Desperate Measures

June 30, 2009

BOSTON – When all else fails, beg.

As the value of endowed gifts continues to shrink from market losses, more university officials are doing some good old fashioned groveling at the feet of their donors. Such was the sentiment shared by finance chiefs and other administrators gathered here Monday for the annual meeting of the National Association of College and University Business Officers.

In a number of states, charities and universities are prohibited from eating into the principal of an endowed gift. Even if there are no such restrictions in a given state, donors are often loath to see universities spending anything beyond the investment returns they receive from a gift, several business officers noted.

“In most cases they would prefer to write a new check than have us eat into the principal,” said Ric Porreca, senior vice chancellor at the University of Colorado at Boulder.

After the beating many endowments have taken, many donors are more closely watching how universities invest their gifts, and some are even asking that their money be invested with a more conservative approach. At Colorado, some donors have decided to give their gifts over a longer period of time -- say five years -- so they can first invest the money on their own.

“These are people who thought they could do a better job [investing],” Porreca said.

Colorado’s effort to make donors feel more comfortable is just one example of how universities are becoming less rigid in an effort to generate revenue and cut costs. At a NACUBO session entitled “Emerging Trends in Financing Research Universities,” business officers discussed plans to negotiate lower travel costs, better utilize space, recruit more foreign students who will pay full freight, and curtail health-care and retirement benefits -- all in the name of weathering what many fear will be a lengthy economic storm.

The University of California’s 10 campuses are now all required to use a common system for booking travel, which has improved the university’s bartering position with hotels, car rentals and -- to a lesser extent -- airlines, officials said. The system expects to see $7 million in savings in the first year, followed by $10 million next year and $13 million in the third year.

The more faculty and staff participate in California’s travel plan, which is known as CONNEXXUS, the greater the savings should be for the university. As such, university employees are encouraged to use CONNEXXUS even when making their personal travel plans.

“You can use it for your vacation to Hawaii if you wish,” said Stan Nosek, vice president of administration at the University of California at Davis.

Davis and Boulder have also considered increasing their international enrollment numbers, hoping to pull in more students who will pay significantly higher nonresident tuition. For the cash-strapped state of California, virtually nothing is off the table -- even plans that won’t help educate more Californians, Nosek said.

“Clearly the revenue potential [from expanding international enrollment] is significant, but that pushes against the California master plan,” he said. “…. Some people are saying ‘So what it if we get into another fight with the Legislature? They can’t take what we don’t have.’ ”

For financially struggling universities, the burden of health care and retirement costs has become even more significant. Several business officers noted that their universities are reassessing employee benefits, and an Indiana University official said that the institution is capping increases in medical expenses in part by charging higher deductibles.

Monday’s session at NACUBO comes on the heels of a series of other meetings Sunday that featured variations on the same theme: How do colleges cut costs, retain quality and somehow convince the public that they are good stewards of resources? None claimed to have the answers to those questions, but it’s fair to say they’re all looking for them.

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