Endowments nationwide are taking a hit

Just saw a tweet from National Association of Independent Colleges and Universities  about Stanford University letting 412 employees go after a 30 percent drop in its endowment.

The letting happened over the past 8 months but 60 more people will lose their jobs by the end of the year, according the press release from the university.

Some background: Private colleges such as Stanford and, locally, Centenary College depend on endowments to survive. Endowments are, at its essence, the interest from donations.

When a donor gives money, the college invests it. The invested money is called the prinicpal and can never be touched. Ever. That money can be invested in anything including stocks. The money made from the donation is what is used to fund the college and/or programs on campus. Professorships and chairs are also funded this way.

So the older the donation, the bigger the return in a good or average economy. But in a not-so-good economy, the interest doesn't grow as much or as quickly. That means things have to be cut. On a college campus it's either people or programs.

This is different for a public university or college since they also have another source of funding--state money.

I did a story about local endowments and how they were performing back in March. It wasn't going well at the time.

At LSU-Shreveport, the endowment took a 17.3 percent hit by March 2009 (the fiscal year goes from June to July)

"In the 11 years I've been here, I've never worked at a loss," said Glenda Erwin, vice chancellor for university development, at the time.

The university invests it's prinicpal in equities and stocks and strive for an 8 percent return, although it only uses 4 percent.

Centenary's endowment was down 21 percent as of Dec. 31. The college's $100 million endowment is 30 percent of the budget. It invests its prinicpal in U.S. and global stocks and bonds.

Southern University-Shreveport has a small endowment that was recently started. At the time of the March article, the college's $400,000 endowment lost about $5,000.

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