The Power of the Endowment

A Presidential White Paper
Addressed to the Cornell College family
from Leslie H. Garner Jr.

May 2005

“Simply put, Cornell College needs more meat on its bones to become a really great institution in the years ahead. We have never been a wealthy institution, nor have we ever served a majority of full-paying students. However, to be the institution we know we can be will depend on growing our endowment through the generosity of many Cornellians. Under the direction of a strong board, president, faculty, and staff, we have made dazzling strides in the past decade. Now, it’s all about the endowment.”

Mary Bowman Seidler ’61, trustee

No student at Cornell College has ever paid 100 percent of the cost of his or her education. Like every other distinguished liberal arts college in the nation, Cornell finds it needs to spend more per student than is feasible to charge in tuition and fees. Providing a personal, one-on-one education and ensuring it is available to a broad range of students is expensive. The cost of this level of quality and personalization cannot be borne by students and parents alone. Student tuition pays only about two-thirds of the cost. The college makes up the difference through the Annual Fund and earnings from the endowment, most of which was built up through alumni contributions over the years.

Cornell’s $68.7 million endowment (as of March 31, 2005) is the financial foundation of the institution. The principal is not to be invaded and only the return on the invested principal is used to fund the work of the college. It provides financial support for immediate and future needs such as scholarships, faculty, library, laboratories, computer facilities, curricular and co-curricular programs, lectureships, faculty development, and student services.

Nothing is more important in our effort to strengthen Cornell’s finances and therefore its academic future than the growth of the endowment. Though not large enough, the endowment is nearly double its size of a decade ago and donors have added to its strength with significant endowed funds in the past 10 years—including the Richard and Norma Small Chair, the Campbell R. McConnell Fellowship, the Delta Phi Rho Lectureship, the Lloyd C. Geer Scholarship Fund, and the Sherman and Vera Phelps Shaffer Fund endowing a chemistry chair, equipment, and scholarships.

The Cornell Board of Trustees, through its Business Affairs Committee, has responsibility for managing the endowment and it has employed Hammond Associates, a private investment-consulting firm in St. Louis, since 1993. Together, the two groups have developed an endowment investment strategy, monitor its performance, and adjust its strategy as needed. Investment returns on the endowment for the five years ending June 30, 2004, rank in the top 25 percent of all institutions that participated in a nationwide survey conducted by NACUBO (National Association of College and University Business Officers). Trustee policy is not to exceed a 6 percent spending rate to supplement the college’s operating budget.

Despite this growth and performance, Cornell’s endowment ranks below more than half of our peer institutions in the Associated Colleges of the Midwest and the Great Lakes Colleges Association (see graph). Prospective students and their families today consider the endowment as one indicator of how well a college can support an education.

With an appropriate endowment, Cornell will provide students

• the most outstanding teaching faculty available in the marketplace
• the means for fine students to afford a Cornell education through scholarship
• the experience to learn within academic centers of excellence that fit the needs of our times
• the opportunities to engage, as a routine and not an exception, in a range of exciting research projects with their professors
• the opportunities to choose among many study-abroad options
• the exposure to public figures and cultural experiences that broaden their lives
• the advantages of familiarity with cutting-edge technology in their learning experiences in every major field offered by Cornell
• a leg up among their peers in competitive career searches through early opportunities to participate in donor-funded work internships

Over the next five years, the primary goal for Cornell is to secure its position as one of the nation’s leading liberal arts colleges. Achieving this goal includes five objectives:

1. Stabilize enrollment at 1,200 students.
2. Be a leader in liberal arts education in the 21 st century.
3. Engage students in learning and personal development outside the traditional classroom, and enhance the college’s strong sense of community.
4. Provide a stable and adequate financial base for the college.
5. Enhance the physical plant.

The key to attaining these objectives is building the endowment. At the same time, the percentage we use from the endowment must be smaller than 6 percent. Even spending as little as 4 percent, with 2 to 3 percent inflation each year, does not allow for a proper growth rate. Without increasing the endowment, we would have to raise tuition and fees far greater than possible or appropriate. When our students graduate they will be tested not only for their ability to understand their discipline but also for how they apply that knowledge to emerging problems and issues. Students don’t learn that by being lectured to day by day. They need interactions that include active debates, field study, off-campus programs, speakers, and more—and all of that costs money. To meet these needs we need donors who have the faith to give unrestricted gifts to the endowment. This gives us the financial flexibility to respond to evolving educational demands—to develop innovative initiatives and adjust to changing conditions. These activities are essential for the creation of knowledge and for ensuring that Cornell gains an intellectual edge among liberal arts institutions. We are caretakers not only for the Cornell of today and the next five years but for generations to come. Presidents and Boards have come and gone during Cornell’s history. Only the endowment, and every gift that has made it grow, can have an impact on our college into perpetuity. I appreciate your confidence in Cornell and welcome your reaction to the ideas in this White Paper. Leslie H. Garner Jr. President