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Economy slams colleges

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By Todd Cohen

The weak economy and stock market pounded U.S. colleges and universities last year, shrinking their endowments for the second straight year and private giving for the first time in 15 years, according to two surveys.

Endowments fell 6 percent on average for 556 schools whose fiscal year ended June 30, 2002, compared to a 3.6 percent decline a year earlier, according to the annual survey by the National Association of College and University Business Officers in Washington, D.C.

And private gifts to higher education fell 1.2 percent to $23.9 billion in fiscal year ended June 30, 2002, with alumni giving plunging 13.6 percent, or about $1 billion, according to a separate survey by RAND’s Council for Aid to Education.

Endowment holdings of 654 schools overall that participated in the NACUBO survey fell to $222 billion from $236 billion a year earlier.

Public institutions, accounting for $61 billion, or 27 percent of the total, lost 6.4 percent on average, while independent institutions, accounting for $161 billion, or 73 percent, lost 6 percent on average.

Among all institutions, stocks accounted for 57.4 percent of endowment investments, followed by bonds, 26.9 percent; hedge funds, 5.1 percent; cash 3.9 percent; and real estate, 2.7 percent.

Venture capital, private equity, natural resources and other investments accounted for the remaining 4 percent.

Because of their diversified investments, colleges and universities posted higher rates of return than did major stock market indexes, NACUBO said, and larger endowments were more likely to place a bigger share of assets in nontraditional investments.

The biggest endowments, on average, had two-thirds of their investments in the traditional categories of stocks, bonds and cash, compared to 91 percent for the smallest endowments, which benefited from greater allocations to bonds and cash but not enough to offset their larger exposure to stock, the survey said.

Endowments of more than $1 billion lost 3.8 percent on average, compared to losses of 6.1 percent for endowments of $101 million to $500 million, and 6.6 percent for endowments of less than $25 million.

While alumni giving to higher education fell sharply, giving by corporations and foundations held steady, according to the Council for Aid to Education survey.

Giving grew for current operations but fell for capital projects such as endowments and new buildings.

Overall, private giving accounted for 8.1 percent of higher education spending, down from 8.7 percent in fiscal 2001 and 8.8 percent in fiscal 2000.

Gifts of appreciated property such as real estate, art, stocks and other non-cash assets fell in fiscal 2002, with the number of gifts of securities such as stock down 20 percent on average, and the value of those gifts down 25 percent.

For the first time in more than 25 years, foundations gave more, $6.4 billion, or 26.4 percent of all private giving to higher education, than did alumni, who gave $5.9 billion, or 24.7 percent.

Foundation giving grew 5 percent, while giving by individuals who were not alumni grew 3.8 percent to $5.4 billion, and corporate giving grew by less than 1 percent to $4.4 billion.

Giving from fundraising groups such as United Way grew 8 percent to $1.6 billion, while contributions from religious groups fell 2.7 percent to $360 million.

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