CLARIFICATION: An earlier version of this story stated the University of Hartford increased its financial aid budget because of the rising cost of tuition, when the budget increase was made because of the rising expense of tuition as cost of living has increased.
Endowments held by Connecticut colleges are beginning to show signs of life, posting investment gains for the first time after steep recession losses.
But it will take years for the college nest eggs to recover from the financial crisis, which caused schools to eliminate staff and faculty positions, borrow money, freeze budgets and put construction projects on hold.
“We are going to be looking at low double digit or high single digit growth for awhile,” said Kevin Edwards, UConn Foundation associate vice president for treasury services. “We aren’t back to the days of mid-to-high teen returns.”
Since this year’s recovery has only returned a small portion of recession losses, Connecticut’s schools of higher education aren’t ready to reverse many of the cost-cutting measures made in the last two years.
Income from Trinity College’s endowment supports 14 percent of the school’s annual operating budget. But at one point, the fund had lost over $100 million. Broad stock market gains over the past year helped the endowment recover about 15 percent of its value at the end of June, bringing its total value up to $356 million.
The high watermark for the school’s endowment was $441 million at the end of 2007.
Paul Mutone, Trinity’s treasurer and vice president for finance and operations, said effects from the economic downturn were not felt until this academic year. Traditionally, Trinity’s endowment provides about $21 million to the school’s operating budget, but that contribution fell to $16 million this academic year.
As a result, Trinity instituted pay freezes this year, and offered an early retirement plan to faculty and made layoffs in the 2009-2010 fiscal year.
Yale University in New Haven boasts of the state’ largest education endowment and had the largest loss of any school during the recession. From an all-time high of $22.9 billion in 2008, the school lost 25 percent of its endowment in one year to $16.3 billion in 2009.
Despite an 8.9 percent investment return that increased the endowment to $16.7 billion for the fiscal year that ended June 30, the five-year trend for the endowment has been a 7.2 percent loss.
When Yale’s endowment investments tanked in 2009, the school was forced to borrow $1 billion at an interest cost of $29 million per year, postpone new construction, eliminate roughly 600 jobs and decrease the number of new students.
Even with the gains this year, Yale doesn’t plan to make any major changes to its spending decisions, said Yale spokesman Thomas Conroy.
The University of Connecticut’s endowment stood at $263 million at the end of June, up about 9 percent from the previous fiscal year. At the end of June 2008, the endowment had a value of about $317 million, a 17 percent decrease over the two-year period.
The school’s endowment expects to see more gains like the past year, Edwards said, but it will be a slow hike up, mirroring the sluggish growth in the economy.
UConn’s endowment — which funds scholarships, program support and faculty positions — is considered small for a large school and income from the endowment contributes about 1 percent of the university’s annual budget. As a result, losses haven’t had a big impact on UConn’s operations. It has, however, forced cost cutting measures at the UConn Foundation which experienced layoffs and pay freezes.
Like UConn, the University of Hartford counts on endowment income for a small portion of its operating budget — less than 2 percent — so its losses haven’t had a major impact on the university. Hartford’s endowment recovered some of its 20-percent losses in 2009, but today’s endowment level of $86 million is still below the high watermark of $94 million set two years ago.
To offset the rising cost of living and difficulties paying tuition, the University of Hartford increased its financial aid budget from $50 million in 2008 to $59 million in 2010. That increased contribution pulled money from other areas of the budget, resulting in the university eliminating 41 positions earlier this year.
“We are a little more tuition-driven at the University of Hartford than at other schools,” said David Isgur, University of Hartford spokesman. “To remain competitive with other schools like us, we try to keep tuition costs to a minimum, and we decided to commit more to the financial aid budget.”
Wesleyan University’s endowment of $700 million at the end of 2007 fiscal year shrank to $476 million at the end of 2008. The fund has recovered somewhat, growing to $517 million this year, although still down 26 percent over the three years. School officials declined to comment on the school’s financial situation.
Quinnipiac University in Hamden is one of the few schools to recover nearly all of its recession losses in one year. In 2008, the endowment was $227 million and dropped to $185 million in 2009. By June 30, the fund had recovered to $224 million.
The majority of Quinnipiac’s endowment is invested in equity, and the university’s standing improved as those markets improved, said Patrick Healy, Quinnipiac senior vice president for finance.
As schools deal with losses to endowments, they are making a push to raise funds through other sources.
The UConn Foundation launched a $600 million fundraising campaign in September 2009, the most aggressive in its 128-year history. Through August of this year, about $230 million has been raised.
Next year, Quinnipiac is launching a fundraising campaign aimed specifically to grow its endowment. Once the fund reaches twice the school’s annual $300 million operating budget, the endowment will be used for scholarships and faculty chairs.
The University of Hartford has maintained a fundraising campaign for 10 years to transform its physical and academic assets. For the past decade, that Campaign of Commitment raised more than $175 million.
Meanwhile, gifts and donations at UConn, which fund 2 percent of the annual operating budget, have gone down slightly, compared to double digit declines in giving experienced by colleges and universities nationally. In 2009, UConn alumni participation hit 19 percent and new gifts and commitments and revocable and deferred planned gifts totaled $48.5 million.
“Donors have been very true to the university,” Edwards said.
