COLUMBIA — The UM System responded to a U.S. Senate Finance Committee request about endowments Friday. The committee is looking to find ways to make college more affordable.
The letter was sent to the nation’s 136 wealthiest colleges — all the universities with more than $500 million endowments — asking them to explain how their endowments work, how tuition decisions are made and what the financial aid policy is.
The 11-question letter was sent after the National Association of College and Business Officers reported that 76 universities’ endowments were more than $1 billion.
The UM System passed the $1 billion mark this year, making it the 70th wealthiest school in the nation based on endowments.
Endowments are gifts of money, property or assets given to universities.
When the finance committee sent the letter, Chairman Sen. Max Baucus, D-Montana, said in the release that tuition is increasing faster than the rate of inflation. The schools’ responses will help influence future tax policy and ways to make higher education affordable for middle- and low-income students.
The UM System endowment grew 16.3 percent in the last fiscal year, from $944.1 million to $1.1 billion, according to the yearly NACUBO report.
That figure combines the endowments of all four UM System campuses.
Beth Hammock, spokeswoman for the For All We Call Mizzou fundraising campaign, said MU’s endowment was $591 million at the end of the last fiscal year.
“Each campus does its own fundraising,” she said. “It’s a decentralized system. It makes sense because the system doesn’t have alumni; the schools do.”
In those campaigns, gifts can be set up in two main ways: they can be expendable funds or endowed funds.
Expendable gifts are not invested and the full amount can be used right away. Hammock said these gifts often fund research. They are not counted as endowments.
The UM System’s Treasurer’s Office invests the endowment funds in stocks, bonds and real estate. Each year, the university spends about 5 percent of the interest earned on the principal. The endowments are also tax-exempt.
“Last year, the endowment had a good year,” Hammock said. She said the return was about 18 percent, but this year’s returns might be different due to a slowing economy. The school pays out 5 percent a year in an effort to balance years with high and low returns, while letting the endowment grow with inflation.
“Endowments are the financial bedrock of the university,” Hammock said.