The economic downturn has shrunk university endowments, and that could affect the number of students receiving scholarship assistance in the coming years.
According to Judith Heasley, executive director of the ESU Foundation, Emporia State University’s endowment lost $12 million in five months, from $61 million on June 30 to $49 million on Nov. 30.
“We’ve all been watching the economy,” Heasley said. “On a personal level, people have been watching their own portfolios, watching all the crises on the news, so we’ve been watching very carefully.”
Heasley said the ESU endowment has been lucky, because the company that manages its investments, Hammond Associates of St. Louis, has used a well-balanced investment strategy.
“We have been fiscally conservative, very responsive,” Heasley said. “We have not taken unnecessary risks, and so I think our portfolio and our endowment has been very well-managed.”
Heasely said the foundation has been careful in assessing the negative impact of the recession on the endowment.
“Our endowment has decreased similar to KU’s and K-State’s,” she said.
The University of Kansas saw its endowment shrink 30 percent, and the endowment for Kansas State University shrunk 25 percent.
Heasley said she will not have December’s figures until the end of this month. At the end of this week, she said the foundation’s board of trustees will meet to discuss strategies regarding its payouts for scholarships, though this won’t affect scholarships for the rest of this year.
As of Nov. 30, 33 percent of ESU’s endowed scholarships were “under water.”
“The term ‘under water’ is used when the current market value of an endowed fund is less than the original gift value,” Heasley said. “So let’s say our endowment entry level is $10,000. Let’s say, today a $10,000 endowment is only worth $8,000. That means it’s under water.”
The foundation’s scholarship awards come from earned interest income, so an under water account isn’t earning anything.
“Therefore, there can be no scholarship award,” Heasley said, because the foundation has a policy that doesn’t allow going into the principal of the fund. “You sort of defeat the purpose of an endowment if you start invading the principal.”
As soon as the December figures are in, Heasley said the foundation will start getting in touch with those donors whose accounts are under water. The donors will be asked to contribute the difference in the amount the account is under so the foundation can meet its obligations.
“Thereby, we will affect as few students as possible,” she said. “People understand, because they are affected personally. We’re not hitting the panic button, because we’re in it like everyone else is in it.”
The endowment at Flint Hills Technical College has felt the effects of the economy too, according to executive director of advancement Jodi Heermann.
“We’re monitoring the situation very closely,” she said, “and I think we’ll know a little more within the next few weeks regarding decisions we’re going to be making for scholarships for the next academic year.”
This year’s scholarships have not been affected, she said.
“It’s a situation that is impacting everybody, and we’re just keeping an eye on it, and we’ll probably have a better idea in the next few weeks.”