Economy dents UH endowments


POSTED: Monday, February 16, 2009

Endowments at Hawaii universities and colleges lost a fifth of their value in the last six months of 2008, but UH officials say it will not interrupt the operations of the schools.





        Where UH Foundation money went last year:

» Student aid and services: $7.7 million
        » Academic support: $5.9 million
        » Special projects and other: $5.8 million
        » Athletics: $2.4 million
        » Research: $3 million
        » Faculty and staff support: $2.4 million
        » Extension and public service: $996,000
        » Capital projects: $511,000
        TOTAL: $28.7 million
        Source: UH Foundation


The University of Hawaii Foundation, which maintains donated assets for the 10 UH campuses, saw its endowment returns drop nearly 21 percent by Dec. 31, from the end of the fiscal year on June 30. The endowment was $143.6 million at the end of the calendar year, down from $181.4 million as of June 30.

Howard Todo, the UH system chief financial officer, said students might see less scholarship money funded by the endowment. But the endowment drop will not have a significant impact on university operations.

“;While the university does have substantial endowment funds, the actual amount of money that gets allocated from those funds annually to support the operations of the university cover a very small part of the operating cost of the university,”; Todo said.

The drop is slightly below the average loss of 22 percent for universities who report to the National Association of College and University Business Officers for the five months after June 30. Last year's drop was the first time university endowments have lost money since the technology bubble burst in 2001 and the Sept. 11, 2001, terrorist attacks, the Chronicle of Higher Education said last week.

Private Hawaii Pacific University saw its endowment drop about 17 percent from about $72 million to $60 million between June 30 and the end of November, said Rick Stepien, HPU vice president for administration. Stepien said the drop should not have much effect on HPU's operations.

“;We're basically a tuition-driven school,”; he said.

HPU is proceeding with a $70 million plan to expand its Windward campus. Money has already been set aside to design the new dorms, gym, performing arts center and lab space. The university is spending $2.5 million from the endowment for construction of sewer connections to the campus, Stepien said.

Stepien said the university is hoping the economy begins to turn around by the end of the year when fundraising begins for the money needed for the campus expansion.

“;We are optimistic things will change,”; he said. “;We will deliver on the campus.”;

The UH Foundation spends about 6 percent of its endowment annually. The expenditure also includes some operating funds for the foundation. The foundation paid out $28.7 million to the university last year. About $7.7 million went to scholarships and other services for students.

The amount spent was up from $23.1 million in 2007 and $19.4 million in 2006.

Foundation spokeswoman Margot Schrire said in an e-mail that the UH Foundation has kept donations received since October in cash accounts until the markets stabilize.

“;Other efforts have been made to increase cash reserves to take advantage of opportunities that undoubtedly will emerge,”; she wrote.

The foundation does not know yet whether the economy will affect donations to the university, but, Schrire added, “;Private support of public universities is absolutely critical during difficult economic times.”;

Some endowments have dropped below their minimum payouts, UH President David McClain told a state Senate committee last month.

The foundation notes that some endowments are set up to spend the money until the account is drawn down. Other endowment accounts will not pay out if the fund drops below a minimum level.

The university also maintains a separate endowment, managed by the UH system, of funds contributed before the UH Foundation came into existence, Todo said. That endowment saw a similar decline in its investments and dropped to about $53 million on Dec. 31, he said.

The UH-Manoa student government also has an endowment, which supports Associated Students of the University of Hawaii activities, including scholarships, a homecoming event last fall and leadership development.

Jamie Sohn, ASUH president, said the student endowment dropped to about $5.5 million from about $6.5 million last year.

The endowment contributed about $350,000 this year to the $457,000 student government budget. ASUH takes about 5 percent of the endowment's value each year.

The drop in the endowment will not affect student activities this year, Sohn said. But unless the financial markets pick up, it will mean about $100,000 less next year, he said.

“;We don't pull from the portfolio until the end of the semester,”; Sohn said. “;Hopefully, the market is going to recover.”;