raise to compensate shrinking endowment
order to make up for dwindling endowments and increasing
costs, universities across the country have raised prices.
Lacey Krause and Liddy Serio
its any consolation, TCUs continued increases
in tuition is keeping in step with a national trend
toward boasting upfront costs to compensate for decreasing
endowments. And it could get worse before it gets better.
Tuition has risen more than 60 percent since the 1999-2000
academic year, from $12,290. Flat rate-tuition and fees
that began in fall 2001 have risen to $19,700, a 30.9
Although TCUs endowment is on the rebound, the
2004-2005 tuition hike will still be necessary to cover
expenses, said Carol Campbell, vice chancellor for finance
TCU withdrew $40.3 million from the endowment for the
2001 fiscal year, when the endowment was at its highest.
This past calendar year saw the endowment rebounding,
Campbell said. The endowment is currently trending
upward along with the market.
When investments perform poorly in the market, the endowment
will contribute less to the next years budget.
A variety of other rising costs impact the budget, including
increasing enrollment and rising costs for health care
and utilities, Campbell said. Higher education is also
a labor-intensive industry, Campbell said.
The endowments investment returns fell sharply
after the stock market collapse in 2001.
TCUs endowment peaked in March 2000 at $1.026
billion and began to fall with the general market declines
the next month, assistant treasurer Dick Hoban
February 2003, the endowment dropped 25 percent to its
lowest point in recent years, $770 million. As of Dec.
31, it had increased to approximately $870 million.
The endowment money is invested in the stock market,
real estate, government financial instruments, foreign
stocks and other alternate investments by more than
15 different money managers, said Bronson Davis, vice
chancellor for university advancement. The value of
the endowment is taken from its average value over three
years, and a percentage of this average value is taken
each year for spending. Though the endowment itself
has increased this year, spending is down because the
poor investment returns from previous quarters still
affect the average value.
The Board of Trustees is trying to decrease the volatility
of the endowment by diversifying money managers, decreasing
the spending rate and expanding the number of quarters
over which to average endowment value, Davis said.
For the 2004-2005 academic year, the university will
withdraw approximately 6 percent from endowment funds.
This means that the endowment will contribute over $47
million to the universitys operating budget. This
is a decline from the previous academic year, when the
university withdrew $52.5 million from the endowment,
the most ever.
The sustained market declines of 2000 to 2003
are just now beginning to seriously impact endowment
spending, Hoban said. The real endowment
spending pinch will be felt in budget years 2004 and
To lessen the impact on annual budgets, endowment contributions
are being decreased in .05 percent increments over 20
years, Davis said.
This will actually result in the university receiving
more income over time from its endowment because there
will be more principal to reinvest each year,
In the 2003 fiscal year, TCU lagged behind the national
average in terms of earned returns on endowments. On
the national average, endowments earned returns of 3
percent during the 2003 fiscal year, according to a
report by the Chronicle of Higher Education. TCUs
endowment earned 2.5 percent.
However, TCUs endowments three-year average
return, from July 1, 2000, to June 30, 2003, was -4
percent. The universitys endowment was ranked
at $796.8 million, right behind Southern Methodist University
at $810 million.
The dilemma we have is that when the endowment
performs poorly, it puts pressure on out other sources
of income and can also result in some serious budget
reductions as happened last year, Davis said.
To compensate for these rising costs, four-year private
colleges across the country increased tuition an average
of 6 percent for the 2003-2004 academic year. It now
costs an average of $26,854 to attend a private university
for one year. TCU is among the 23 percent of all private
four-year institutions that charge $16,000 to $20,000
for annual education costs.
The universitys rising costs may actually help
students perceptions of the schools prestige,
said Ray Brown, dean of admissions. Students sometimes
assume that because TCU doesnt cost as much as
other private schools, it cant be a high quality
institution, he said.
Folks in our office travel a great deal every
year visiting high schools, staffing college fairs,
etc., Brown said. All too frequently, we
hear comments to the effect of, $25,000 for everything?
Thats it? Ridiculous, but true.
Chancellor Victor Boschini said he would like to raise
$100 to $200 million within the next four or five years.
He said he would like to increase the amount of scholarship
money given, because he sees it as a permanent investment
in the universitys future.
Boschini said the amount of endowment per student is
more important than the lump amount. With 6,482 undergraduates
at TCU, the endowment per student is about $134,000,
I would like to be able to provide a TCU education
for every student we accept, Boschini said.