The University Board of Trustees approved an increase in endowment spending last week to provide more undergraduate financial aid, including funds earmarked for the dining costs of upperclassmen, the University announced yesterday.
The trustees, who normally announce budget decisions in January, also expanded the target range for endowment spending in the future.
"They had to make some sort of adjustments now, particularly the ones related to financial aid that affect students' thinking about their eating arrangements in the next year," University Vice President and Secretary Bob Durkee '69 said.
Juniors and seniors can expect to receive about $2,000 more in their aid package to cover the difference between dining hall board and the average eating club contract of $6,300, the University said in a press release.
The additional endowment funds will also go toward reducing the school-year work obligations of aid recipients and building a dedicated staff to attract more corporate and foundation funding for faculty research.
President Tilghman and University provost Christopher Eisgruber '83 recommended the "onetime infusion into the budget," Durkee said.
Rising expenditures
The University's endowment rose to $13 billion dollars this year, buoyed by a 19.5 percent return on investments, the Princeton Investment Company (PRINCO) reported. Only Harvard, Yale and the University of Texas system boast larger endowments.
This year, the University will fund about 37 percent of its $1 billion operating budget from endowment income, according to the 2006 Priorities Committee report.
Despite several years of stellar endowment growth, the University has spent less than its self-imposed minimum of 4 percent of the endowment market value, Durkee said.
"You're trying to make sure that you can sustain the purchasing power, but you don't want to over-save. The reason you have the endowment is to support programs of teaching and research," he explained.
In recent years, the University has aimed to spend between 4 and 5 percent of the endowment's market value. At their meeting last week, the trustees raised the upper limit of this target range to 5.75 percent.
"PRINCO was so successful again over the summer and into the fall, they would like to get further up into the range," Durkee said. "They ought to have a wider target because they'd like to avoid hitting the high end."
University treasurer Chris McCrudden and PRINCO president Andrew Golden led the effort to determine the proper range of spending.
"This expanded range helps ensure an intergenerational neutrality in which the benefits of the endowment to current students and future students are roughly similar," Tilghman said in the press release.
Though 5.75 percent of the endowment's market value is now the upper limit of what the University aims to withdraw, Durkee expects the average expenditure to be about 4.5 percent.
Harvard will spend about 4.3 percent of its $29 billion endowment in 2006, according to the Harvard alumni magazine. Yale expects to spend about 3.7 percent of its $18 billion endowment this year, its press office reported.
"I don't think any of that discussion had anything to do with what our competitors are doing," Durkee said.
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