Endowments suffer at area universities
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At Washington and Lee, administrators will rely partly on a reserve fund. |
The economic downturn that has shrunk college endowments nationwide is taking its toll on Rockbridge County’s universities.
Washington and Lee University and Virginia Military Institute both reported losses in their endowments so far for fiscal 2009, which began July 1, 2008. VMI, a public university, has lost 32.7 percent of its endowment’s value. At Washington and Lee, a private school, it is down by about 18 percent.
Many universities rely on the interest from their endowments to fund at least part of their operating expenses. When the value of an endowment drops, the amount of money from interest also drops. That can leave universities short of operating money.
The plunge in university endowments follows a string of grim reports from the nation’s wealthiest colleges last fall. College endowment investment dropped 22.5 percent in the first five months of the fiscal year, according to a recent survey by the Commonfund Institute and the National Association of College and University Business Officers.
"We have no way to predict what the markets will do, but the decline in endowment values has already caused a number of institutions to cut their operating budgets, so if we see more declines the problems will only increase," said John Griswold, executive director of the Commonfund Institute. The institute is the research and education arm of Commonfund, a manager of non-profit investments based in Wilton, Conn.
Southern Virginia University, the county’s third four-year college, was the exception to the downward trend. Though with a considerably smaller endowment than either Washington and Lee or VMI – at roughly $500,000 – SVU saw a 5.1 percent gain in its endowment, said Bob Huch, the private university’s chief financial officer.
W&L’s endowment, the largest in the county’s higher education system, has lost about $130 million from its peak of $723 million last June. VMI lost $127 million in its endowment from Jan. 1 to Dec. 31, 2008.
The effect of the current economy on university endowments was a major topic of discussion at W&L’s Board of Trustees meeting last week. The outcome of the board meeting has yet to be released, said Steve McAllister, the university’s treasurer and vice president for finance. McAllister said that the community would be notified within the next few weeks of any new developments.
Money from the endowment covers a range of university operations, from faculty salaries and financial aid to visiting speakers and general operations, he said.
“There is almost no aspect of university life that does not have at least some support through endowments at the university,” said McAllister.
The majority of the money the endowment generates, about 40 percent, goes toward financial aid.
Last month, President Ken Ruscio in an email assured students and faculty that W&L was prepared to take on the economic challenge.
“We know the year ahead will not be an easy one,” Ruscio wrote. “But we feel exceptionally fortunate. The generosity and devotion of our alumni, the dedication of our faculty and staff, the careful stewardship of our trustees — those are the most precious resources we have, and we have them in great abundance.”
Ruscio cited a reserve fund established by the trustees and administration over the last seven years. McAllister said that reserve will make up revenue losses, keeping the university’s core scholastic and athletic programs alive.
At VMI, losses in the endowment will be met by filling only critical faculty vacancies while tightening spending on noncritical items such as travel costs, equipment and office supplies, a spokesman said. Those measures will save the institute about $2.1 million for the fiscal year, said Lt. Col. Stewart MacInnis, acting communications and marketing director. This year VMI trimmed $1 million from its annual budget without laying off any permanent fulltime employees, MacInnis said.
As endowments continue to plunge nationwide, universities are trying to make the economic downturn easier for students to cope with. Virginia Tech, for example, has a $500,000 emergency loan fund for students and families affected by unemployment.
VMI is also working to reach out to students in dire need of financial help, said MacInnis. He said he expects financial aid provided by the VMI Foundation to remain steady in the coming year. The VMI Foundation was established by institute alumni during the Great Depression to raise money to augment the school’s state support.
“Our financial aid office is working with parents who are suffering because of the economy on a case-by-case basis,” MacInnis said.
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