Bailout fever reaches Charlottesville
By: Barbara Hollingsworth
Examiner Columnist
January 5, 2009
Turns out we were afraid of the wrong bug.
Bailout fever has proven a much more contagious disease than the dreaded bird flu. In a little over two months, this economically deadly pathogen has spread from Wall Street on the east coast to California on the west and infected all of Detroit. Entire states have been reduced to begging on political street corners.
Spent all of the last decade’s record revenue on patronage jobs instead of highways, bridges and schools? No problem. Just get in line and the new administration will miraculously cure what ails you.
The epidemic is even making its way into prosperous enclaves such as Charlottesville, where the president of the University of Virginia became one of thousands of line standers patiently waiting for the federal government to redistribute money forcibly taken from the nation’s dwindling productive sector.
Just before Christmas, the Carnegie Corporation of New York – a philanthropic organization set up by steel baron Andrew Carnegie, who in his day was the richest man in the world – took out a rare double-page ad in several prominent newspapers.
The ad, an open letter asking President-elect Barack Obama to put them on his economic stimulus list, was signed by the heads of 54 academic institutions, including UVA president John Casteen.
Like most investors, UVA lost $1 billion in the recent stock market meltdown due to the fact that if followed the so-called “Yale model” – shunning safe, traditional investments such as Treasury bonds to pursue much higher yields in risky hedge funds and then-popular private equity offerings.
Virginia Gov. Tim Kaine also says that the commonwealth’s own worsening financial condition will force him to cut $23 million out of the $160 million UVA typically receives.
So like many of his peers, Casteen is now publicly begging for a federal bailout. Does the man have no shame?
For one thing, UVA had a $4 billion endowment as of October 31. Watching it lose $1 billion in value was no doubt a most unpleasant experience, as millions of workers with much smaller 401(k)s can attest, but when you still have about $3 billion left over, it’s survivable.
And despite the fact that UVA will receive $23 million less in state funds, the university has no plans to lay off any employees - even though payroll accounts for two-thirds of UVA’s operating budget.
Besides his reported $797,048 university salary, Casteen himself also made $220,000 annually for serving as a part-time director of Wachovia Bank. He’s apparently okay with the federal government taking even more money away from single mothers and truck drivers, but won’t even consider scaling back his own lavish lifestyle.
Secondly, the stimulus package is supposed to be invested in the nation’s long-neglected infrastructure, not the operating budgets of academic institutions that are already prime beneficiaries of public spending.
According to a recent report released by Virginia’s Joint Legislative Audit and Review Commission, state funds for Virginia colleges and universities increased 108 percent from 1999 to 2008, while the general fund increased only 70 percent. So Casteen’s “public Ivy” was already at the head of the funding line.
The JLARC study also noted that state colleges like UVA, Virginia Tech and Virginia’s community college system consistently receive the largest appropriations in the state. If anybody in Virginia deserves a bailout, it certainly isn’t them.
Furthermore, UVA has a Triple A bond rating. If Casteen finds himself short on cash, he can raise tuition on half of the student body that comes from out of state, cut costs, or borrow. In other words, he has options.
The Carnegie letter claims that the nation’s institutions of higher learning are unique because they produce “the people, ideas, tools, solutions and knowledge infrastructure our economy needs” to get out of the fix it’s currently in.
But if they’re smart enough to save the entire U.S. economy from Armageddon, they should be able to figure out how to manage their own well-padded balance sheets during a recession without hitting up Joe the Taxpayer yet again.
I’m an enthusiastic supporter of higher education, but having the federal government borrow money so that pampered professors and university administrators at prestigious institutions like UVA can continue to indulge their surf-and-turf appetites is as ludicrous as it is offensive.
Here’s my prescription for Casteen: Take a reality pill and don’t call Obama in the morning.
Barbara Hollingsworth is The Washington Examiner’s local opinion editor and editor of the Sharp Sticks blog.
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