Hartford Business Journal

www.HartfordBusiness.com • September 30, 2019 • Hartford Business Journal 17 For university endowments, stock market isn't the only risk By Matt Pilon and Sean Teehan mpilon@hartfordbusiness.com; steehan@hartfordbusiness.com F or higher-education officials, a good year of stock market re- turns and fundraising is cause for celebration. But investment gains do sometimes come with another risk for schools to manage: public perception. The high cost of college, or even a state budget shortfall in a given year, have tended to draw lawmakers' at- tention to how much money schools are holding in the bank. "With the biggest of endowments, I think people could look at them and say, 'Jeez, what are you gonna do with all that money?' " said Martin Van Der Werf, an education policy researcher at the Georgetown Center on Edu- cation and the Workforce. "And I think there's some public policy questions that could be asked there." Yale University is among those elite institutions, boasting an endow- ment of $29.4 billion as of fiscal 2018. Yale declined to comment for this story, but the school has faced political pressure to spend more of its money. In 2016, for example, as the state was facing a multibillion-dollar defi- cit, some lawmakers proposed a bill that would have taxed investment returns earned by Yale's endowment, unless the school invested more of that money locally. The bill faced major backlash and ultimately didn't gain traction. Meantime, Yale is among a handful of Ivy League schools facing a new 1.4 percent excise tax on en- dowments — a provision slipped into the federal tax cuts passed by Congress in late 2017. Sandy Baum, a senior fellow in the Income and Benefits Policy Center at the Urban Institute, said no matter your viewpoint, wealthy schools use at least some of their endowment distributions for social good. "A lot of people are really angry that Harvard and Yale have all this money, and don't think about all the things that those institutions do," Baum said. "If you're asking what am I going to do with my money, I'm not going to give it to Harvard or Yale, because they have plenty of money, and that's fine. But that doesn't mean that they're not doing socially benefi- cial things with their money, because by and large, they are." Of the 802 colleges and universities included in the National Association of College and University Business Officers' most recent endowment sur- vey, about 100 had $1 billion or more in endowments assets. With $423 million in endowment assets, UConn still has a ways to go to reach the $1-billion mark, but that doesn't mean the state's flagship public university has been immune from criticism. Last month, state Senate Minority Leader Len Fasano (R-North Haven) called for the UConn Foundation to foot the $20.5 million bill associ- ated with moving the school's sports teams to the Big East conference. In a letter to UConn President Thom- as Katsouleas, Fasano, who has publicly the latter of which has been generated during a long period of growth in the markets," Ganz said. The UConn Foundation, like other college endowments, has also in- creased its holdings in alternative investment vehicles such as hedge funds, which can be riskier than tradi- tional stocks and bonds, but can yield larger returns, said UConn Founda- tion President Scott Roberts. That fits with a broader trend for pub- lic universities, which across the country have increased bets on alternative invest- ments, from 41 percent of their overall portfolios in 2009 to 46 percent in 2018, according to the National Association of College and University Business Officers. However, those schools still haven't caught up with their private college counterparts, which last year had 56 percent of their endowment portfolios in private equity, hedge funds and venture capital. Nurturing a nest egg While some have criticized schools (particularly the wealthiest ones) for sitting on large and growing endow- ments while the cost of college contin- ues to climb, administrators say the way endowments work is nuanced and sometimes misunderstood. Officials say bigger endowments have allowed for increases in student aid, helping blunt what would have otherwise been even bigger cost hikes for students. Not-for-profit institutions are also restricted by law, university policy, and often donor wishes when it comes to how they can spend endowment funds. It ranges from school to school, but the main way universities spend their endowment distributions annually is on student aid, according to NACUBO, which found that nationally, colleges al- located nearly half of their endowment allotments in 2018 for financial aid. That was followed by support for academic programs (16 percent), fac- ulty positions (10 percent) and campus operations (7 percent). Roberts, the UConn Foundation president, said it's vital for future fund- raising that donors can trust schools to use their charitable gifts as intended. "We are stewards of funds that generous donors have invested in the future of our university," Roberts said. USJ's Harrington said the overarch- ing strategy for managing an endow- ment boils down to protecting the longevity of the institution. That's why university policies on spending endowment money appear so conservative — most schools tap just 5 percent or less of their invest- ment returns in a given year. "We're leaving something to build in the future," Harrington said. "The ten- dency to want to raid the kitty to spend Yale's multibillion-dollar endowment has come under political scrutiny. Martin Van Der Werf, Education Policy Researcher, Georgetown Center on Education and the Workforce Sandy Baum, Senior Fellow, Income and Benefits Policy Center, Urban Institute Continued on next page >> Continued on next page >> CT college endowments, tuition see double-digit growth This chart compares the growth of endowments vs. tuition at Connecticut's largest not-for-profit colleges and universities. Endowment Total in-state, living on-campus tuition % change % change Institution Name FY 2018 FY 2009 2009-18 FY 2018 FY 2009 2009-18 Yale University $29,444,936,000 $16,103,497,000 83% $71,290 $51,400 39% Wesleyan University $1,065,219,000 $476,481,000 124% $69,935 $51,935 35% Trinity College $621,190,886 $339,757,696 83% $71,470 $50,645 41% Quinnipiac University $526,568,412 $192,579,287 173% $63,770 $44,900 42% University of Connecticut $423,165,900 $245,845,448 72% $31,044 $22,382 39% Fairfield University $331,859,000 $203,162,000 63% $64,325 $49,725 29% Connecticut College $315,189,000 $165,045,000 91% $69,440 $51,685 34% University of Hartford $178,755,000 $82,887,000 116% $54,662 $41,258 32% Sacred Heart University $167,403,999 $67,364,074 149% $58,440 $42,720 37% Central Connecticut State University $72,666,207 NA NA $25,215 $19,648 28% University of New Haven $72,023,966 $12,286,283 486% $56,446 $41,796 35% University of Bridgeport $34,028,000 $9,985,000 241% $54,508 $41,467 31% University of St. Joseph $33,519,000 $15,503,000 116% $51,404 $40,540 27% Source: National Center for Education Statistics PHOTO | CONTRIBUTED

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