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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 clich 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
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