John Casteen was only hours into his first day as the University of Virginia's seventh president on Wednesday when the announcement came. A huge projected state deficit would probably mean deep cuts in the university's funding.

For Casteen it was de'ja vu.

Having just finished five years as president of the University of Connecticut, Casteen is accustomed to lean times. When New England's economy began sagging about two years ago, university officials were forced to lobby hard in Hartford to keep the university's funding up.

"Certainly we'll have to go back and reexamine everything," he said in an interview just after Gov. L. Douglas Wilder's announcement last week that Virginia faces a $1.4 billion revenue shortfall.

"You have academic visions, and you have the reality of how to achieve them," said the new president. "You can't do everything . . . . That comes true with a vengeance when you have a state budget that can't keep pace with inflation."

Casteen, 46, assumes his $147,000-a-year job at a critical time at Virginia's flagship university.

The University of Virginia faces not only cuts in its $416 million operating budget but also a plateful of divisive issues, including racial divisions in its 17,200-member student body -- almost a third of it from Northern Virginia -- and decisions about how to increase the numbers of qualified in-state students without succumbing to the "state U" syndrome that many fear will accompany greater size.

Casteen is no stranger to Charlottesville. He has spent most of the past 30 years there, as an undergraduate, graduate student, professor of English and finally, dean of admissions.

At the universities of Virginia and Connecticut, he earned a reputation as a hard-nosed, occasionally arrogant -- some say meddling -- manager for whom no detail was too insignificant.

"He won't have a honeymoon. Too many people remember him from before," said one University of Virginia official, who did not want to be identified.

"He does get involved with all the details . . . . As a physician, I was concerned that he maintain some leisure," said Andrew J. Canzonetti, chairman of Connecticut's board of trustees. "He doesn't take time to smell the flowers."

As a parting gift, the Connecticut board gave Casteen a high-tech navigational system for his 22-foot sailboat, in hopes, Canzonetti said, that he'll use the boat to relax. At the moment, it is parked in the garage at Carr's Hill, the imposing university home that Casteen occupies with his wife, Lotta, 39, and their two children, ages 8 and 10. Casteen's son by a previous marriage, John IV, will be a second-year student at the University of Virginia.

Casteen is the first to admit he works hard, 60 to 70 hours a week in Connecticut, he said.

He takes the job seriously, and even says the university president's "personal life ceases to be separate from your professional life."

Casteen also has the demeanor of someone who takes himself seriously. Sitting in his new office in Madison Hall, he answers questions quietly, thoroughly, deliberately, seeming to speak in paragraphs and often numbering his points, 1, 2 and 3.

According to campus sources, Casteen was not the faculty's preferred choice to succeed Robert M. O'Neil, who left July 1 to direct the university's Center for the Protection of the First Amendment.

But now, according to faculty Senate Chairman C. Ray Smith, concerns about the university's funding situation have subsumed worries about Casteen's management style. "Now, most everybody is positive," Smith said. "Some who were the most negative aren't any more. The attitude is, 'Let's give him a chance.' "

The consensus is that with his reputation for decisiveness, Casteen is a much-needed antidote to what many saw as O'Neil's tentative approach.

"There was a serious morale problem developing under O'Neil. There is now an opportunity for Casteen to get everybody's batteries recharged," said economics professor Richard Selden.

Casteen's supporters point to his experience in Connecticut and the three years he spent in Richmond as Gov. Charles S. Robb's education secretary as boons to enhance the university's relations with the state government.

But Casteen plays down his political skills. A medievalist whose favorite text is "Beowulf," and who can go on at length about the Venerable Bede (Britain's famous 7th-century historian), the soft-spoken Casteen maintains he is first and last an educator.

"I've never made a pretense that I was a bureaucrat or a politician," Casteen said. Even during his tenure as education secretary, "I always saw myself as a teacher with a chance to make it better for other teachers and students . . . . I never pretended to be part of shad planking" -- a reference to the annual shadfish cookout in Southside that attracts virtually all of Virginia's leading politicians.

Casteen has managed to continue teaching, whatever his job, and beginning this fall he plans to teach a course at Virginia, which he calls "Origins."

"I've been thinking about it for 25 years," he said, laying out a syllabus that includes not only Bede but also Nat Turner, an 18th-century New Jersey Quaker named John Woolman, and Alex Haley's "Roots." The course will examine "how individuals decide, 'I'm different from that guy across the river' -- how people define themselves as groups, nations," Casteen explained.

Casteen also has some academic dreams for the university, some of which he concedes will be unpopular. One is a resurrection of the "comprehensive exam," which decades ago was a required test for all undergraduates in their major field. "It was not popular then," he said. "It was hard. But it made you sit down and make sense" of prior course work.

Before he begins changing the university's curriculum, Casteen will be facing other more pressing decisions. Tops among them will be strategies for managing growth -- a bitter pill for many students and faculty at a university founded 172 years ago by Thomas Jefferson as an "academical village."

Under pressure, particularly from Northern Virginia politicians, to admit more qualified in-state students, and facing a projected jump in the number of high school graduates, university trustees have approved a modest expansion plan beginning in 1997. Now the university's vow to build facilities for the new students before they come is jeopardized by budget problems.

As the son of a Portsmouth boat builder, Casteen was the first in his family to go straight from high school to college, and he often mentions "increasing diversity" -- both economic and ethnic -- as a goal of the university.

"As admissions dean, the real stamp he left here was in affirmative action," said one longtime university official. "He was one of the few administrators in the late seventies in a position to make a difference who did make a difference."

Today Casteen said he's pleased to see "so many minorities in leadership positions at the university. We worked hard to get the critical mass to make that happen."

With a greater minority presence -- black students make up 8.3 percent of the student body, Asians 4.9 percent -- have come some racial strains. Last spring, racist graffiti at a university bus stop and later calls by white student leaders for the resignation of Lee Barnes, the first black to be elected campus-wide as student government president, brought turmoil to the campus.

Casteen is no stranger to campus racial incidents. For almost a year, he recalled, the University of Connecticut "was kept off balance" after an incident in which white male students spat on and insulted female Asian American students.

"The remedy {for such occurrences} is educational in nature," he said. "Heavy-handedness, tough rules, are just not effective."

Casteen said he has met with minority student leaders and plans further meetings with all student groups to try to bring the community together "to make sense of the diversity . . . to face the need to regroup."

The university is "a place of celebration of differences," he said.

John Thomas Casteen III, seventh president of the University of Virginia

Born: Portsmouth, Va., Dec. 11, 1943

Education:

BA, University of Virginia, 1965

MA (English), University of Virginia, 1966

PhD (English), University of Virginia, 1970

1985-1990: President of the University of Connecticut

1982-1985: Secretary of Education, Virginia, under Gov. Charles S. Robb

1975-1982: Dean of Admissions, University of Virginia

1970-1975: Assistant professor of English, University of California, Berkeley