Educational Endowments Slowly Improving
WASHINGTON (AFP eWire - Feb. 9, 2004) - U.S. educational endowments improved last year, but schools will likely still face challenges during the next few years, a new survey from the Commonfund Institute reveals.
Educational endowments and foundations reported average annual total returns of 3.1 percent for fiscal year 2003, which ended June 30, 2003. Although a gain from a 6 percent drop in 2002 and a 3 percent drop in 2001, financial problems were still evident, according to the fourth annual Communfund Benchmarks Study of 657 institutions.
Institutions reported increased levels of debt, budget cuts and the emergence of 'underwater funds,' which are individual restricted endowment funds with current market values that have fallen below their historic dollar value at the time of the gift. In many states, endowments are barred from spending from underwater funds and must wait until they are restored to historic dollar value.
The survey found that 37 percent of institutions made cuts to their operating budgets last year, with 'across the board' cuts reported widely. Thirty-six percent said they anticipate making more cuts this year. In addition, 30 percent of endowments reported increased levels of debt last year. The average debt as a dollar-weighted percent of endowment value was 30 percent, and the average debt service was 6 percent of the operating budget.
While donations to schools had increased slightly, they were still below annual giving levels of previous years, the report said. Thirty-four percent of the institutions said gift flows had increased, while 31 percent reported no change and 30 percent reported a decrease. Eighty-two percent of the new gifts were restricted.
For more information, visit Commonfund Institute News.