A president’s dream? Absolutely. A common occurrence? Absolutely not.
“What Dick and his wife, Norma, did is just phenomenal,” Garner said. “Essentially they looked at a Cornell education and communicated through this gift that they understand we are in business for perpetuity. They understand that our endowment is the key to continued academic excellence and the single most important indicator of institutional strength.”
After all, Cornell’s $66.3 million endowment (as of March 30, 2004) is the financial base 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, library, laboratories, computer facilities, curricular and co-curricular programs, lectureships, faculty development, and student services.
“I’ve been involved in capital projects in the past, but a college of the quality of Cornell must have much more than brick and mortar,” said Small, the school’s most generous benefactor. “We need a large endowment—one that is much larger than it is now. No student at Cornell has ever paid 100 percent of the cost of his or her education. I benefited from an excellent Cornell education that was partly paid by Cornellians from earlier years. The same is true for students today. We must increase the endowment to provide a quality liberal arts education to future Cornell students.”
Endowments are critical to liberal arts colleges. An education that provides for small classes and intense interaction between students and faculty—the essence of a good liberal education—is expensive. Cornell, like every other distinguished liberal arts college in the nation, finds it needs to spend more per year per student than is feasible to charge students in tuition and fees. Student tuition pays only about two-thirds of the cost of their education. 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.
“Nothing is more important in our effort to strengthen Cornell’s finances and therefore its academic future than the growth of the Cornell endowment,” Garner said.
Mary Bowman Seidler ’61, longtime trustee and chair of the recent Arts at Cornell campaign, agreed, stating that Cornell’s future is “all about the endowment.”
“Simply put, Cornell College needs more meat on its bones to become a really great institution in the years ahead,” she said. “We have never been a wealthy institution, nor have we ever served a majority student body 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 of us Cornellians—through gifts made during our lifetimes, trusts, and bequests under our wills. 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.”
The endowment, though not large enough, 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.
Trustee John Urheim ’62 said the administration bears the burden of meeting day-to-day needs while also looking at what will be in the best interest of the college 150 years from now. “When someone asks what is the most important, a restricted or unrestricted gift, my answer is ‘yes.’ Cornell needs both of these. In today’s environment we need to support the operations of the college, but we also have to look to the future. I think endowments are a big part of the answer to that question. This is money the college can rely on for years to come.”
Endowment touches students
The William Fletcher King Scholarship endowment, which was set up by President King in 1903 upon the death of his wife, Margaret, is an example of the type of gift that has, and will continue to have, a lasting impact on Cornell. King, who was president of Cornell for 45 years, gave $100,000 to establish scholarships to finance a Cornell education. To this day, Cornell gives ten $20,000 William Fletcher King scholarships annually, and they remain the college’s most prestigious academic scholarship.
“King’s term of service to Cornell and the impact of his endowed gift have provided stability for Cornell,” Garner said.
From the beginning Cornell has benefited from the support of alumni and friends. In 1873, alumnus and professor Hamline Freer founded the Cornell alumni association, and within a year, thanks to the loyalty and generosity of the college alumni, he had raised enough money to endow an alumni professorship. James Harlan, an alumnus, much-respected teacher of mathematics, and Cornell president from 1908 to 1914, first occupied that chair. The college still draws from this fund for faculty salaries.
A measure of excellence
In addition to providing much needed financial aid and academic support, the school’s endowment is used as a measurement of excellence by U.S. News & World Report and others who rank institutions of higher education.
“While the endowment is certainly not the whole picture of a college, students and their parents do look at it when deciding where to go to college,” Garner said. “They see it as one indicator of how well a college can support an education and provide learning opportunities such as off-campus study and student research.”
Having said that, Garner believes there are some misconceptions about the endowment. “They think it can be drawn on all of the time,” he said. “People will ask, ‘Why is $60 million not enough for an endowment?’”
The answer is simple. The endowment is a permanent foundation for the college, and because of that the principal cannot be touched. That means the number of new gifts Cornell receives is critical, as is how the gifts are invested.
“The way we feel about education, through our commitment to the liberal arts, small classes, one-on-one contact with faculty, and aspirations for all the opportunities related to our unique OCAAT calendar—all of that is very expensive,” Garner said. “It’s much more expensive for one faculty member to work with one student. We don’t want to offer classes with 300 students. That’s not the quality to which we aspire. We believe we need the close interaction with students, and that means we need a strong, committed faculty and the facilities and programming to support our goal. If it’s a lab, we need lab materials. If it’s in humanities, our faculty members need funding to travel to conferences and to pay for student research materials.”
Almost every aspect of running an institution of higher education takes more money today than it did five years ago. That is especially true when a college shares Cornell’s mission of creating a caring educational environment that is accessible. “So when you put our goals together—providing a personal, one-on-one education and ensuring it is available to a broad range of students—that can be an expensive proposition,” Garner said. “What that means is that the full cost of a Cornell education cannot be borne out by students and parents alone.”
Managing the endowment
One key component to increasing Cornell’s endowment is its oversight. 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. About 6 percent of the endowment’s total value is used annually to supplement the college’s operating budget.
Glenn Dodd, Cornell’s vice president for business affairs, said investment returns on the endowment for the five years ending June 30, 2003, 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).
“Recognizing that we are not likely to see returns in the near term that we saw in the 1990s, what we have done is look for ways to add different classes of assets to our portfolio,” Dodd said. “Because the reality is that without the growth of the endowment it is going to be increasingly difficult to provide the support for the college to sustain itself at its present enrollment levels.”
Garner said that in order to move the institution forward, Cornell must continue to develop more opportunities for students and faculty through programming, faculty chairs, academic initiatives, internships, off-campus experiences, study abroad, and more.
“We would really like for the percentage we use from the endowment to be smaller,” Garner said. “When you think about spending as little as 4 percent and you think about having 2 to 3 percent inflation each year, the reality is that at present it is hard for the endowment to grow through management alone.”
It takes contributions of all sizes to benefit faculty, students, and programming across the spectrum. “Without increasing the endowment, we would have to raise tuition and fees, and we’d have to drastically cut back on our innovative course and program offerings,” Garner said.
Terry Gibson ’59, vice president for alumni and college advancement, said the endowment—much like a Cornell education—has an enduring value that benefits not only this generation but generations to come.
“When our graduates emerge they will be tested not only for their ability to understand their discipline but also for how they can apply that knowledge to new and emerging technologies,” he said.
Students don’t learn that by being lectured to day by day. They need interactions, he said, 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 gifts to the endowment that are openended,” Garner said. “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.”