a student newspaper of the university of tulsa
october 29, 2012 issue 9 ~ volume 98
Financial collapse took toll on TU, American university endowments
Representation of the Dow Jones Industrial Average (grey) and TU’s endowment (yellow) from 2003 to 2011.
Efforts by TU’s administration to protect the endowment in the wake of the 2008 financial crisis steered TU away from financial disaster. Oscar Ho
Student Writer
T
he Great Recession, which began in 2007, was damaging not only to the job market and banking sector, but also to education. State-funded schools have found themselves with shrinking budgets, and all schools—public and private—have found themselves directly or indirectly affected by the downturn. Everyone has been affected, including the University of Tulsa. However, the university does have the advantage of being a private institution, which means that it does not have to rely on state funding as its primary means of sup-
port. However, the recession has adversely affected the university in other ways related to funding. The university’s endowment and some trust funds have been exposed to market change and those investments took a sizeable hit after the financial crisis of 2008. These accounts have dropped from an all-time high of $971 million in 2007 to $626 million by the end of the 2009 fiscal year. This drop caused university administration to worry, because endowment income constitutes about 20 percent of the operating budget. Less-than-stellar endowment performances were a part of a larger disappointment for the university. In a statement in October 2008, President Steadman Upham discussed “the unsettled feeling” he experienced due to ”constant bad news stemming from the meltdown of the global credit markets.” These worries were compounded due to the method by which
TU endowment compared to total funds in top 120 U.S. university endowments
Year
Total in top 120 TU endowment U.S. endowments
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$ 154,674,237 $ 194,002,678 $ 186,390,154 $ 175,489,026 $ 180,992,339 $ 208,667,975 $ 234,940,282 $ 268,899,430 $ 322,194,627 $ 312,068,725 $ 243,496,751 $ 263,961,330
$ 684,138 $ 725,470 $ 730,949 $ 679,691 $ 640,119 $ 701,948 $ 769,551 $ 816,980 $ 915,320 $ 843,030 $ 646,672 $ 691,917 $817,322
Dollar amounts listed in 1,000s of dollars. Source: Institute for Education Sciences
funds are withdrawn from the endowment. Upham explained in his 2010 convocation speech that “each quarter, any earnings generated by our endowment go into a holding fund. And each quarter, we draw from that fund based on an average of the previous 12 quarters’ performance.” This means that the losses and paltry earnings experienced in late 2008 and early 2009 have been affecting the operating budget of the school for several years. Considering that TU’s expenditures outstripped its revenue for the 200809 and the 2009-10 academic years, it has become clear the the university has been dealing with very difficult issues for quite some time. However, TU’s administration has been quick to address those issues under their immediate control. As the student housing campaign and other major renovations neared completion, TU suddenly needed to adapt to a volatile economy, which led to some university-wide reform the the spring of 2008. After a healthy financial year in 2007, as the economy began to take a turn for the worst, Upham laid out his plans to keep TU’s books balanced. Upham optimistically cited ten factors that he believed would help TU to emerge from the recession relatively unscathed. Upham cited robust enrollment, the academic talent of the student body and encouraging fundraising statistics. However, due to the unpredictable nature of the economy, he remained cautious, and acknowledged that a balanced budget was “almost taken for granted” at TU, emphasizing that “balanced budgets are the wellspring of financial stability.” During the past fews years, TU’s administration has adopted more conservative fiscal measures in an effort to reduce the risk of financial disaster. For several years before the bulk of the recession swept the nation, TU built a small stockpile of funds to use as a cush-
Photo courtesy Erik Campos, University Relations, the University of Tulsa
TU President Steadman Upham delivered his convocation address Thursday Oct. 25, in which he addressed the university’s developing financial position.
ion if the economic situation worsened. It remains unknown how much of that stockpile was used, but the university also relied on many other strategies to curb the effects of the crisis. Many of the university’s successes were due to careful work by the school administrators, Upham said. He highlighted their individual roles in his 2010 Presidential Report: “As the 2008-09 academic year drew to a close our deans, vice-presidents and other senior administrators began to discuss the challenges presented by the troubled economy.” The administration instituted several cost-saving measures like significantly reducing use of overtime, unpaid half-days through the summer, a brief hold on merit salary increases, reclamation of funding for vacant positions, and a moratorium on the creation of new positions. However, absent from those cost-saving measures implemented were layoffs. Avoiding downsizing is a feat the administration is particularly proud of. “TU did not lay off one single person during the recession years. That’s due to President Upham’s leadership and an executive team that worked very hard every day to find cost savings and efficiencies,” said Kayla Acebo, Vice President of Public Relations. Additionally, the private dona-
tions of alumni and local foundations have meant that the number of scholarships awarded by the university has not decreased since 2006 and the university’s commitment to education and the edification of the Tulsa community remains strong. “Despite troubling changes in the nation’s economy, TU has enjoyed milestone-filled (years) as a value provider for our students, partner institutions and the wider Tulsa community,” said Upham. In fact, TU has been fortunate that spending on academic instruction did not decrease during the recession and appropriations for university-funded scholarships increased during the recession. Other contributing factors to TU’s financial stability are the completion of the “Embrace the Future” campaign which raised $698 million for the university and the successful campaigns to build the Rayzor Hall, Stephenson Hall and the Lorton Performance Center. In the end, the strategies employed by the executive team and the Board of Trustees have proven successful, and despite the hits to the budget, TU has managed to remain significantly more successful than other academic institutions during the recession.
Steven Buchele contributed to this report.