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Rich foundations

A&M System endowment 10th-largest in nation, leading four of eight Ivy League schools

Published: Wednesday, April 25, 2012

Updated: Wednesday, July 25, 2012 20:07

rich foundations

Talya Lazerus — THE BATTALION

The Texas A&M Foundation, headquartered on campus at the Hagler Center (above), supports A&M programs and education through an endowment exceeding $1 billion. Other endowment funds come from the state.

While tuition and student fee levels steadily rise with each passing year, many people may be surprised to learn that colleges across the U.S. are sitting on mountains of cash. Many more may be surprised to learn that of these colleges, the Texas A&M System currently lays claim to the 10th-highest mountain.

In a comprehensive study, the National Association of College and University Business Owners evaluated the 2011 endowment funds for 839 institutions. Of these, 75 have more than $1 billion in the bank. Harvard University ranked No. 1 in the study with just over $31 billion, Yale took second with $19 billion and the University of Texas System ranked third with slightly more than $17 billion. The Texas A&M System endowment registered at approximately $7 billion.

The study revealed that A&M’s endowment grew 22 percent in the past year, tied with the University of Texas System for the largest percent increase among schools in the top-30 endowments.

A university endowment fund is an investment fund set up by an institution in which regular withdrawals from the invested capital are used for specific purposes. They are normally funded by donations, but A&M and UT benefit from another source.

The Texas A&M University System is primarily funded from two endowments: the Texas A&M Foundation and the Permanent University Fund.

Established in 1876, the Permanent University Fund supports both the A&M System and the UT System, totaling 18 higher education institutions. The fund, earmarked for higher education in the state, devotes two-thirds of available funds to the UT System and the remaining one-third to the A&M System.

Other public universities in the state, including the University of Houston, Texas State and Texas Tech, do not benefit from the Permanent University Fund.

The Texas A&M Foundation handles large donations from the University, distinct from the Association of Former Students, which typically handles smaller donations. The Foundation raises and manages funds from private individuals, corporations and foundations to benefit Texas A&M University.  

Kathy McCoy, director of marketing at the Foundation, explained that donors direct their gifts to areas they want to support.

“Some donors direct gifts that can be very general, such as supporting their undergraduate college with discretionary funds for a dean,” McCoy said. “Or they can direct their donations to a very specific goal, such as a President’s Endowed Scholarship for students from Harris County majoring in architecture.”

Speaking about the Permanent University Fund, Jason Cook, A&M vice president of marketing and communications, said the policy for the fund’s spending is tightly controlled.

“There’s only certain things the fund can be used for, and that is primarily related to construction,” Cook said. “The University can bond off the fund [borrow from the fund], or they can take revenue off the interest, which is called the Available University Fund.”

Cook said the Available University Fund may only be used for “excellence,” meaning that it is not to be used for general operations, but for activities such as the recruitment of high-level faculty and raising the profile of the University.

Since 1996, the University of Texas Investment Management Company has managed the Permanent University Fund. One A&M regent sits on the nonprofit’s board of directors, joined by four UT regents, the UT System chancellor and four investment professionals selected by the UT board of regents.

The company’s asset holdings trace largely to Texas oil and natural gas. However, according to the company’s semi-annual reports for 2011, the most profitable holdings are from overseas investments. Among these are Russian natural gas titan Gazprom and international property developers Hong Kong Land Holdings Limited and Sun Hung Kai Properties.

On Friday, University President R. Bowen Loftin requested a $43.58 student fee increase from the board of regents for the coming academic year. In light of this increase and the general trend in higher education, some students were left wondering whether parts of the endowment might be better used to offset University costs. Jason Cook said these arguments, while appearing attractive on some levels, could actually cause University costs to increase if implemented.

“Texas A&M has a very sensible tuition price currently, and we are consistently ranked as one of the best colleges in terms of value,” Cook said. “And when we have buildings like the new MSC on campus, it attracts more students which helps to keep A&M successful and keeps tuition down.”

Patrick Keable, junior mechanical engineering major, said endowment funds should be kept to use for purposes such as new buildings.

“The cost to go here is really a lot cheaper than other universities around Texas,” Keable said. “If the University uses endowment funds for general things like keeping tuition down then everyone will start asking for the money. Then students won’t be able to keep getting good faculty and nice facilities.”

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1 comments Log in to Comment

sondra
Wed Apr 25 2012 13:46
Thanks for the great article, Justin. Endowments are a complex subject and we appreciate it when The Battalion educates on this topic. We wish to clarify just a few points.

First, the Texas A&M Foundation handles large donations "for" the university, not "from" the university. As you explained in the next sentence, this money is donated by individuals, corporations and other foundations to the Texas A&M Foundation.

Our private, nonprofit structure has tremendous benefits: we have the freedom to be flexible with our investments to increase our donors' earnings; we ensure that funds are used only for the purpose designated by the donor; and we respect our donors' privacy by keeping their personal giving and financial records confidential.

Our endowment is not available for Texas A&M University annual operating expenses.

But many of our donors endow scholarships that offset the cost of tuition, which can be a tremendous help. Endowed funds, whether for scholarships, faculty support or student programs, have an additional benefit-they support the beneficiary forever, not just once.

Consider for example a former student who wishes to fund an endowed scholarships for freshmen students majoring in business who have demonstrated strong leadership skills in high school. He (or she) expects and trusts the Foundation to invest that money and protect it so that it creates generates a scholarship stipends every year forever. We do this by investing only the gift principal-only the earnings off the investment are used each year to fund the scholarship to the student.

If the foundation arbitrarily decided to spend this donor's money on university operations, we would lose trust and credibility. When donors create endowments, the Foundation agrees that the funds will be used for the designated purpose. The Foundation does not have the right to arbitrarily change a donor's purpose.

Parts of our endowment are offsetting university costs by providing scholarships, faculty support and money for student programs ranging from The Big Event to the Corps of Cadets - but all according to our donors' wishes.

Our structure and investment strategy ensures that the "mountain of cash" given by our generous donors who direct its specific use, will be here for the long run, regardless of the state budget.

Sondra White '87
Marketing Communications Manager
Texas A&M Foundation

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