(12-07-2014 09:58 PM)Gravy Owl Wrote: FFS.
The endowment is not kept in Leebron's piggy bank. It is not spending money. It gets invested, and the income from it is used to run the university.
The athletic department can't spend a few months' worth of interest because that money is already being spent. Some of it already goes to the athletic department in the form of the institutional subsidy, which was up to $20M for 2012-13.
The most that could be done directly with the endowment is use it as collateral for borrowing. (Even this was forbidden by the charter until sometime in the '90s, and there might still be restrictions on what that loan could be used for.) Frankly, I'm skeptical of the athletic department's ability to repay such a loan.
IMO the solution to the athletic budget is fundraising. I have heard that there have been various restrictions on athletic fundraising over the years. I'm not sure about the current status, but this is the area that might need to be addressed.
My understanding (from reading web accounts of various "State of the University" presentations over the years, such as
this one this past September) is that in general the University reinvests more of its endowment income than it spends on running the university.
For example, slide 25 ("Financial Update") in the linked presentation says:
Code:
Endowment: $5.53 billion (as of June 30, 2014)
• 3-year endowment spending rate: 5.45 percent as of June 30, 2014
• 5.37 percent projected for FY 2015
These spending rates are typically moving averages -- a prudent move, financially, that's intended to provide a relatively constant and predictable contribution to support the university's operations despite the peaks and valleys of the investment return (or loss) from the endowment.
In the previous year, the endowment's value rose $14.5%, due to investment gains and contributions. (slide 19 of the 2014 presentation, linked above.)
While it might not be a precedent the Trustees would want to make, especially for athletics, I'd think that it would be possible to allocate funds for specific programs over and above the annual funds (especially if they are short-term "investments" made in high-return years) without actually spending current endowment funds. (They would be, however, funds that would have otherwise been deposited into the endowment.)
In 2013, for example, the
endowment returned 13.5%. (Slide 19 of the linked 2013 presentation.) But for the five-year period, the return was only 5.3% due to investment losses in the recession.
In
2009, the endowment shrunk from $4.61 billion to $3.61 billion, which required spending funds greater than the returns, which were negative.
2009 State of the University news story Wrote:...(T)he endowment as of June 30 was down approximately $1 billion from a year ago, both from investment losses and spending, ...
Leebron said the endowment, currently valued at $3.6 billion, is about where it was four years ago. Because the endowment distribution supports about 46 percent of the operating budget, Rice had to take a number of steps to balance the FY 2010 budget. That included a 5 percent reduction in operating budgets and limiting pay raises to those who make $60,000 or less.
A board of trustees policy sets a target spending range from the endowment of 4.5 to 5.5 percent, with a ceiling of 6.5 percent, on a three-year moving average. Leebron said further budget cuts will be needed in FY 2011, which begins July 1, as the university works to get the endowment distribution back to the preferred target range in the coming years.
