College and university endowments made gains in the fiscal year that ended in June, but many are still struggling to make up ground they lost in 2008 and 2009, according to a report released Tuesday.
Data gathered from 823 U.S. colleges and universities show that the institutions' endowments returned an average of 19.2 percent for the 2011 fiscal year, the National Association of College and University Business Officers and Commonfund said. That's up from 11.9 percent in fiscal year 2010.
Still, NACUBO President John Walda said 47 percent of the institutions have endowment market values below what they reported in 2008.
"Even though we had a really great year, many of our institutions are still not at a point where they've recovered in terms of value from the recession," Walda said.
Harvard University had the largest endowment of any U.S. university at $31.7 billion, up from $27.5 billion in fiscal year 2010. Yale was second with $19.4 billion. At the other end of the scale were colleges with small endowments like Pennsylvania's Keystone College with $7.1 million and Tennessee's Pellissippi State Community College with $5.7 million.
Colleges typically spend around 5 percent of their endowment annually to boost spending on things like faculty salaries, student financial aid and other operating costs. Most colleges depend largely on tuition revenue and government support, but at elite universities, endowment spending accounts for a substantial part of the budget; at Harvard, for instance, roughly one-third of the operating budget comes from income generated by the university's endowment.
Steve McAllister, vice president for finance at Washington and Lee University in Lexington, Va., said the university's $1.2 billion endowment allows it to offer need-based financial aid to 45 percent of students.
"Last year markets were strong," McAllister said. "You do have periods like 2008 where markets are less than cooperative."
The 73 colleges and universities with endowments over $1 billion had returns of 20.1 percent last fiscal year while those under $25 million showed returns of 17.6 percent.
Verne Sedlacek, president and CEO of Commonfund, which manages money for colleges and other nonprofit institutions, said many of the smaller institutions have low-risk investment strategies that don't yield high returns.
Of the 20 largest endowments on the list, five belong to public universities such as the University of Texas and the University of California that are facing budget pressures from state legislatures. "The challenge there is to try to make up for what's going on with state appropriations," Walda said.
The donations that colleges rely on to replenish their coffers also have not rebounded from pre-recession levels.
Sedlacek said 46 percent of the colleges and universities reported that donations rose in 2011 from the prior year and 31 percent said they dropped. "It's still not really a vibrant picture with respect to gift flow," he said.