September 9, 2004

Economy Down, But Alums Keep Giving to C.U.

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Although the national economy — especially the stock market — has been less bullish in the early years of this decade than in the 1990’s, it has not affected alumni giving to the University. The 2003-2004 fiscal year marked a record-breaking year for Cornell, which received almost $386 million in gifts.

Over the past six years, the amount of cash that the University actually received ranged between last year’s record-breaking high and a low of $308.68 million raised during the 1999-2000 fiscal year. Based on figures maintained by the Office of Alumni Affairs and Development, the University raised $341.36 million between July 1998 and June 1999. Fiscal year 2001 saw Cornell receiving $309.47 million, slightly up from the previous year. During fiscal year 2002, however, there was a large spike in giving, especially in the month of December, during which the University received $122.06 million — whereas the median received during that time over the six years was approximately $77.42 million. This is about 63 percent of what was raised in December 2001.

Fiscal year 2003 saw a dip to $317.04 million — still a sizable improvement over fiscal years 2000 and 2001 — before it reached its high of $358.94 million last year. December 2003 had the second highest amount of money received over the six years, at $101.59 million. “December is always a big jump for us,” said Inge Reichenbach, vice president of alumni affairs and development. “It’s the end of the tax year, and gifts are tax deductible.”

June is also a generally good month for gifts, which Reichenbach attributed to the reunions which take place in that month. Distinct jumps in new commitments and gifts are apparent during these months every year; December is consistently the best month for new gifts and commitments. This is not always the case, however, because of large amounts given by individual alumni. For example, the University received $155.07 million October 1999, making that year, in which the University raised a commitment of $527.89 million overall, abnormally high for this category. According to Reichenbach, these one-time large gifts skew the statistics.

While other universities have been hurt by the collapse of the dot-com bubble, Cornell’s fund raising does not seem to have been hurt badly. According to Reichenbach, the reason that fiscal year 2003 lagged had more to do with administrative changes — especially the appointment of President Jeffrey S. Lehman’77 — than with the economy.

Of all the money received, the vast minority, is given as an unrestricted gift. The majority of money goes instead to Cornell’s endowment. Reichenbach characterized the endowment as “money received from donors with the stipulation that the University doesn’t spend the money, only a certain amount of the income.”

This amount is determined by Cornell’s Board of Trustees, which has a committee to determine how much is invested and where it is invested.

“The Board decides how much is to be spent and we invest the money and make provisions so that the money is available for spending after the Board designates it,” said Don Fehrs ’77, Chief Investment Officer, Cornell University Endowment Fund. According to Fehrs, the Board designates how much of each share is spent annually, but it is generally about five percent of the endowment. The way the endowment is invested to generate profits is also determined by the board. According to Paul Gould ’67, chair of investment committee on the Cornell University Board of Trustees, the amount that the University spends from the endowment, called the spend rate, is calculated in a three year average by the University’s financial committee.

While giving seems to have not been hurt by the fluctuations in the market, the profits generated by investment have been.

“We had good long-term returns in the 90’s, which led to higher spending,” Fehrs said. “We benefited greatly during the 90’s as part of the [dot-com] bubble, and a significant portion was given back [between 2000 and 2002].”

Gould emphasized that the endowment was extremely diversified, however, and included assets not only in the form of stocks and bonds, but also included hedge funds, natural resources and real estate, among other investments. However, he acknowledged “clearly part of what the endowment does is tied to how the markets do…In general you have to stay invested.” Gould said that the key was to sell assets believed to be overpriced, and invest in assets believed to be undervalued. In doing so, the goal is to create a situation where there is not an extreme risk, but still generally good returns.

“It’s hard to generalize,” Gould said of the exactly where assets are invested. “There may be some slight changes in ways investments are made, some funds would be sold if we thought that certain asset classes are overpriced. By the same token, you run investments over a long period of time, and you have to take that into account.”

Gould said that there had been no drastic shifts in terms of asset classes recently, though in some cases the committee will shift investments.

Money raised by the University goes to various projects. Many of the gifts given to the endowment have specific stipulations, the establishment of a new position for a professor at one of the colleges, for example. However, money raised is paying for the construction of facilities, including the recently-completed Duffield Hall, the renovations for White Hall and Lincoln Hall and the ongoing West Campus Residential Initiative, among others. Gifts also help to finance projects related to specific programs, including the Life Sciences Initiative. Others go to establishing scholarships which allowed Cornell to make the need-blind admissions policy permanent.

Some recent large one-time gifts to the University include $100 million to Weill Cornell Medical College by Sanford Weill ’55 and Joan Weill; a $50 million donation to the medical school by Maurice R. Greenberg; and Samuel C. Johnson’50’s donation of $21 million to the Johnson Graduate School of Management.

Archived article by David Hillis
Sun Senior Editor