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Reminder that endowments are highly illiquid and typically are not used to fund budgets

by DrBenCarson 2y ago

nxm 2y ago
What should they be used for the ?
- lamp_book 2y ago
  Used? The university is what is used to grow the endowment.
  - y-curious 2y ago
    So what's the point of the endowment then? To make the green numbers go up?
    - duskwuff 2y ago
      To be invested and generate returns which can fund the university's programs. As I said in another comment, it's a long-term investment, not a spending fund. You don't eat your seed corn.
- johnnyanmac 2y ago
  I believe most endowments have conditions. So whatever the donator say?
- bobthepanda 2y ago
  Universities use the interest and dividends to pay for operating expenses. Actually drawing down the fund would just ruin future finances.
kaonashi 2y ago
endowments are the tail wagging the dog in many educational institutions
mi_lk 2y ago
that's just misinformation. > In particular, the endowment supports roughly two-thirds of the budget for undergraduate and graduate financial aid, as well as a significant portion of faculty salaries, research, and key programs like libraries and student services. from https://news.stanford.edu/stories/2025/02/staff-hiring https://news.stanford.edu/stories/2025/02/staff-hiring
- duskwuff 2y ago
  The returns from the endowment are used to support university programs. The endowment itself is not spent - it's a long-term investment which produces dividends, not a spending fund.
  - pclmulqdq 2y ago
    Universities will dip into endowment funds if the returns are worse than expected. They will pretty much never make plans to dip into endowment funds, though.
  - giantg2 2y ago
    Yeah, $500M (a 5% return) is still a lot of money.
- Salgat 2y ago
  To add, money is fungible. $100 for one department just means that $100 is freed up for a different department.
  - PhotonHunter 2y ago
    Money in university budgets is most certainly not fungible. Endowments are for the most part directed for specific uses and cannot be used outside of the restrictions. Education and General (E&G, terminology varies between institutions) includes tuition (only part of the yearly budget) and cannot be used for research. Unrestricted funds are as rare as hens teeth and doubly so outside upper admin. The “color of money” is perhaps the most misunderstood aspect of university admin but explains so much about how things operate.

Reminder that endowments are highly illiquid and typically are not used to fund budgets

nxm 2y ago

What should they be used for the ?

lamp_book 2y ago
Used? The university is what is used to grow the endowment.
- y-curious 2y ago
  So what's the point of the endowment then? To make the green numbers go up?
  - duskwuff 2y ago
    To be invested and generate returns which can fund the university's programs. As I said in another comment, it's a long-term investment, not a spending fund. You don't eat your seed corn.
johnnyanmac 2y ago
I believe most endowments have conditions. So whatever the donator say?
bobthepanda 2y ago
Universities use the interest and dividends to pay for operating expenses. Actually drawing down the fund would just ruin future finances.

kaonashi 2y ago

endowments are the tail wagging the dog in many educational institutions

mi_lk 2y ago

that's just misinformation. > In particular, the endowment supports roughly two-thirds of the budget for undergraduate and graduate financial aid, as well as a significant portion of faculty salaries, research, and key programs like libraries and student services. from https://news.stanford.edu/stories/2025/02/staff-hiring https://news.stanford.edu/stories/2025/02/staff-hiring

duskwuff 2y ago
The returns from the endowment are used to support university programs. The endowment itself is not spent - it's a long-term investment which produces dividends, not a spending fund.
- pclmulqdq 2y ago
  Universities will dip into endowment funds if the returns are worse than expected. They will pretty much never make plans to dip into endowment funds, though.
- giantg2 2y ago
  Yeah, $500M (a 5% return) is still a lot of money.
Salgat 2y ago
To add, money is fungible. $100 for one department just means that $100 is freed up for a different department.
- PhotonHunter 2y ago
  Money in university budgets is most certainly not fungible. Endowments are for the most part directed for specific uses and cannot be used outside of the restrictions. Education and General (E&G, terminology varies between institutions) includes tuition (only part of the yearly budget) and cannot be used for research. Unrestricted funds are as rare as hens teeth and doubly so outside upper admin. The “color of money” is perhaps the most misunderstood aspect of university admin but explains so much about how things operate.