Listen: Endowed (Hughes)-2050

MPR’s Art Hughes reports on Minnesota colleges and universities endowment growth, as well as tuition hike ups.

Minnesota Higher Education institutions with substantial endowments are being forced to reconcile their flush coffers with the growing debt students are assuming as they pay for their educations. The University of Minnesota has the largest educational endowment in the state, by far. The market value of the university's half-dozen separate endowments climbed 26 percent in 2007 to almost three billion dollars. But the tuition students pay also climbed during that time. Hughes is joined by financial officers from various institutions around the state.


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ART HUGHES: The University of Minnesota has the largest educational endowment in the state, by far. The market value of the university's half-dozen separate endowments climbed 26% in 2007 to almost $3 billion. But the tuition students pay also climbed during that time. Chief Financial Officer Richard Pfutzenreuter says endowment money and tuition funds are combined to offset University operating costs. But much of the endowment spending is restricted by donors.

RICHARD PFUTZENREUTER: If they give us the money to endow a faculty chair in medicine, we can't take that money and lower tuition in the College of Liberal Arts. I mean, it would literally be illegal. There is a signed agreement with the donor as to where that money is going.

ART HUGHES: The University raised more than $200 million of unrestricted money to provide scholarships to low-income students. The US Senate Finance Committee is reviewing endowment spending of 136 colleges across the country, including the U of M. Iowa Senator Charles Grassley suggests universities spend at least 5% of what their endowments are currently worth to lessen the burden on taxpayers.

The University aims to spend between 4 and 1/2% and 4.8% of the endowment total, averaged over the past five years. It's a conservative approach that lets the endowment build, pays for research and faculty positions, and provides student scholarships. It added up to about $38 million going to help students in the 2006 academic year. It's money that freshman Sysouda Sara Yabandith couldn't do without.

SYSOUDA SARA YABANDITH: There's no way my family could help me out either. And if anything, my family needed more help than they could help me.

ART HUGHES: Yabandith's siblings started college but quit to help earn money for her Laotian immigrant parents. Now, for the first time, she envisions a life of academic research to help other people.

Private nonprofit colleges depend on their endowments for much more of their operating costs. Carleton College's $664 million endowment covers about a third of the school's operating costs. Chief Financial Officer Fred Rogers says it's important to have a predictable, steady source of income. He compares Carleton's careful endowment management to a fixed-rate home mortgage, as opposed to the short-term gains of a variable-rate loan.

FRED ROGERS: So in a reverse way, that's kind of what endowments are trying to do is to provide a median rate that will be maybe too low at some points, when people think there's more money, but could also be too high, when markets have gone down, and over time, will be about right.

ART HUGHES: In the past year, Ivy League schools with flush endowments, such as Yale, Princeton, and Dartmouth have upped their endowment spending. They and others are aiming aid to burdened middle-income students. One program buys down tuition to ensure students graduate without any student loans. Macalester College Investment Officer Craig Aase says it's possible such practices will filter down to schools like his with fewer resources.

CRAIG AASE: It's a tremendous waterfall effect in higher ed. So to the extent that Harvard does it and Yale does it and Princeton does it and-- before you know it, Bowdoin and Colby are doing it, taking loans out of portfolios and so on. As soon as you get down one layer in that hierarchy, there's plenty of overlap with Macalester. So this has implications for us.

ART HUGHES: Macalester's $676 million endowment is second only to the U of M. But unlike the U, 3/4 of students at Macalester receive institutional aid. In the end, one of the main reasons endowments continue to grow is continued support by donors. Matt Hamill with the National Association of College and University Business Officers says donors seem to appreciate careful conservative progress.

MATT HAMILL: We think that endowments are well-managed. That's why donors continue to entrust their gifts with colleges and universities.

ART HUGHES: While Grassley and other constitutional leaders indicate a desire for colleges to dig deeper into their endowments, no one knows yet what will come from the added scrutiny. The most recent reports on endowment earnings were positive. But indications are the coming years will be much leaner, triggering more caution by endowment managers. Art Hughes, Minnesota Public Radio News, Saint Paul.

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