In an effort to jump-start the University's future, the Board of Visitors may soon elect to reach a little deeper into the pockets of the institution's endowment next year.
"There was a very lively conversation about the pros and cons of whether we should increase the conservative endowment spending or not," University spokesperson Carol Wood said about the Board's April meeting.
Yoke San Reynolds, University vice president and chief financial officer, said the Board's recent pattern of endowment spending and investment has allowed for a possible increase in spending.
"We talked about the fact that we have been conservative in taking distributions out of our endowment and, as a result, we may have some room to increase our distribution," Reynolds said.
She maintained that many Board members were open to the idea of increased endowment spending, especially because the additional funds could be used to finance the priorities highlighted in the University president's Commission on the Future of the University. Those priorities include increasing faculty diversity, addressing curriculum internationalization and improving the University's core science programs.
"I think there was certainly support for increasing the distribution partly to fund the priorities of the president's Commission on the Future of the University because the Commission is finalizing its report, and we know these priorities have to be funded and the endowment is one way to do that," Reynolds said.
Though increased immediate spending has its advantages, certain disadvantages must be acknowledged and considered before a decision regarding endowment spending is reached, Reynolds added.
"We're trying to invest in our future, leveraging and investing now in order to get returns more quickly," Reynolds said. "The disadvantage is that if we spend it now, we have a smaller balance in our endowment."
Deciding how much of the University's endowment's balance to spend next year, therefore, will be a balancing act. Reynolds noted that the decision is not one to be taken lightly.
"You don't want to overspend because we have a responsibility to our donors; when they gave us an endowment for a program they expected we would keep that program going in perpetuity," Reynolds said. "And if we overspend we won't be able to continue those programs. But if we under-spend then we're not leveraging our endowment and not investing in our priorities and we may lose an opportunity for greatness."
Board Rector W. Heywood Fralin said the Board is waiting to make a spending decision until after the issue has been carefully studied.
According to Reynolds, recommendations will be presented to the Board in June after sensitivity analysis is completed and various options are considered.
"We will not overspend," Reynolds said, noting that the Board can only spend between 3.5 and 5.5 percent of the endowment's market value because of University policy. "We are very conscious of our stewardship responsibility"
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