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TCU Magazine Feature

Change for dollars

TCU's endowment grew to a billion dollars in the spring, yet the University's new vice chancellor for finance and business is suggesting the school should spend less of it.

By David Van Meter

Carol Campbell doesn't have a picture on her wall, though she began working in TCU's top financial position in March. Her office ornaments, as well as most of the furniture from her home in Northfield, Minn., are still there, waiting for the property to sell.

Still, the good-natured Campbell, an avid traveler, maintains her humor as well as her two mortgages.

That may be because she and her husband Jack, a retired schoolteacher of 35 years, just came through their first Texas spring.

Married for 25 years, the two met as single parents, each with three children, their ages ranging from 5 to 15.Today, they also count seven grandchildren.

Or maybe Campbell is smiling simply because TCU's finances seem to be in pretty good shape . . .

Q. I agree that Texas has great springs, but our summers may change your mind about Texas weather.

A. You may be right, but in Minnesota, we don't have spring. Winter sputters on forever, and summer just comes suddenly and doesn't last very long. The joke is, What do Minnesotans do in the summertime?

Q. I don't know. What do they do?

A. Well, if it falls on a Sunday, they go on a picnic.

Q. That's a good one. I understand that you served a decade at Carleton as vice president and treasurer, taking the endowment from $175 million to about $650 million, and before that you spent six years at the University of Minnesota, your alma mater.

A. Yes, and TCU sits right in the middle of those two polar extremes, and thus it enjoys the best of both worlds. It's private, so it doesn't have to rely on state funding or state regulation to the extent that public land-grant institutions have to. But it does have a larger student body and graduate school that a pure liberal arts college does not have.

Q. I also have read that you are a past chair of something called NACUBO (National Association of College and University Business Officers), which makes you sort of a national figure in your field, right?

A. You could say that. I chaired the group in 1993, and I still actively serve on three committees. On one of them, we're looking at the costs of higher education. It's chaired by the CFO of Princeton, and we're developing a template for simplified financial reporting that is understandable by members of Congress and other non-academics, yet robust enough to demonstrate why tuition is going up. It is still rising, but not as quickly as it has in the past. Q. How does TCU's financial picture compare with other institutions you know? A. You see the whole educational picture separating into haves and have nots. TCU is among the haves. Its endowment is among the top 50 in the nation. But total endowment is not the best measure of the strength of an institution; endowment per student is the real test. TCU is still well-ranked but not as highly.

Q. What else do you financial minds look at in regard to TCU's financial health?

A. Alumni support is key, that students walk out of here happy with TCU and the education they received. One indicator of that is alumni gifts. One interesting phenomena I've noticed is that giving is most entrenched in the Northeast. Of course, you're giving back to good old Yale; the same families have been doing that for generations. As you move to the west, participation rates go down. That may be because it's more dominated by state institutions. Of equal importance is student demand. And again, TCU separates into the haves. When you look at the applicant pool, it is growing. We're able to consider raising the rate of tuition at a rather stiff pace because demand is there.

Q. Don't you think TCU's tuition ($16,260 for the 2000-01 academic year) is high?

A. We're woefully underpriced if you compare the tuition rate at TCU to a national list of institutions, or even locally to SMU or other overlap institutions. The good news is that TCU has done a great job over the years of keeping tuition low, giving it the flexibility to raise tuition in the future, but among many families, there is a high correlation rate between tuition rate and perceived value of the institution. The chief financial officer before me and I come in agreeing that there is tremendous value in a TCU education, more than what is reflected in the tuition rate.

Q. Why don't we just spend more of the endowment and keep tuition low? TCU has a billion dollars in its savings account, right?

A. The corpus [or principal] of an endowment is never spent. The old clichŽ is that it is the gift that keeps on giving. It is invested, and the earnings from it do two things. Part goes back into the body, to maintain the purchasing power for the future. If you gave a gift to TCU that was supposed to give the school $1,000 in purchasing power, we have plowed money back into that initial fund so that it continues to provide the same goods and services today, such as an endowed professorship or a scholarship. The other part of earnings is spent every year.

Q. Who determines how the endowment is invested and how much income is spent?

A. The trustees. The endowment when I came in had been very well invested; it's had a fantastic year. It's aggressively invested, a high proportion in equities, technology and other small capital stocks. And we are going to slowly ratchet down the amount we spend. We spent six percent this year, and next year we're going down to 5.75 percent. In fact, one prominent Michigan study holds that even a five percent payout of endowment is risky. Moody's, the bond rating agency, also believes a 5 percent payout rate is the prudent amount.

Q. Hmmm É in spending less, doesn't that put a greater burden on student tuition?

A. I like to think of it over a long period of time as a larger reliance on endowment income. We're growing the corpus of the endowment, through gifts, through good investment strategy. Over time, a larger percentage of revenue would come from the endowment. And that is our goal.

Q. Could you establish an endowment or something for my household? I would, but I haven't balanced my checkbook to the penny in a decade.

A. No, but one of my main tasks is to meet with you -- as well as campus and alumni groups -- to share as much financial information as possible. With the Commission on the Future finishing up, you have 17 task forces coming up with all kinds of new ideas. How do all of our big dreams fit together financially? What can we afford to do going forward? The best decisions are made when you have the largest picture. Good communication provides that.

Top endowments per full-time student:
2. Princeton $1.007 million
31. Southwestern $272,959
39. Trinity $232,015 50. Notre Dame $195,032 75. Duke $150,329
84. Johns Hopkins $132,878
85. TCU $127,351 108. SMU $97,768
120. Austin College $86,162

Top College Endowments:
1. Harvard..............$14.2 billion
13. Rice..................$2.9 billion
43. Wake Forest......$857 million
45. TCU................. $835 million
50. SMU................$790 million
59. Tulsa...............$684 million
73. Baylor..............$587 million

Where TCU's income comes from:
Tuition and fees $75.4 million
Private gifts, grants $4.3 million
Government contracts and grants $6.5 million
Investment income $35.9 million
Auxiliary activities $19.4 million
Other income $3.8 million
Total $145.3 million