UT Austin holds an endowment of $7.2 billion, none of which can be spent.
The UT System holds the largest public-school endowment in the nation and fifth largest overall, totaling more than $15 billion, according to a December study released by the National Association of College and University Business Officers. The results of this study, showing vast increases in the market value of endowments at most major universities, sparked the interest of U.S. Sens. Chuck Grassley, R-Iowa, and Max Baucus, D-Mont. Both senators serve on the U.S. Senate Finance Committee.
The Senate Finance Committee requested in January that U.S. colleges with endowments of at least $500 million submit detailed spending reports. Over the past few months, several universities, including Harvard and Stanford, have increased their endowment spending to support student financial aid initiatives.
Endowments consist of money, property or other assets donated to an institution that must be invested. The donation will appreciate over time for the university's well-being, but the original donated amount is given with the intentions of never being spent. The portion of each endowment that can be spent comes from the interest made by investing the principle amount.
"When a donor gives their money for their endowment, we say that's a permanent endowment that will not be spent," said Martha King, director of development at UT-Austin.
King said UT-Austin's first endowment of $250 was given on June 16, 1898. This February, the same endowment was valued at about $37,377, which means that the distribution of interest UT institutions receive has increased
as well.
"I think an endowment is a gift that keeps on giving," King said. "I'm not a donor myself, but if I had a big chunk of money I'd put it in an endowment."
All endowment investing in UT System is handled by a private entity, the University of Texas Investment Management
Company.
The UT System's endowment is divided into three parts. The more than $7 billion in the Permanent University Fund, which consists of monetary investments and land holdings in West Texas, was given to the system by the state of Texas. The UT System Board of Regents increased the distribution of this fund from the interest made on the original endowment to 5 percent in February. This was a 0.25 percent increase, which means UT-Austin will receive more money from the interest made.
The Permanent Health Fund and the Long Term Fund are the other two parts of the endowment. The $890 million in the health fund is used for health-related research at the six UT health institutions, and the $5.6 billion in the Long Term Fund comes from private donations to individual institutions, which provide a steady stream of revenue to all 15 institutions at a 4.5 percent distribution rate. Once a system institution receives a private endowment donation, UTIMCO makes all decisions regarding how the endowment is invested.
King said that if donors do not want their money to be invested by UTIMCO, they can choose to invest it through their own bank. However, UT requests that it is given money from the investment at the same distribution rate as investments handled by UTIMCO.
UT-Austin received $108.6 million from the Long Term Fund distribution this year. The University does not use the $7.2 billion endowment it possesses for Long Term and Permanent University Fund distributions. The spendable money, such as the $108.6 million, comes from the interest made by investing the original endowment donation.
Many endowment donations are designated for specific purposes by donors.
"Rare is the case where endowments are used for unrestricted purposes," said Randa Safady, vice chancellor for external relations in the UT System. "People rarely give their hard-earned money and say, 'Do with it what you want.'"
Though gift officers, who work with donors, may present a list of the university's needs to donors, they do not try to negotiate what the donations will fund, King said.
"The gift officer does not go in with a checklist of what we need to do," she said. "That is not in the best interest of us."
Safady said endowment spending is a very transparent process and that the system reports back to every donor each year.
"The UT System have endowment compliance committees that really ensure that the endowment is not just sitting there," she said.
She said every institution has an endowment compliance committee to ensure the endowment is being used according to the donor's wishes.
The state constitution also specifies the use of most of the money made from the Permanent University Fund.
