UC System Sees Unusual Decrease in Endowments

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College endowments nationwide dropped for the first time since 1984, with UC suffering more decline than the national average, according to recent reports.

The university's endowments dropped 5.5 percent, despite drawing more than $1 billion in private support for the second consecutive year.

The shrinking endowments, combined with the state's $12.8 billion budget deficit has administrators tightening their belts.

Currently valued at $6.2 billion, UC's total endowment fund consists of money derived from an investment portfolio organized by the UC Office of the Treasurer, as well as contributions from corporations and individuals.

Endowments across the country lost on average 3.6 percent of their value in the last fiscal year, said the National Association of College and University Business Officers.

The commission conducted a survey of 610 institutions of higher education. Its full report will be released in March.

In contrast, the 2000 fiscal year saw average college endowments increase by 13 percent.

Since 1992 the UC Berkeley Foundation, which handles campus endowments, has recorded an average endowment increase of 14.4 percent, until this year. Growth rate peaked in 2000 at 21.6 percent.

UC spokesperson Trey Davis estimated that a quarter of UC funding comes from the state, a third comes from the federal government, and a large part of the remaining support is from the endowments.

Endowment funds support scholarships, fellowships, professorships and research efforts throughout UC.

"They are used to generally support the academic and research mission of the university," Davis said.

Private contributions to the university also create new faculty positions. Distinguished professorships and endowed chairs can be established with minimum donations of $1 million and $500,000, respectively. The money is put into a fund, and its interest goes to support faculty.

Holders of the positions, which are among the highest honors bestowed on faculty, receive non-salary backing for professional and research expenses.

J. Karl Hedrick, a UC Berkeley mechanical engineering professor and recipient of the James Marshall Wells chair, said flexibility the chair's most important benefit.

"Endowed chairs are awfully important for both faculty and the university. Usually I receive $20,000 to $30,000 a year from it, which allows me to do more general work," he said. "Engineering contracts that come from government or industry are usually much more narrow and restrictive."

UC's drop in total endowment funds came despite high private support. Gifts and pledges totaled almost $1.18 billion last year. UC Berkeley raised the most contributions, leading the nine campuses with $315 million. UC Alumni contributions reached an all-time high of $219 million.

The total decline was largely a reflection of the economic downturn, Davis said.

"In the past year the market fell. There was less of that extra money available for endowments," he said.

Stock decline has hit endowments in two ways, affecting UC's own investments and decreasing contributions from outside parties.

"A good portion of endowments from recent years at all universities and foundations is the result of large profits that individuals have realized in the stock market," Davis said.

Endowments are vital in keeping top faculty, Hedrick said. The existence of distinguished professorships and endowed chairs provide incentive for faculty to stay.

"If you leave, you give it up. Positions are usually given to senior faculty, who are often receiving offers from other universities. Endowments are important in keeping productive faculty here," he said.

With money from his chair position, Hedrick said, he can fund graduate student research, buy equipment, fund his own proposals, and travel to international conferences, activities otherwise not permitted under traditional contracts.

"It gives me freedom," he said.

Dennis Levi, dean of the School of Optometry, echoes the importance of endowments in faculty relations.

"They are very helpful in retaining, rewarding and attracting really good faculty," he said.

Levi said the drop in endowments is a critical concern.

"Any time there's a drop, it makes it that much more difficult to fund worthwhile programs, such as graduate fellowships, and just making the department more state of the art," he said.


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