Last month, a number of Board of Visitors members indicated that this year was the time to increase UVA’s endowment spending. And increase it they have.
The Board, which governs the University, voted on June 13 to increase the endowment payout rate to 5 percent from last year’s 4.5 percent, which amounted to a $134 million payout. The increase, which will likely yield more than $15 million annually for spending, came as UVA bumped up in-state tuition next year by 7.3 percent.
Increases in tuition across the nation have led to Republican U.S. Senator Charles Grassley, ranking member of the Senate Finance Committee, to pressure universities to spend more of their endowment to make college more affordable. He has gone as far as floating the idea of requiring universities to spend at least 5 percent of their endowments each year.
UVA’s $5 billion endowment does partially fund AccessUVA, the University’s financial aid program. In the 2007-2008 school year, 11.5 percent of AccessUVA money came from unrestricted endowment funds. The two largest expenditures from the endowment go toward instruction (48 percent) and financial aid (25 percent). This coming school year, AccessUVA will have a budget that tops out at almost $62 million.
Chief Operating Officer Leonard Sandridge asked the Board of Visitors to approve a 0.5 percent increase in endowment payout.
The Board also mandated that endowment distribution will increase in subsequent years by the rate of inflation. That rate will be determined by the Higher Education Price Index. In past years, the allowable payout had to have fallen between 3.5 percent and 5.5 percent. This year the Board increased that range to 4 percent and 5 percent.
In an interview last month, UVA spokesperson Carol Wood said that the University hasn’t felt any pressure from Grassley to increase the payout from the endowment. UVA officials pointed to solid investment returns and the increasingly important role that the endowment plays in the University’s budget as the reasons for the payout increase.
From 2006 to 2007, UVA’s endowment increased by $560 million, though investment returns were only 3.3 percent. The University projects that in the 2008-2009 fiscal year, incomes from endowment and gifts will provide 9.1 percent of total revenues. The Commonwealth, it projects, will provide 8.2 percent.
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