bees on honey...
SOLR Governments lease buildings all the time
Simple math If te county wants to build a school for ten million they float a bond and pay interest on the note and the principal upon maturity. If UVA builds the building with the same ten million and rents it to the county perpetually then the county never needs to pay the principal and uva has a perpetual income on its endowment that is as secure as it comes. Since they both are "forever" everybody wins.
The problem is UVA got greedy and wanted higher returns and took risks with other peoples money (donors). If they think the losses from the current fund are bad wait till the allumni that saw it pissed away stop refilling the coffers.
This sounds more like a joke to ridicule the bailout. Surely, casteen wouldn't expect taxpayers to flip the bill for all the EXCESS building he seems to have mastered! With BILLIONS in the endowment he has the balls to ask for a handout when our country is nearing bankruptcy so he can have new pretty buildings? Haven't they gotten enough already???
That John Casteen is appearing in the NYT, WaPo, Globe, etc., asking for a bailout indicates that *he* has been given the preliminary numbers for just how much *more* the endowment lost in the fourth quarter. Just one billion? That's so Third Quarter. It's bad, bad, bad.
Hopefully the federal government won't hand out taxpayer's dollars to organizations that are poorly managed again. It's disgusting to me that Casteen had the nerve to even ask.
Come to think of it isn't this the same Casteen who entertained the idea of reducing the drinking age to 18 and banning signs at UVA games? Perhaps age is having its effects on his senses. What's next John, windmills on Monticello!
The returns have been somewhat suspicious over the past 5 to 10 years. I suspect that enormous risks were embedded in their portfolios, to a level they did not understand. It read like more and more of the investments were less and less liquid. A ââ?¬Å?black swan” has pooped on our great campus and the mess will take many new gifts to clean up. OK, large donors, please start lining up”Š”Š
If the government is giving away billions on infrastructure, why not have some of it go to higher education? Aren't they just doing their homework.
Rich, don't you think the large donors took a hit as well? If the university only loses 20%, this year that will be outstanding management. Anytime you beat the averages it's a good year
Of course the large donors took a hit, especially the ones invested with Madoff. I was really joking some about the focus on large donors, and all the naming opportunities. Has The Lawn been offered up for a naming opportunity? Also, the final number is not in, and also, endowments by nature should not be over 60% equity, or somewhere thereabouts. The old 60/40 asset mix was ignored by many institutions groveling for higher returns
countyguy,
by "government" i assume you are talking about the taxpayers, which is you and I. I for one do not see adding even more buildings to UVA grounds as an emergency. Do you? the ordacity to equite what lehman or wachovia went through due to deadbeat borrowers and bad decisions with casteen and other schools building wants is comical if not sad. why would anyone want to incurr more debt for our country than we already have? its ludicruos and irresponsible!
It would be interesting reading to delve into what investments UVA has been involved with. Lubert-Adler is a prime example of an investment firm that has at its disposal 30 university endowments to invest in real estate projects. Obviously, the universities that were heavily involved in real estate investments are poised to take a big hit which probably is not even yet apparent. Lubert-Adler is the money behind Bobby Ginn Resorts which are sinking all over the country and the Bahamas leaving many investors with overpriced lots that they can't sell and builders with homes in foreclosure all wondering what happened to the money. Bobby Ginn wasted a chunk of these people's money trying to race in NASCAR. It is all about GREED. Why give money to any charity including universities, when the majority of times it is poorly used or used for the recipients benefit? Remember the heat the automaker CEOs took for flying in private Jets. John Casteen has a private jet at his disposal. That is where these hard earned dollars are going. The state and local governments only have to tax themselves out of their outrageous overinflated budget shortfalls and burden the otherwise overburdened taxpayer. They, including the university have amassed large reserves during the expansion years so why don't they use their savings to conduct business like the rest of use are forced to due in these hard times rather than look to the innocent bystander or Washington for help which translates to the taxpayer again.
it is conceivable that some of these investments were made with the pledge to supply more funds to the entities, given the outcome of certain events. That would mean UVA would be on the "hook" to take some more of its good money to send off to meet its funding requirements on a sinking investment. Does anybody have info on this potential? And who knows what the accounting would be for such a contingent "investment"/liability at FYE?????
They've screwed the pooch and are now looking to cast blame or gather undeserved help.
Look at how money is squandered at Darden. There's a good story for an intrepid reporter.
I wish this article had more exposure across the state. Put the McEntire School of Commerce to work to figure it out ... their conclusion will be to end the President's perks ...
The commerce school undergraduates would do well to evaluate all that is wrong and sleazy at UVA -- much of it wrought by a sense of entitlement and overblown egos, especially among the dead-wood faculty.
Many honest people have seen firsthand how the so-called leadership at UVA holds out the hat for well-heeled donors to contribute, then spends the money on ridiculous perks for...the so-called leadership at UVA. And they will deny it to their dying breath, but it is there just the same.
If donors to the Darden School saw how their philanthropy was squandered in a thousand subtle ways, day in, day out, the Darden School would soon be spending down its endowment.
But money is incestuous and breeds with its sister, "prestige," which results in the cross-eyed bastard child of arrogance. It is arrogance that has led inevitably to the current situation.
Where will it stop?
Agreed. The arrogance and sense of entitlement is overwhelming.
Here's a handy way to shake your head in wonder: a run-down of (mostly) faculty salaries in 2008. Some of these fossils are raking it in, working maybe 2-3 days a week, and many of them are consulting heavily on the side:
http://www.cavalierdaily.com/media/files/CD-FacultySalaries2008.pdf
The appalling fact is, when the administration announced a salary freeze until July 2009, the first individuals to squeal like little piggies bound for the skillet were the very individuals pulling down $150,000 to $500,000 annually.
Cry me a river, you poor, dumb bastards who can't cut it in Charlottesville on six figures a year.
Arrogance? Good Lord. You can scarcely imagine.
Most of you are simply nuts. Everyone else has their hands out- why not UVa? It is the smart play.
Wait for those 4Q numbers...
UVA medical is like all other forms of government and big business. Top heavy with paper pushers that are overpaid to come up with rules and regulations that hamper those that do the real work that generates profit and serves the patient's needs. There are 10 paper pushers for every health professional at UVA. The fact is that you could get rid of 75% of these non vital individuals and save a ton of money and increase efficiency. So why doesn't that happen? Paper pushers were allowed to gain control many many years ago. HSF(health services foundation)is a prime example of the unnecessary duplication and excess that is integral to the system. HSF was originally created for the benefit of the physicians at UVA but has evolved into a blob that has now engulfed that original purpose. It is so top heavy with paper pushers the result is due to federal government retirement contribution rules, the physicians yearly retirement distributions have to be made with after tax dollars and is tied to insurance which everyone knows is a terrible means to invest for retirement. UVA also has a tradition of underpaying its staff( physicians, nurses, techs) compared to the majority of similar academic centers and as a result it is becoming harder and harder to retain and attract talented individuals. It seems that the top brass counts on the appeal of Charlottesville and the national prominence and tradition of the university to make up the difference. Luckily for them there has been an influx of bright foreign trained physicians to fill these positions. This could be the subject of another philosophical discussion.
"Everyone else has their hands out- why not UVa?"
Ooooh: that's precious. Everyone else is doing it, why not us?
That is possibly the dumbest attitude toweard life i have heard in the long, sad history of dumb people offering rationales for idiotic behavior.
So let's just follow this idiot's logic to its terminal conclusion and give everyone a handout. Everyone who has lost anything as a result of a financial crisis fueled by poor regulation and greed. Just bail out anyone who lost so much as a nickel and watch the country go bankrupt.
The samrt play? Only a child would think such a thing.
Dear But Seriously...
Ok Herbet Hoover- let's do it your way. Oh wait...we already did and it was called the Great Depression.
Without the bailouts our economy would have completely collapsed, unemployment would already be greater than 12%, and we would be screwed worse than we already are. Even with the bailout our 4Q GDP will be negative 4%-8%. Think about that. Quit thinking about moral hazards and start contemplating what is in your best interest.
Samrt is spelled smart by the way- probably not going to take advice from this person.
Commentators here are so right in so many ways. Mr Casteen is one of a generation of University presidents who have upped the ante remarkably in the commercialization of higher education. A huge majority of UVa students today care only about acquiring job skills, which is exactly the opposite of what Mr Jefferson intended universities to be about (which is the creation of an informed, skeptical citizenry). Education is not supposed to be about profit; higher education is not a business. But you'd have real trouble getting Mr Casteen or Mr Sandridge to acknowledge that. Putting the endowment into risky investments guarantees the university will be subject to market forces much more than it should be.
What's happened is a shame, and Casteen, the Darden School, the Comm School, the "Leadership" institute, the Medical School, etc., are all responsible for it--look at the close ties between Darden and Lehman Bros, exactly responsible for the kind of investments that make Casteen's precious endowment--which he spends 80% of his time raising money for, & then treats as a leveraged stock market account instead of what it's supposed to be--an ENDOWMENT, & as County Farmer says, to be invested largely in municipal projects and bonds and other conservative, interest-bearing investments. Instead of being held responsible for two decades of decisions that commercialized education and guaranteed this kind of catastrophe, they will go out and ask the very people they have victimized (by denying the citizenry the kind of education that would raise questions about commercializing education) to rescue them. It is shameful.
interesting thoughts. It will be interesting to see where the next round of money comes from. It does seem as though the mission of the University has drifted somewhat in the past 10 to 20 years. Weren't they trying to go private also? What's up with that one?
Poor UVA doesn't have enough billions to keep the caviar buffet open while also pumping distilled water into the restrooms. "I will not permit my spoiled child to live like a commoner at a public university! Send a horse and carriage full of money!"
The link between Darden and Lehman Bros. is indeed interesting and mertis coverage. A good reporter could produce a career-making article. Fact is, most of Darden's business connections are sketchy. The "leadership" is the very definition of duplicity, and the alumni who give to the school are more interested in having their sses kissed than by any meaningful sense of altruism. From the school's mission statement, "developing primcipled leaders," right down to the end product (which has got to be a massive disappointment, based on the mission statement), the place is a greed-fueled joke.
Oh...the Enron case-study angle at Darden is also worth close inspection, if you want to see hypocrisy in action.
Giving these numbnuts more money is like giving whiskey and car keys to teenage boys.
And Grant, above, sounds like just another wee, smarmy Darden student. Always looking for a handout cuz everybody else is doing it. What a rationale. But we can suppose that's to be expected from someone with an obvious sense of entitlement.
Get a good night's sleep, little Grant. Santa may yet slide up your wee chimney and give you what you crave.
I know that most of you won't believe it, but Darden doesn't run off a dime of public money. They get nothing from the University - it's all funded through insanely high tuition that students seem willing to pay. Hard to complain about that, now, is there? If they see the value and want to pay for it, then that's their business, no?
Grant,
Please show me some data that indicates the impact the bailout HAS ALREADY had. Credit markets are still frozen, and the money is not being distributed to many of the companies that were/are hoping to get some.
You have quoted some interesting statistics and I wonder if you made them up or they were generated based upon some factual data...
im can enter in beta house?