Georgia colleges stumble as endowments fall

Georgia's public and private colleges have eliminated some scholarships and scrambled to find money for some positions and research projects as endowments dwindle in a harsh economy.

The endowments the colleges use to help pay for scholarships and other programs have declined by about 25 percent over the past year, according to officials at several Georgia colleges.

Those who manage these funds worry about replenishing the accounts, with some saying the philanthropic trend has moved away from endowed gifts.

An endowed gift is invested in a permanent fund and the returns are spent on a purpose designated by the donor, such as scholarships or a professor position in a certain department. The investment allows an endowed gift to last for years, while other donations are quickly spent in their entirety.

Michael Ruffner, vice president for university advancement at the University of West Georgia in Carrollton, said colleges are encouraging donors to contribute to the different endowments.

"Unless people endow gifts, the only way to get the endowment back up is for the economy to rebound," he said. "We must be very vigilant and go after the money."

College endowments lost their value as stock prices, real estate values and other investments plummeted. Profits from endowments support scholarships, graduate assistantships, endowed professors and department chairs, and research-related travel for some professors. Some of the money is reinvested.

Officials said they were able to survive this past academic year, but they said cuts have been made as they prepare for the 2009-10 year.

The endowment at the University of West Georgia dropped by about 29 percent, causing officials to eliminate about 70 scholarships, which Ruffner said is roughly 15 percent of what the college typically awards.

Clark Atlanta University's endowment fell by about 26 percent, and officials also cut back on scholarships. Typically about 23 percent of incoming freshmen receive scholarships, but officials expect that figure to fall by about 3 percent.

The University of Georgia saw its endowments decline by about 25 percent, a loss of almost $163 million. College officials are finalizing cuts.

"It is the same thing that goes into budgeting when you know the state is giving you less," said Tom Landrum, senior vice president for external affairs. "You decide what is important to the university, and you apply your funding to the mission's critical needs first. You focus on continuing programs that have become expected or necessary."

For example, institutional scholarships, such as the Charter Scholarship for freshmen, will remain, Landrum said.

Scholarships awarded by individual schools and colleges may be reduced or eliminated, he said.

Deans have been encouraged to redirect money from discretionary accounts if there are graduate assistantships or travel or other expenses that they want continued that the endowment can't support, Landrum said.

Fortunately, he said, foundation trustees set aside about $500,000 to fill some gaps for the 2010 fiscal year.

"Beyond that we don't know," Landrum said.

Many colleges determine endowment payouts using a "rolling average." Foundation managers evaluate an average, often over a three-year period, and pay out a percentage of the total portfolio. The recession means averages will be lower next year and possibly beyond then.

"The situation will likely get worse for all of us," said Carlton Brown, president of Clark Atlanta. "What's worse is this is happening at a time when students are in greater need of financial assistance."

Brown said the college plans to improve its relationship with donors and find more people and groups to contribute.

Ruffner said West Georgia wants to double the staff it currently has for soliciting donations. The college has to find the money for those positions.

"It is a challenge because the recent trend is people shying away from endowed gifts," he said. "A lot of donors want you to use the money immediately."

Colleges across the country are reporting similar trends, according to the Association of Fundraising Professionals.

Ruffner described a situation where a college would want to attract a professor with a national reputation. Between salary and assistantships, the positions could cost about $250,000 a year.

If someone donated $1 million, it would cover the position for only four years. But an endowed gift would allow the college to maintain the position for years, Ruffner said.

"You want endowed professorships because they have longevity and guarantee continuity in programs," he said. "But you must be financially secure to build them up and keep them there."

Some colleges still get endowed gifts.