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Local colleges see savings shrink

Endowments lose funds as stock markets weaken

Thursday, November 20, 2008
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— Colleges are seeing the value of their endowments drop by millions of dollars as the economy tanks, putting pressure on even deep pockets.

Rensselaer Polytechnic Institute and The College of Saint Rose have restricted hiring and put construction projects on hold. Union College is leaving some open positions vacant.

Officials acknowledge that tuition hikes are possible, a burden for families already struggling in the current economic climate.

Diane Blake, Union College’s vice president of finance and administration, said, “We are no different than anyone else. Just as individuals have suffered reductions in personal assets, the college is in the same position.”

Union’s endowment as of June 30 was $400 million. “We are definitely down from that point,” said Blake, estimating that it is around the 2007 level of $370 million.

“Everyone is down. It’s just a matter of degree. There is no safe haven. It comes down to how you are allocating the funds. It depends on where the assets are,” said Blake.

Endowment income is a line item in the college budget. Union College officials are working with the president on a budget that will be in place by July 1.

At Siena College in Loudonville, a private school run by the Franciscans, the endowment was $135 million at the start of the year and now stands at $104 million, a 24 percent drop.

Phil Stec, vice president for finance and administration at Siena, said the drop in endowment funds is unlike anything higher eduction has experienced since the 1970s.

The college takes 5 percent from its endowment fund each year, which makes up 7 percent of Siena’s operating budget.

“It’s not affecting the payout from the endowment for this year’s operating budget,” Stec said. “Unless the market comes back, it will have an impact in the future.”

The hope is that the financial conditions will improve and the markets will rebound, but the question is how long it will take. Siena’s trustees and administrators don’t anticipate that the market will come roaring back, and the college is preparing to trim.

There is not a hiring freeze, but Siena’s administration is looking carefully at vacant positions. “We will fill health and safety positions, but if we can live without filling other jobs, we will.”

Siena College won’t change its portfolio and is confident in its asset diversification.

Stec said, “The big worry is how this will impact the students and parents. It’s a tough economy, and unemployment is going up.”

A college’s endowment could be compared to an individual’s personal investment portfolio of assets that can be invested in stocks, bonds or alternative investments. It supports the college’s mission and generates income for things like scholarships and new buildings and helps keep the cost of tuition down.

The idea is not to overdo use of the endowment for one generation at the expense of the next.

Recent figures from RPI said the school had an $813 million endowment in 2007 and had lost $5 million of it. The college publicized the amount of its endowment in March amid federal scrutiny of how the nation’s richest colleges were spending money.

It is also included in U.S. News & World Report.

Rensselaer spokesman Jason Gorss said, “The endowment has been negatively affected by the downturn in the market, but we do not anticipate any immediate impacts on programs that rely on support from the endowment.

“We are long-term investors, with a long-term investment horizon, and the endowment will recover.”

The Sage Colleges’ interim president, Susan C. Scrimshaw, said, “Of course we have been impacted. Every college has, but we have been impacted less than the market drop. We were spared the worst case scenario.”

Sage’s endowment in January 2008 was $32 million; a recent report had it at $27 million, and with October’s performance, it may be closer to $25 million, according to Scrimshaw.

Sage’s fund manager became concerned in January 2007 and put the colleges in a more financially conservative position. Scrimshaw said the colleges put operating money into M&T Bank and it’s very secure.

The colleges started cost-cutting measures several years ago and have “cut past the bone,” Scrimshaw said.

At Skidmore, a liberal arts college in Saratoga Springs, the endowment was at a high of $296 million in December 2007 and in September of this year was $257 million.

Spokeswoman Andrea Wise said, “We know the markets have declined and we are anticipating a further decline, but we do not have final numbers for October.”

Skidmore is looking at capital expenditures and whether to fill open positions. Typically, the college renovates two residence halls each summer, but next summer will do only one.

“In general we are looking for ways to obtain savings without a negative effect on students,” Wise said. “We want to take care of current employees and provide ways to make Skidmore as accessible to students as possible.”

 
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