Recession hits colleges' endowments

San Diego Union-Tribune--California State University San Marcos' endowment began with a $450,000 gift in 1996. Twelve years later, the fund was valued at more than $14.6 million.

Greg Svatora, the school's director of finance and business services, said he knew the university couldn't count on double-digit gains in the stock market forever.

But Svatora didn't realize a crash was on the horizon.

“I've been in this business for 20 years, but I've never seen anything like this,” Svatora said of the 23 percent loss that dropped the endowment's value to $11.3 million by June.

University endowments nationwide have plunged an average of 23 percent since last July, the worst drop since the 1970s, according to the National Association of College and University Business Officers. Officials from the University of California San Diego, San Diego State University, Point Loma Nazarene University and the University of San Diego also reported losses ranging from 12.6 percent at SDSU to 27 percent at Point Loma Nazarene.

An endowment is a gift that keeps on giving, holding its principal while providing a steady stream of investment returns in most economic climates. Universities rely on endowments to bankroll everything from scholarships to faculty positions and research. With the value of endowments plummeting, much of those programs have been put at risk....

USD's endowment — valued at $267.9 million last June and $217 million this June — pays for 5 percent of the university's operations. UCSD, SDSU, Cal State San Marcos and Point Loma Nazarene do not rely on their endowments to fund operations.

Compounding the losses to the endowments is a drop in fundraising, college officials say.

Donors understand that universities' needs are greater than ever, but their own finances have limited their ability to give, said Rae Goldsmith, a vice president of the Council for Advancement and Support of Education.

Fundraising at UCSD has declined 17 percent from last year, Neuman said. Officials at SDSU and USD reported drops of 5 percent to 10 percent, which is about average, according to a study by Goldsmith's group.

Even as they prune their operations, local institutions must deal with ambitious projects they committed to in heartier times.

USD is still raising money to complete its 50,000-square-foot Student Life Pavilion, which opened Aug. 3. Administrators signed off on the building before the recession and debated whether to halt construction when the stock market plummeted, Provost Julie Sullivan said.

They decided it would be more cost-effective to proceed with the project as planned.

UCSD administrators are cautiously moving forward with several construction projects, though they say they are taking on a risk as state funding is no longer a guarantee, said Stacie Spector, associate vice chancellor for university communications.

Alan Gin, an economist at USD, said residents have a vested interest in the financial condition of local universities. The universities bolster the local economy in countless ways by attracting students with purchasing power, educating the work force and putting thousands of residents to work. (Full story).

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