Because of the current economic climate, St. Mary’s will no longer be receiving up to $875,000 of endowment support. However, the college’s administration has taken precautions to make sure that this downturn does not affect the valuable scholarships endowments provide.
Endowments are primarily handled by the St. Mary’s College foundation, a private organization founded in 1972 to receive gifts for the college. According to Torre Meringolo, the organization’s current director, endowments are permanently restricted, meaning that the original donor money that makes up an endowment cannot directly be spent on anything for the College. Instead, endowment money is either put into bonds and money market accounts (which are low risk, low return) or handed over to investment groups, which in turn invest it in various stocks in the hopes of making a profit. A part of this profit, usually around five percent of the endowment’s total value, is then spent on the endowment’s intended purpose, most frequently a scholarship. Tom Botzman, Vice President of Business and Finance, said many larger donors decide to set up endowments because in theory, they create a sustainable source of income which will eventually exceed the original gift.
Problems arise, however, in an economic climate such as this one where it becomes more difficult to make a profit in the stock market. According to Meringolo, losses in the stock market have amounted to a loss of around 11 percent of the total endowment fund through December 2008, added onto the around five percent loss on the endowment from the year before. This has caused certain endowments to “go underwater,” which means that their current value has fallen down to the endowment’s original value. To counteract this, the foundation has had to freeze spending on these endowments, meaning that any profit on them cannot be spent on the college until the total value increases. Meringolo said this means around $875,000 usually provided to scholarships and academic funding by endowments will no longer be available.
This does not mean, however, that these scholarships will no longer be offered. According to Botzman, the college administration has decided to continue to support the over $5 million in scholarships given by the college every year by tightening the operating budget, and will hold afloat many of the other endowment perks such as endowed chairs. Botzman said, “Next year, it will look to the students that receive aid from the scholarships, both merit- and need-based scholarships, the same as it did this year or last year”
Meringolo agreed, adding, “We think we have averted any one or any program being hurt badly by this downturn.”
Botzman cited multiple budget changes, such as an increase in the number of open positions, cut backs on the college’s energy use (including shutting off some buildings during breaks), and cuts to the Athletic and Recreation Center (ARC). Botzman also cited the changes being implemented by faculty and students, such as hosting fewer catered events and helping fill the voids caused by leaving positions open.
Regardless of the fact that finances are almost universally bad in the current economic climate, the College continues to see support from many sides. For one, Botzman said that the state of Maryland “has still continued to be a very strong supporter of higher education.” He added, “We’re still getting that continued support both for our day-to-day operations and for the facilities we need to carry on our academic programs.”
According to Director of Alumni Giving Chris Sushinsky, alumni giving also remains strong. He added that although “everyone’s a little more cautious with the state of the economy,” the number of alumni gifts has even increased over the past few years, even if the size of those gifts has decreased. Students have also supported the College through the Student Government Association (SGA)’s donation of $15,000 from the operating budget, and $20,000 of the SGA carry-over account.
Although workable in the long term, both Meringolo and Botzman stressed that this is not a long term solution, and steps are also been taken to mitigate the loss of endowment money. According to Meringolo, there has been a general shift in the endowment fund from stocks to less risky bonds, which are far less affected by stock market shifts. Meringolo also said that, in many ways, the College was fairly conservative with its investment choices even before the economic downturn, which has allowed its endowment to do generally better than many others. “In this market, it is very difficult to say that your investment goal is going to be to make money in the stock market. You are very very lucky if you can preserve your capital.” He added, “We’re very defensive right now.”