Market plunge threatens university scholarships

With the recent economic downturn, university endowments drop up to 15 per cent in value

The global financial crisis is striking university endowments. And schools like NSCAD, which put these funds towards scholarships, are already seeing the dip.

Peter Flemming, NSCAD vice president of finance and administration, says the market plunge has sliced the school’s scholarship budget in half — from $100,000 last year to $50,000 this year.

“The market value of securities has of course dropped in the last year or so because of the economic crisis, so it makes it difficult for us to maintain the scholarship level we had before,” he explains. “We’ll have to decrease the amount of scholarships because the fund won’t have as much money to give out.”

University endowments are funds collected from donors that are invested in the stock market. Most schools allocate these funds to go towards scholarships. If the market suffers, the investment value of endowments drops.

Flemming says NSCAD’s fund, currently worth $2 million, has decreased by roughly less than 10 per cent.  He says the dive in funds won’t affect university operations, but that students will receive less in scholarships.

“There’s nothing we can do about it,” says Flemming. “We have no other resources we can put into it. Our board of governors is looking at maybe making some donations to help out, but there’s nothing firm in place right now.”

Not all universities in the Halifax area are saying they will reduce the money they hand out in scholarships this year.

But Dalhousie financial vice president Ken Burt says the university’s endowments aren’t what they used to be.

“It’s down, there’s no question about it,” says Burt. “I suspect that we’re down in the 15 per cent range at the moment.”

Burt says in Dalhousie’s total endowment was $341 million in August. In September, the figure dropped to $315 million. For this year, the university’s endowment fund was budgeted at $18.4 million, with roughly $8 million going toward student assistance and around $6 million to endowed chairs.

He doesn’t anticipate any changes to scholarships this year. This is because Dalhousie averages the endowment performance for July, August and September to determine a range for scholarship spending. This year, range is $12.4 million to $19 million, so he says current market activity won’t hurt the fund.

But if the stock market exchange continues to crumble, there could be trouble in the 2010-11 budget year.

“That’s the year when we’re going to have to look at the budget a little closer,” says Burt. “It just reduces the amount of money that’s available for scholarships and those sorts of things.”

University of King’s College Bursar Gerry Smith also says the value of King’s endowments might not affect university operations until the next budget year.

“If there’s a downturn in the economy and the stock market is in terrible shape and stays down for a long period of time, the first impact to us should be in 2010-11,” he says.

But unlike Burt, Smith says he hasn’t planned for what cuts King’s would make to bounce back.

“How will that affect us? I don’t know,” he says. “Will we cut sports teams? Will we cut library books? Will we cut scholarships? I don’t know because we don’t have those kind of strategic allocations decided in advance of either new money or a reduction in spending.”

Association of Atlantic Universities executive director Peter Halpin says university administrators are concerned.

Halpin was in Ottawa earlier this week at the Association of Universities and Colleges in Canada annual fall meeting. He says although the financial meltdown issue wasn’t penciled in the formal program, it was clearly a concern.

“There was a lot of a hallway discussion about the impact of the economy on university finances,” he says. “Presidents are talking about it because it does have an impact, not just on endowments but on university pension plans as well.”

Halpin explains each university will be affected and cope differently as universities are autonomous bodies and some have larger endowments than others.  He says he’s certain they’ll be strategizing with their boards to discuss the impact of the world economy on finances and future paths to take.

Kaley Kennedy, the Nova Scotia representative for the Canadian Federation of Students, a national student lobby group, says provincial governments are ultimately to blame for universities’ reliance on the market performance of endowment funds.

“The reason why universities rely on endowment funds is because they’re not adequately funded by the government,” she explains.

Kennedy says it’s the province’s duty to provide essential public services such as education and health care.

“If the government were to guarantee those things for all people,” says Kennedy, “when there was an impending financial crisis there would be those services and that social safety net to ensure that people were not shut out of the system.”

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