Ostriker proposes larger-than-usual increase in endowment spending

Provost Jeremiah Ostriker announced at the U-Council meeting yesterday that the University likely will spend a greater portion of the endowment in the 2001 fiscal year — as much as $40 to $50 million more.

The trustees' finance committee will meet Friday to discuss the exact percentage by which it will recommend the trustees increase spending. The committee will present its proposal to the entire board at its January meeting, Ostriker said.

Endowment spending normally increases at a rate of 5 percent per year but the committee will be considering a significantly larger spending rate that would be in effect for one year. Such an increase would be the third of its kind in six years.

"The situation is that investment returns have been so good in recent years that basically we have the capability to spend significantly more than 5 percent more than last year," Vice President for Finance and Administration Richard Spies GS '72 said.

The additional funds made available through the spending increase would be used to fund accelerated campus renovations, undergraduate and graduate financial aid and University debt reduction.

In addition, the extra capital will be used to help finance educational initiatives such as the new freshman writing seminars, which may require the University to bring in outside personnel to teach some of the classes.

According to Spies, the University's endowment spending for the 1999 fiscal year was approximately $200 million — or 3.5 percent of the endowment. The University's $8.4 billion investment pool — the University's invested net worth — has experienced an average annual growth of 28.6 percent during the past two years. More than $6 billion of that pool is the endowment itself.

"Normally when we've had a very good year we wait and see," Spies said. "You normally let it play out for four or five years. We've really had two good years in a row." He added that the continued success of the endowment fund justifies the additional expenditure.

Though financial markets have been performing below average this year, Spies said he does not expect it to adversely affect plans to spend more of the endowment.

"We can't be overly conservative. We can't always consider the most pessimistic model of the market," he said. "We've been very successful in the past years and we can afford this additional increase."