The University Board of Visitors Finance Committee approved a 5.5 percent endowment spending distribution rate for the 2009-10 fiscal year after meeting to discuss the status of the University's monetary investments yesterday afternoon.
In difficult economic times, the University's endowment helps provide some financial stability to support initiatives as commonwealth funding fluctuates, particularly in light of Gov. Tim Kaine's recently announced state budget cuts. As of June 30, the market value of the endowment was $2.5 billion, spread across 1,862 accounts. This placed the market value per share at $4,005.7, according to the University of Virginia Investment Management Company.
As a result of inflation growth, the Board approved a 5.5 percent spending rate, an increase from the fiscal year 2009's 5 percent payout rate.
Despite the increase in the payout percentage, however, the distribution of actual money decreased from $162 million in 2009 to $138 million this year because of the endowment's lesser value, a result of the economic recession. This will be the first year that the University's payout has decreased since 1984, said Yoke San Reynolds, vice president and chief financial officer. Reynolds said the distribution for fiscal year 2010 is still an increase, though, from fiscal year 2008's $135 million.
Fiscal year 2009 had the highest distribution the University had ever seen at $253 per share, making 2010 "still the second highest distribution year we've ever made" at the proposed $220 per share, Reynolds said.
The 5.5 percent payout falls within a band of 4 to 6 percent market value which the University maintains as a policy. Leonard Sandridge, executive vice president and chief operating officer, said historically, the University has hit the bottom of the band much more often than the top in the past 20 years. This year's high payout rate is a new experience.
Board member Austin Ligon asked why the payout was not set at the maximum 6 percent in "the most challenging market time we've ever faced." He added that although it is quite possible that next year's market will be even worse, "a betting man would put his odds against that."
Sandridge said although Ligon could be seen as justified in his argument, the Board must also balance the endowment's funds and ensure the long-term viability of the University's investments. Sandridge added that the 5.5 percent payout is higher than the 5.3 percent distribution anticipated by stakeholders but better than what most University deans and officials expected.
"We want to have a sustainable, predictable payout," Sandridge said.
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