Recession saps USC, Clemson endowments

The endowments of Clemson University and the University of South Carolina have lost a combined $156 million over the past two years as the nation's sharp economic downturn turned investment earnings into hefty losses at colleges and universities across the country.

"We are not immune," said Harrison Trammell, president and chief executive officer for the Clemson University Foundation, which lost about $99 million from June 30, 2007, to June 30 of this year.

Clemson's endowment stood at about $331 million on June 30, a decline of 23 percent. USC's endowment was approximately $382 million, down 13 percent.

Endowments are giant pots of cash and real estate used to pay for student scholarships and academic programs and to augment faculty salaries. The money is invested by professional managers in a variety of ways - stocks, bonds, mutual funds, hedge funds and even natural resources like timber.

While the endowment hits have been big at Clemson and USC, they are dwarfed by the losses at institutions like Stanford University, Harvard University and Yale University, each of which lost 30 percent of their endowments' value over the past year, according to news reports.

Even with those steep losses, the endowments at those schools are far larger than what Clemson and USC have at their disposal.

Stanford's endowment is at $12 billion, according to the San Francisco Chronicle.

The Wall Street Journal reported Yale's endowment was at $16 billion, and Harvard's endowment was worth $26 billion.

USC officials said state schools tend to be less aggressive than private schools in investing endowment money.

"We're trying to hit singles and doubles and forgo the home run," said Russell Meekins, chief financial officer for University Foundations at USC. "We just don't want to strike out."

For the last seven years, the performance of USC's endowment investments have stayed close to that of the Standard and Poor's 500.

USC's endowment investments have slightly outperformed the S&P 500 in five of those years, growing each time the S&P grew and dropping when the S&P fell.

Before the losses of the last year, the large endowments at colleges and universities had attracted the attention of lawmakers, who believe the schools should tap those piles of money to prevent tuition increases and limit faculty and staff losses.

Both Clemson and USC have raised tuition in recent years. Both schools have also restricted travel and limited hiring as they wrestled with state budget cuts.

But officials at those schools said handling budget cuts or other economic perils is not as simple as dipping into endowment resources.

Trammell said most of his school's endowment money was given by donors who want it to be used for a specific, contractually agreed upon purpose.

"As a foundation, we have a responsibility to our donors," he said.

Those donors do not give with the idea that their gifts will be exhausted in a short period of time, Trammell said.

To keep that from happening, USC and Clemson pay out only a portion of the interest earned from the endowments' investments, typically 4.5 to 5 percent.

"The foundation has to strike a balance between meeting the needs of the students today and those of the students yet to be born," Trammell said.

State Rep. Chip Limehouse, the Charleston Republican who chairs the higher education subcommittee in the state House of Representatives, said colleges and universities need to be more flexible during these tough economic times.

"I would say flexibility, creativity, thinking outside the box are bywords these schools need to consider," Limehouse said. "They need to think in terms of how we get from here to four or five years from now. When they get that donation, they need to say, 'By the way, can we have the flexibility to pay the electricity bill or the custodial bill?' It's all going toward the same end - educating our children."

Many of today's students are having an increasingly difficult time paying for college.

Last year and into this year, Trammell said, Clemson officials heard from a number of upperclassmen who said they might not be able to afford to complete their college educations.

Clemson reached out to many of those who contributed to the school's endowment, asking that they give additional money that can be used to keep those students enrolled.

In about four months, donors gave $468,000, Trammell said.

That money was used to fund 170 student jobs that had been cut through budget tightening. The money also paid for 43 student awards.

Priority was given to low-income students.

"This is a testament to our donors," Trammell said.

As the U.S. economy stabilizes, so, too, do college endowments.

Meekins prepared a chart showing USC's endowment investment income by calendar quarter.

For the first time since the third quarter of 2007, USC's investment income had grown. And it was up by 14.2 percent, the best quarter in the last seven years.

Don't expect to hear Meekins crowing about it, though.

"I don't want to jinx us," he said.