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Endowment plunges causing college cutbacks

10:33 AM, Sep 2, 2009   |    comments
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With the economy still wreaking havoc on college endowments, campuses are struggling to come up with money to keep scholarships and other special programs alive. In some cases, schools are tapping already-depleted general funds, which means something else has to give.

At the Colorado School of Mines in Golden, endowment assets fell 24 percent for the six- month period that ended in December. Assets were expected to drop by 15 percent over the year. While those dips are not as severe as the Standard & Poor's index, they're worrisome. At Mines, endowment support did not drop in fiscal 2009. In fiscal 2010, however, support for endowed programs declined 47 percent from $6 million to $3.2 million, said Linda M. Landrum, executive director and vice president of finance and administration for the Colorado School of Mines Foundation.

The shortfall directly affected the funding of scholarships and endowed professorships. The gap will be covered by $2 million from the university's general fund, generated through a hiring freeze and the decision not to give faculty or staff pay increases in 2010. The remainder will be covered by reduced general fund spending and budget cuts. Foundation officials are also hitting up donors to fill some gaps so programs can continue, university officials said.

The University of Colorado at Boulder is dealing with several donor funds that are "under water," or funds that have fallen below the principal, said the campus Senior Vice Chancellor and CFO Ric Porreca.

Some accounts had some money left in them and so programs will continue this year. But if the economy doesn't turn around, more programs could face cuts next year, Porreca said.

Last year, CU-Boulder grabbed $85,000 out of its beleaguered general fund to meet certain obligations in fiscal 2009, such as scholarships in music, law and engineering; a law technology policy clinic endowment; and endowed chairs in music and engineering.

Porreca estimates it will take more than four times that amount - or $470,000 - to plug endowment gaps in fiscal 2010. Some 55 requests have come in for a general fund bailout from various schools and colleges.

"Now we're getting into a different range of need," Porreca said. "We haven't evaluated all those requests yet. Are they linked to hard commitments, or just things you'd like to do to advance your program?"

"The ongoing concern is whether the investments are going to stay where they're at, or whether they go back down again."

The good news is that the cuts and funding shifts will only last as long as the economic downturn. In other words, they're temporary.

Colorado State University's the foundation's $241 million in assets were expected to drop 18.3 percent this year over last.

"We are also struggling with our endowment reductions here at Colorado State as are most institutions of higher education," said Interim Provost and Executive Vice President
Rick Miranda. "We have needed to backfill some salaries that have in the past been paid from endowment funds - we have a commitment to those individuals if they are faculty or other long-term employees that we should not abandon."

That doesn't mean everything got funded, however. Miranda said other uses of endowment funds, such as student scholarships or equipment and research supplies were cut.

"Each of our deans manage the endowments related to their own colleges, and they are employing a variety of strategies to deal with the situation both short-term and long-term, if necessary," Miranda said.

DenaSue Potestio, executive director of the CSU-Pueblo Foundation, which has assets of $20 million after the downturn, said the foundation lost more than 22 percent during calendar year 2008, or about $3.9 million in total holdings - including endowed and non-endowed funds.

"Numerous endowed scholarship funds are under water, and the economic downturn has severely impacted the foundation's ability to award scholarships to a student population of whom 80 percent receive some form of financial assistance," Potestio said. "We have been working with donors to educate them, and we are truly grateful that some have stepped forward to fund scholarships despite the scholarship status."

Potestio said that in a normal year, foundation scholarships make up about one third of the total scholarships the university distributes. She said some scholarships have been supplemented by small distributions from money raised at the President's Scholarship Gala.

The University of Northern Colorado has taken a slightly different approach and is not using its general fund to backfill foundation endowments.

"Our Board of Trustees continues to emphasize and support scholarship development," said UNC spokesman Nate Haas, adding that through the annual budgeting process trustees allocated more than ever to institutional financial aid ($9.2 million), which included maintaining an increase of $525,000 in scholarships ($1.3 million total) from a year ago.

Haas said these investments provide tuition discounts for many students.

"A majority of our students receive some form of financial aid," Haas said. "Beginning this fall, we'll begin working on a five-year budgeting plan as we aim to be even more strategic in pricing and discounting."

For private schools, the impact of the economic downturn is just as dramatic, if not more so.

The University of Denver, which doesn't release detailed information about its budget, has $253 million in its endowment. Campus spokesman Jim Berscheidt said DU's operating budget for 2010 takes into account a reduction of about $2 million in endowment fund distributions.

"The $2 million affects scholarships and professorships," Berscheidt said. "However, the university covered the reduction through adjustments in the operating budget."

Written by Julie Poppen, Education News Colorado 

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