University officials foresee recent fluctuations in the stock market to affect annual fundraising efforts and budgets more than the value of the endowment.
“Right now, when people have seen the value of their stock portfolios drop, this is not the time to go and ask them for large gifts because they’re uncertain. They don’t know what they’re wealth profile is going to be,” Lyn Lakin, vice president of university advancement, said. “Once the market stabilizes, we’ll be back on track.”
Lakin said it’s not going to stop the university from trying to generate money for the general operating fund or for the endowment, though.
“That’s clearly a part of what we do,” she said. “When we visit with our alums, we ask them for the annual gift, so that does pay for electricity and the annual general operating (fund) and then we ask them for endowment gifts or special projects.”
The endowment, which Lakin describes as a large savings account, varies on a regular basis because it’s invested in the stock market. It is estimated to be in the mid-$30 million range.
“That’s a respectable number,” Lakin said. “Obviously one of our fundraising goals is to get that number as high as we possibly can. My personal goal is to get us to $50 million.”
Jo Adams, vice president of financial services, said the endowment creates revenue mostly for scholarships by drawing interest off the principle, which is never invaded.
“We never take the principle; we take a certain percentage of the earnings and the appreciation,” Adams said.
Adams said the university determines how much of the interest to spend each year by averaging the last three years and recommending a percentage, usually 4-5 percent, to the Baker University Board of Trustees to approve.
“If there’s any effect (this year), it may be that we are not able to use as much of the earnings (in the future) but we’re never going to invade the principle.”
University President Pat Long said investments in the endowment for the last few years have done very well, with last year resulting in record high fundraising overall.
“That’s where you get very concerned right now,” she said. “All of us in higher ed believe that we need more money to operate, whether you’re public or private.”
Lakin and Adams agree that, despite concerns with the current economy, students shouldn’t be worried about declining scholarships.
“The university funds a great deal of scholarships, the endowment funds a small portion of it,” Adams said.
Lakin said one way the university protects the endowment is by continuing to raise money for it.
Adams said the university is also very careful about diversification of resources – meaning the university invests in many different areas within the market to protect it when it’s up or down.
“We’re invested in the market, but we’re invested in the market for the long term,” Adams said. “We expect that the market will come back and that we’re going to be fine because we are invested for the future of Baker, for its next 150 years.”