Public colleges across the nation are putting more effort toward attracting new investors – alumni and community supporters – to build up endowed funds that will keep them afloat when state budgets get tight.
It paid off for the Minnesota State University Moorhead Alumni Foundation’s endowment, which grew by 23 percent from 2011 to 2012.
In just five years, the endowment has almost doubled from $5.7 million in 2008 to $11.2 million in June 2012, according to the school’s most recent audited financial statements.
Part of that growth can be attributed to a rebound in the financial market, but officials say it’s largely driven by their renewed focus on growing the endowment.
While endowments vary from institution to institution, they’re essentially used like a savings account, said Michelle Asha Cooper, president of the Institution of Higher Education Policy. Donor gifts are invested and the profits on that investment can be used “like a rainy day fund” to offset lost income.
“Schools use returns from their endowment to supplement their income and that number varies,” she said. “How campuses use it varies, as well.”
Despite its recent growth, Moorhead’s modest $11.2 million endowment is probably “too small to draw much funding from it,” said Ken Redd, director of research and policy analysis for the National Association of College and University Business Officers.
Redd said an endowment should be about $50 million to $100 million before a school can draw significant returns from it.
Neighboring Concordia College’s endowment is more than $78 million. The North Dakota State University Development Foundation reported $109 million, while the University of North Dakota Alumni Foundation’s endowment surpasses $140 million, based on audited financials for 2012.
Even compared to four-year college peers in the Minnesota State Colleges and Universities system, Moorhead’s endowment is small. It falls behind Bemidji State University, Winona State University, St. Cloud State University and Minnesota State University, Mankato.
“There’s no way around it, this is not a large endowment,” said Laura Huth, vice president of the MSUM Alumni Foundation.
As state appropriations have declined, small public schools such as MSUM are looking to grow their endowments so the returns are large enough to offset tuition increases, provide scholarships and balance the budget.
Though it was first established in 1982, the MSUM foundation has only started focusing on growing the endowment in recent years, Huth said.
Previous fundraising campaigns focused on more immediate needs such as a new program or building.
“As state support has been dwindling, we are looking further out,” Huth said. “We understand the need for money to spend right at this moment, but we also need to look to the future.”
Page 2 of 2 - Moorhead isn’t alone. The MnSCU system has encouraged schools to do more fundraising.
Mike Dougherty, vice chancellor of advancement for the MnSCU system, said they are being more deliberate and coordinated about reaching out to supporters.
“Some of these efforts, while perhaps modest by the standards of some private colleges and universities, for us they are a very significant undertaking,” Dougherty said.
He said donors understand more than ever that private funds are needed to help colleges and universities “realize their vision.”
Huth said endowed funds will continue to be a priority for the MSUM foundation, and she hopes to see it continue to grow.
Last year, the MSUM Alumni Foundation used $504,000 from endowment returns to fund scholarships for 436 students.
“What it really means is that we don’t start at zero every year,” she said. “The size of the endowment helps solidify the future for us.”
Nationwide, returns on endowments have been flat, Redd said. He anticipated endowment returns will still be volatile for the next couple of years.
The growth of Moorhead’s endowment, even during the aftermath of the recession, indicates efforts to really build the fund, Redd said.
“It’s a testament to the support that alums and other donors have toward the school,” he said. “It bodes well for the future.”