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On therebound; Area college endowments -- vital to financial health -- recover after some tough recession losses.

Byline: Christina Patracuolla

Colleges and universities in the Worcester area had healthy investment returns on their endowments in 2014, according to the National Association of College and University Business Officers.

Endowments are the savings accounts held by schools, and the investment returns on those accounts are important source of income. The investment returns can be spent on anything from scholarships to professorships.

In the Worcester area, endowment returns in 2014 were up and average of 15.5 percent. That is on top of a 11.7 percent increase in 2013; in 2012, the average endowment lost 0.3 percent.

Worcester has 11 colleges and universities with varied student populations, tuition costs and endowment funds. The institutions are an integral part of the economy in Central Massachusetts.


As the economy has recovered, some schools have thrived, while others have struggled to get back to growth. Nationwide, smaller schools handled the winds of financial adversity better than larger schools with bigger endowments, achieving better results than larger schools with bigger endowments.

Harvard University's disastrous deficit in 2012 -- a loss of $1.2 billion from its $36 billion endowment -- exemplified the risks of having larger amounts of money in the market during the recession. Despite higher education's difficulties in the Great Recession, 2014 represented a second year of double-digit increases for most college endowments.

The College of the Holy Cross holds the largest endowment fund of Worcester-area schools, at $726 million market value as of July 2014. Timothy Jarry, chief investment officer at Holy Cross, said the finance committee of the college's board of trustees determines the spending taken out the endowment. Holy Cross takes 15 percent of its endowment to finance the operating budget.

The college's assets were increasing rapidly, with a gain of $35 million in net assets at the end of the 2010 fiscal year, and then an increase to $96 million gains in 2011. However, the growth in net assets plummeted as a result of the recession with a loss of $16 million in 2012. The 2013 fiscal year showed exponential improvement, but improvement nonetheless, with a $67 million gain.

Worcester Polytechnic Institute has the second highest endowment in the area at $433 million as of December 2014. WPI gained $76 million in net assets by the end of the 2011 fiscal year, but lost $5.44 million in 2012. WPI came back in 2013 with a $38 million gain in net assets. The difference from the end of the 2012 fiscal year was the weak return on investments with a $4 million loss as compared to the investment gain of $35 million in 2013.

Worcester Polytechnic Institute's Chief Financial Officer, Jeffrey Solomon, explained the decline in 2012 was related to the use of the endowment because of a the declining market.

"To raise our endowment and net assets for 2013, we didn't change out strategy. What changed was the rate of return at risk and volatility,'' said Mr. Solomon. "Asset allocation is the most important thing, and it hasn't changed much over the last several years. What's causing all the changes is the market we're in.''

By June 30, 2013, WPI's equity was up 30 percent based on market performance from 2012-2013. According to Mr. Solomon, the 2014-15 fiscal year is doing well at a 15 percent return thus far in investments, with little to no change in asset allocation.

Clark University's $406 million endowment was third-highest in the area. The university increased its net assets by $55 million in 2011, but similarly to Holy Cross and WPI, saw a drop in net assets by $14.4 million in 2012. The loss in 2012 was fueled by a $20 million deficit due to investment spending, a drastic change from its $50 million increase in 2011 and an increase in its endowment by 16.7 percent.

Assumption College's endowment skyrocketed 48.4 percent from 2009 to the 2013 fiscal year, despite problems in 2012 regarding its net assets, based on the national association's report. Assumption College's fund made its biggest jump from $69 million in the 2010 fiscal year to $81.3 million in 2011, showing an 18 percent boost. Assumption College currently sits at $100 million, up $8 million in 2014.

Despite the woes of those with healthy endowments, Worcester State University with its $23 million endowment as of December 2014, and Fitchburg State University with $20 million at the end of the 2014 fiscal year, have stayed strong through the volatile market experienced in the last decade.

Worcester State University generally transfers five percent of its endowment to operating expenses, according to Vice President of University Advancement, Thomas M. McNamara.

"Our very successfully managed funds are because of the foundation board and investment committee. They make good, business savvy decisions,'' said Renae Lias-Claffe, WSU's assistant to the president for campus communications.

Community Connections

WSU is especially integrated into the Worcester community, totaling over 150,000 hours of community engagement, with 43 percent of the education department made up of alumni and the residents of Worcester, which is has helped keep the school on track financially. The school is giving back immediately to its alumni, which attracts local applicants around the area while encouraging the alumni to give back to the school in donations. Ted Coghlin, a dedicated alumnus and prominent community leader and philanthropist who passed away in December 2014, was one of nine member in his family to attend WSU, advancing the institution by giving them $4 million in donations which helped raise over $20 million more in matching funds.

"WSU helps put nurses in hospitals and teachers into school rooms around the city and 85 percent of graduates stay here after graduation,'' said Ms. Claffey.

Net revenue for WSU increased from $88 million in the 2012 fiscal year to $89 million in 2013 while the endowment fund received $6 million, $3 million of which were from alumni and the rest from corporations, parents and friends, corporations, Worcester Center for Crafts and governmental grants.

Smaller Colleges

The smaller colleges in the area had no drastic changes in revenue over the last five years, according to their financial statements. Anna Maria College has a $3.27 million endowment as of 2013. Nichols College, in Dudley, reported in its annual report that its endowment was $6 million in fiscal year 2013. Becker College reported in its annual report that its endowment has grown from $1.6 million to $4.5 million, from fiscal year 2011 to 2014.

Mount Wachusett Community College's endowment is $3.5 million, with an extra $2.25 million in renovations and $1.5 in program support. MWCC is has a healthy endowment in comparison to other community colleges, but scholarship funding requests "currently exceed available endowment funds,'' according to the college's campaign for globalization. Another issue surrounding the liabilities overpowering its assets of the college is the cost of college books, which have increased 62 percent over the last few years.

Quinsigamond Community College's endowment was $4 million, which is considered in the median nationally for college endowments. QCC is state-assisted, not state funded, receiving approximately 27 percent of its operating budget from the Commonwealth.

Cherie L. Ronayne, marketing and press relations administrator of QCC, said, "Typically, community colleges don't run off of large endowments such as private universities do.''

Similarly to most colleges with smaller endowments, the college's standard policy is to distribute 5 percent of the returns from the proceeds of the endowment investments. QCC also recently announced its Capital Campaign, RISE (Regional Investment in Service and Education) which will provide the opportunity for QCC to make the leap required to serve more students and our community, particularly in the Healthcare and Science, Technology, Engineering and Math (STEM) sectors. Through the foundation, the first year of the overall campaign goal of $5 million has reached $3.2 million.
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Title Annotation:Business
Author:Patracuolla, Christina
Publication:Telegram & Gazette (Worcester, MA)
Date:Feb 1, 2015
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