Endowments take a hit, but students won’t notice much difference

  • By Peter Sachs
  • Staff Writer
  • July 08, 2009 @ 7:00 AM

While endowments at universities across the city are taking a beating as investment markets continue to slide, most schools are making only minor changes in response, financial officers say.

The endowments at the University of Chicago and Loyola University have both dropped by about 25 percent since last June, while Columbia College’s endowment has decreased 32 percent in that time, school officials say.

And while that much of a drop means putting some construction projects on hold to save cash, schools say they’re fortunate that only a small part of their day-to-day operating budgets are funded by endowment proceeds.

“We’re not having to respond to the changes in the endowment with any kind of draconian operating cuts or layoffs or things like that,” says Eric Jones, Loyola’s assistant treasurer and chief investment officer.

Nationwide, most universities have watched their endowments slide by 25 percent or more in the last year, but the fallout is varying widely from school to school. Harvard was forced to borrow more than $1 billion and is laying off almost 300 people because about a third of its operating budget is funded by its endowment, which lost billions of dollars last year.

Other schools have reduced scholarships to deal with the declines.

Loyola’s endowment was $373 million this time last year and is now at about $280 million. Though the endowment lost nearly $100 million, the interest it would have earned had been slated to fill just 3 percent of Loyola’s budget this year. Instead, the school is using a budget surplus from last year to make up the difference.

That also means the school won’t draw any money out of the endowment for at least the next year, Jones says.

“It’s basically a way to allow the endowment to keep what it has so it can hopefully grow at a faster clip,” he says.

Some upcoming construction projects are being tabled, but nothing that students will notice immediately, Jones says.

“We’ve postponed capital projects that we’re in no rush to complete, but you’re not going to walk around campus and see big holes in the ground,” he says.

Columbia is making similar moves, putting on hold some construction projects it had underway, says Chief Financial Officer Michael DeSalle. The school’s new Media Production Center in the South Loop, slated to open in early 2010, isn’t affected, though.

“It does save, in our case, millions of dollars,” he says.

Similar to Loyola, about 5 percent of Columbia’s budget depended on endowment proceeds. By raising some fees and reducing travel, the school is getting by without making any big cuts, he says.

“Because the economy was so difficult, we did a 3-percent price increase that our board approved last fall, and we took (two-thirds) of that and put it into additional scholarships,” DeSalle says. That move increased Columbia’s scholarship fund by 45 percent to $11 million, he added.

The University of Chicago’s endowment has shed about $1.5 billion in the last year, bringing its balance to about $4.6 billion, spokesman Bill Harms says, but the implications of that decrease are less clear.

“We don’t discuss the endowment, what we do with it or how we invest,” Harms says.

DePaul University declined to provide any figures about its endowment, since calculations on where it stood at the end of the fiscal year won’t be complete until next month, spokesman John Holden says.

 

Daily News Staff Writer Peter Sachs covers higher education. He can be reached at 773.362.5002, ext. 18, or peter [at] chitowndailynews [dot] org.

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