The University of Richmond's endowment has fallen 15 percent since December 2007, from a $1.7 billion high to $1.45 billion as of October, but it's difficult to predict how it will continue to fare in response to the deepening worldwide recession.
President Edward Ayers has said the university expects to make a "modest" increase in tuition, room and board -- one that could send Richmond's price tag above $50,000 per year.
Before the economy took its calamitous tailspin this fall, Richmond climbed from No. 43 to No. 41 nationally in terms of endowment value out of 791 colleges, according to rankings calculated for June 30, 2008 from the National Association of College and University Business Officers. The endowment actually grew 3 percent from June 2007 to June 2008, the statistics show.
The university's spending policy is designed to allow resources to continue to be drawn from the endowment, even when the markets are down, said Lori Schuyler, Ayers' chief of staff. As a result, even though the value of the endowment has decreased, there is no reason to expect reduced spending in 2009, she said.
The endowment is not immune to the current economic crisis, and like most colleges, is suffering losses as a consequence of the market downturn. Richmond has lost more than $300 million in the market value of its endowment since June 30, 2008, said Herb Peterson, vice president for business and finance.
Despite the decline, Schuyler and Peterson said they believed Richmond would weather the turmoil better than most colleges.
Officials determine how money is spent each year based on a three-year rolling average of the market value with a one-year lag, Schuyler said. The system protects the university's budget from fluctuations in the market and allows growth in spending, even during years with negative endowment returns, she said.
The endowment must benefit both present and future students in an equal fashion, Peterson said. To achieve and maintain this "generation neutral" approach through difficult times, the policy reigns in the university's spending, forcing it to use an amount that can be sustained rather than the maximum that can be spent in a year, he said.
The investment and spending policy is an attempt to ensure that a full scholarship donation given in 2009-10, without any added gifts, will pay a full scholarship 20 years or 50 years in the future, Peterson said.
Looking forward, Peterson said that the spending policy would sustain endowment income for two years at its current level and then provide endowment income at a "slightly declining level" thereafter.
"UR and the world will have many bigger problems with which to contend," he said, assuming the economic situation doesn't change during the next two years.
In an effort to meet obligations to the students at Richmond while managing expenditure, Peterson said that general fees and room and board increases for next year would be "the lowest percentage in 40 years."
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Schuyler said that next year's endowment would also provide $18,000 per student in support of the operational budget. While she acknowledged that many alumni and friends of the university weren't in the position to give as generously as before, Schuyler said that it was heartening "to see participation numbers this year consistent with last year."
Schuyler emphasized the "crucial role," that the endowment plays in providing "the Richmond education that students expect," and said the university community was so grateful to alumni and friends who retain Richmond as a priority in difficult times.
Contact reporter Sarah Blythe-Wood at firstname.lastname@example.org
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