Recent Declines in Endowment Market Values and Their Possible Effect on Institutional Finances

2008 NES Overview 796 Institutional Respondents (Representing 791 Endowments) $412.8 billion in Endowment Assets Endowment Performance, Market Values, and Asset Allocation as of June 30,2008

Endowment Income Accounts for 12% of Average Total Operating Revenue at the Largest Endowments Avg. Endowment Distribution ($1,000s) Pct of Operating Rev. Avg. Tuition & Fee Revenue ($1,000s) Pct. of Operating Rev. Greater than $1 billion 166,359 11.9% 255,894 18.3% $500 million to $1 billion 31,285 5.8% 118,565 22.0% $100 million to $500 million 10,539 3.6% 78,878 26.7% $50 million to $100 million 3,427 2.7% 45,080 35.3% $25 million to $50 million 1,745 1.6% 34,804 32.0% $25 million or Less 387 0.8% 15,412 32.6% Public 3,761 1.8% 40,938 19.3% Independent 11,465 11.1% 37,837 36.5%

Average Sources of Funding for Institutional Grants for Four-year Private Colleges and Universities in 1999-2000, by Undergraduate Admissions Selectivity Level

Nominal Average Investment Returns for College and University Endowments, FY08 and Estimated for FY09 (to Nov. 30)

Percentage Change in College and University Endowment Market Values, FY08 and Estimated for FY09 (Through Nov. 2008), by FY08 Endowment Market Value

How Decline in Endowment Value Will Affect Endowment Draw, by FY08 Endowment Size No Change Planned Plan to Decrease FY09 Endowment Draw Plan to Increase FY09 Endowment Draw Don't Know/No Response Over $1 billion 74% 16% 3% 8% $500 million to $ 1 billion 68% 25% 5% $100 million to $500 million 61% 30% # 9% $50 million to $100 million 65% 27% $25 million to $50 million 60% 28% 1% 10% $25 million or Less 45% Total 11%

Chief Financial Officer’s Preferred Strategies for Dealing With New Fiscal Restraints Preferred Strategy Mean Preference Score Increase Tuition and Fees 4.03 Increase fund-raising 4.01 Emphasize resource sharing 3.58 Build partnerships with industry & business 3.29 Increase number of adjunct faculty 3.06 Defer maintenance 2.99 Reduce administrative positions 2.95 Initiate hiring freeze 2.50 Initiate across-the-board budget cuts 2.23 Reduce number of faculty 1.92 Mean Score Interpretation: 1=Never; 3=Sometimes; 5=Always. Source: Garret, M.D. 2007. The Influence of Financial Pressure on Academic Administrators’ Selection of Management and Resource Allocation Strategies.

Comments on the Possible Impact of the Endowment Declines on Institutional Finances Budget cuts and hiring freezes: “We have frozen the creation of any new positions, asked for non-mission critical expenditures to be suspended, will review any vacant positions before deciding to refill, and will not be increasing any departmental budgets for the next fiscal year.” Fewer funds available for financial aid: “Student scholarship dollar availability will be less, at a time they are most in need.” Concerns about the future: “We are more concerned about what will happen if the financial downturn doesn’t begin correcting in the next year, then FY 2011 and beyond could usher in some hard choices.”