Tuition increase looks likely at UVa.

The University of Virginia is likely both to raise tuition and ask alumni to dig deeper into their pockets as the university seeks to find a more sustainable funding model in an era of dwindling state support.

“We are going to be able to depend on two revenue sources,” Leonard W. Sandridge, UVa’s executive vice president and chief operating officer, told the university’s Board of Visitors on Monday. “We have potential in the areas of tuition and private support.”

It is too soon to offer specifics about precisely how far tuition costs might climb, Sandridge said. He added that UVa has room to increase its rates and still remain more affordable than most other highly ranked colleges and universities, both public and private.

“We are an extraordinary bargain compared to our peer institutions,” he said.

Virginia has seen its revenue fall short of budget expectations by $7.13 billion over the past two years, nearly twice as severe as the 2002 recession. For higher education institutions, the state’s revenue shortfall has meant a cumulative cut of nearly $500 million.

UVa has seen its state funding reduced four times since the current recession began. All told, the university has suffered a total $51.5 million reduction. The state now provides UVa with a scant 6 percent of its budget, marking the lowest level of state funding in the university’s history.

State funding has fallen to such a historic low that for the first time ever, UVa in-state students are kicking in a greater percentage of the cost of their education than the state does. UVa students are paying $7,873 in tuition, while the state is contributing $7,566 per full-time student, according to figures presented at Monday’s Board of Visitors meeting.

Colette Sheehy, UVa’s vice president for management and budget, told the board that the state’s revenue outlook continues to be bleak. In October, she said, state revenue was down 8 percent from the previous year.

As Virginia struggles through its revenue challenges, Sheehy said, other state priorities — including Medicaid increases, new prison openings and K-12 education — are expected to come before higher education.

“It’s hard to see higher education moving to the top of the list of priorities,” she said. “We’re going to have to look seriously at tuition and private funds.”

UVa’s ongoing $3 billion fundraising campaign surpassed the $2 billion mark in September and is on track to conclude on Dec. 31, 2011.

Yet UVa officials believe they may need to encourage more alumni to make contributions on an annual basis. Increasing annual giving, Sandridge said, is one of UVa’s greatest potential sources of revenue.

“We have some real opportunities for annual giving in some of our schools to produce a revenue stream,” he said.

Overall, 24 percent of UVa undergraduate alumni make contributions to the university. Carol Wood, UVa’s spokeswoman, noted that U.S. News & World Report has ranked UVa as the No. 1 public university for annual giving participation.

UVa’s School of Law is a national leader in annual giving, with a participation rate of 47.4 percent. Other schools at UVa — such as the Curry School of Education, the College and Graduate School of Arts & Sciences, and the School of Engineering & Applied Science — have a far lower participation rate.

John O. Wynne, the university rector, noted that annual giving can a “feeder system” for larger gifts down the road. Nearly all major university donors, he said, started out as annual contributors.

Wynne also said that many of UVa’s peer institutions are considering mid-year tuition increases to cope with their own financial difficulties.

“In theory,” he said, “we have the authority to increase our tuition now. There are obviously political ramifications to consider. But that’s something we need to think through.”