UM ENDOWMENT REPORT statistics submitted to Congress last week

Source: University of Missouri Office of the President

Lora Wegman graphic

Congress recently asked the nation’s wealthiest colleges and universities to report on their use of endowments and efforts to keep tuition down and recruit low-income students. Congress believes schools with sizable endowments should be spending 5 percent of them to keep costs down.

The University of Missouri’s endowment of just more than $1 billion is ranked 70th nationally. The university spends an average of 4.1 percent per year on scholarships, professorships, capital projects and other aspects of its mission.

Why did Congress request the information?

Sens. Max Baucus of Montana and Charles Grassley of Iowa, chairman and ranking Republican member of the Senate Finance Committee, respectively, requested the information after a record 76 colleges and universities reached $1 billion endowments. On average, nearly 800 institutions earned 17.2 percent returns on their endowments last year, but many still raised tuition.

UM earned 18 percent last year on its $1 billion endowment. The Missouri General Assembly last year capped UM’s tuition and fees to the rate of inflation. Many schools nationwide are still raising tuition at a rate higher than inflation.

What has been the result of Congress’ inquiry?

Many Ivy League schools have agreed to give grant aid instead of loans to qualified students.

The UM System’s chief budget officer, Nikki Krawitz, says the four UM campuses already are doing enough to keep costs down in a fiscally prudent way.

"We spend a lot on financial aid and we work hard to ensure that students have access and affordability," she said. "The challenge is that there is a big difference between the University of Missouri, which has a $1 billion endowment which covers four campuses, and Harvard or Yale, which may have $20-, $30- or $40 billion endowments and a lot fewer students."

Krawitz said the university’s policy of not paying out more than 106 percent of the previous year’s endowment payout is meant to smooth out the use of the endowment with market fluctuations and protect "intergenerational equity," or the ability of the endowment to help future students.

Will UM increase the use of its endowment?

In a word, ‘no.’ By Congress’ calculations, the university averages around 4 percent payout per year, but Krawitz said it’s more appropriate to use the average market value of the endowment over three years, not one year. Under that calculation, UM’s payout is closer to 5 percent.

"The reason" Congress’ 5 percent is "not a good idea is that you want to be able to ... build up a cushion within your endowment so that you don’t lose the buying power of the endowment."

The UM Board of Curators asked in its January/ February meeting why UM wasn’t using more of its endowment. The report to Congress says that 73 percent of UM’s endowment is subject to permanent spending restrictions or limitations set by the donor.

"One of the problems we have is that when somebody gives an endowment … the donor is telling where that money can be used," said Don Walsworth, a curator from Marceline. "We have to abide by the donor’s wishes."

How does UM grow its endowment?

All four UM campuses have development offices that raise funds, and investing the money is handled by outside managers. Last year the university spent $4.7 million in fees to investment managers, who are overseen by Krawitz.

MU launched a $1 billion "For All We Call Mizzou" funding campaign in 2000. In the past seven years, MU’s development staffers have doubled to158 and the development budget is currently $14 million a year. Beth Hammock, spokeswoman for the MU campaign, said it costs MU about 14 cents to raise $1.

Why have an endowment?

Krawitz said in an era of decreased state funding, endowed professorships and other resources take the place of funds that would otherwise come from the state. And as long as only part of the earnings generated by the endowment are used, it will always be there for future generations.

What is the university doing to recruit low-income students and keep tuition down?

UM’s report to Congress said it spends an average of $700 to recruit each low-income student from Missouri. UM defines low-income students as those with families earning less than $40,000. The university reaches out to these students by visiting urban high schools in low-income areas and rural areas throughout the state. These students then receive about 80 percent in aid toward tuition and fees.

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