Emporia State’s Foundation has lost $14 million since last year’s stock market crash. The loss amounts to 25 percent of the foundation’s total endowment and is worse than what was previously estimated.
“At this point in time, (what the endowment was worth) to me is irrelevant,” said President Michael Lane last week, before the new loss estimate was released. “It doesn’t matter what it was. I do know that our foundation investments are performing better than the national average. We are not losing as much as average educational foundations across the country.”
In previous interviews, ESU administrators have reported that the losses only amounted to 19 percent of the ESU endowment.
Judith Heasley, president of the ESU Foundation, said that after speaking to the foundation’s investment managers last Friday, the loss estimate was revised to 25 percent. The estimate was released in response to The Bulletin’s request for the current worth of the foundation’s endowment.
As of March 31, Heasley said, the total worth of the endowment is $43.4 million, down from $57.5 at the beginning of the fiscal year, July 1, 2008. The total net worth of the foundation for Fiscal Year 2008 was $72 million, which includes the endowment and all other assets the foundation has acquired, including the Sauder Alumni Center located at 1500 Highland St.
The additional $4 million in losses brings the foundation to just below the national average. Donations to the university are collected through the foundation, which provides scholarships to students.
Heasley said that while the foundation wasn’t asking “for a bailout” of entire funds, it was asking donors to meet the shortfall for those scholarships that are under water and unable to make awards this year.
One longtime donor, however, said that he’s given enough.
“I’ve had a few times when people have called (asking for donations),” said Ron Swint, a 66-year-old Emporia resident. “We give money and as soon as we do, someone else calls again.”
Swint has donated to the ESU Foundation for over 15 years and has contributed more than $50,000, according to the foundation’s annual report.
“We get tired… they call too many times,” Swint said. “(I told them) ‘you need to call somebody else to help you.’ I get tired of doing that all the time.”
A university faculty member and frequent donor, however, said that he understood the foundation was experiencing trying times.
Dan Kirchhefer, a professor of art, said the foundation has told at least one donor that they would only take an amount that was predetermined by the foundation, even if the donor decided that they could not afford the entire amount. He declined to identify the donor, however.
“They’re doing the best they can,” he said. “We still have some money to award scholarships. Other than the one instance when someone tried to contribute a lesser amount and the foundation was pretty discourteous to them… I don’t want to imply that there has been any mishandling.”
In earlier statements, ESU administrators had said the average loss for other university foundations was either 24 percent or 31 percent.
“Currently we’re down, along with every other foundation in the United States,” said Heasley on April 17. “The national average is about 24 percent down.”
Lane said during an interview last week that the national average was 31 percent.
Brian Flahaven, the director of government relations for the Council for the Advancement and Support of Education, said yesterday the national average for losses the size of Emporia’s foundation was 24 percent as of January. For Ivy League schools, Flahaven said, the average was 31 percent.
Despite economic woes, Heasley is convinced that scholarships will only take a slight hit.
“We have donors that have been exceedingly generous,” Heasley said. “We are going to be a little shy this year but not as bad as we thought because our donors have been fantastic. It will affect scholarships but the impact is not going to be as great as it was.”
When the stock market causes an endowment to decrease below what the original donated value was, the scholarship goes “under water,” Heasley said.
“Initially when we went through and did our analysis, 31 percent of our endowed scholarships were underwater,” Lane said, in a previous interview.
Accounts that are under water cannot pay out the scholarship amount unless the original donors pay for the scholarship themselves.
“When a fund is underwater, our options are to not make an award or to ask our donors, who are only in a position to make an outright gift, if they would consider making a donation equal to what their scholarship normally is,” Heasley said. “If a scholarship normally is a $500 scholarship and the fund is underwater so it’s not going to pay out, (we would ask that donor) would they be willing to contribute $500 to us so that it could be allocated directly to financial aid.”
Each individual endowment pays out a 4 percent scholarship on the total amount of the endowment, Heasley said.
However, Heasley could not say how much money would be available for scholarships in fiscal year 2010, beginning July 1, because donors are still making contributions to the Foundation. Last year, the foundation paid out $1.82 million in scholarships.
All of the endowment assets that the Foundation has are invested in the stock market. Hammond Associates, a national institutional fund consultant firm, manages and advises the foundation’s financial committee on how and where to invest.
“(The committee) makes decisions on where funds are going to be invested,” Heasley said. “Almost every foundation you will find invests in a combination, stock market, equities, some mutual funds. Our endowment dollars are invested in one form or another.”
Even with all of the financial troubles, Heasley said that donations have still been coming in at a good rate. She also said that, overall, donors are happy with the way things are running.
“Donors are savvy folks,” Heasley said. “What’s happening with our foundation is no different than what is happening with the foundations all over the country and with people’s personal pension plans. This is unprecedented. It is like a market melt down. Our donors are not surprised. It’s just what’s going on right now with our society and with our economy.”
The Foundation also pays a small portion of Lane’s salary.
Foundation provides presidential perks
Some of the benefits of being president of Emporia State come from the ESU Foundation.
By the end of this fiscal year, 2009, the foundation will have contributed the maximum allowable amount of $10,660 to ESU President Michael Lane’s annual salary. In total, Lane’s salary topped $213,200.
“The Board of Regents tells the University what it is going to recommend for the salary for the CEOs,” said Raymond Hauke, vice president of fiscal affairs. “They tell us what we are allowed to pay with state money and they also allow an amount that is over and above that, that the Foundation can put in if they wish to.”
Hauke said that the foundation does not have to supplement Lane’s salary and they do not have to pay him the maximum amount.
“This most recent year, (the Board of Regents) increased the compensation cap by 2.5 percent, which increased the amount the foundation would contribute,” Hauke said.
Lane is also provided with a Foundation Operating Fund for use “at the President’s discretion, with the expectation that expenditures from the Fund are for the greater benefit of the University” according to Lane’s initial employment offer letter.
“He does have an account for discretionary funds and anyone can donate to it at any time,” said Judith Heasley, president of the ESU Foundation. “It’s funds that are used at his discretion for programs and projects for Emporia State University. My budget items are confidential.”
Vanessa Lamoreaux, associate director of communications for the Board of Regents, said that there is no contract between the board and Lane. The initial employment offer letter outlines the details of Lane’s employment and all of the stipulations in said letter currently apply.
Lane is required to live in an on campus residence, which is located directly behind the Foundation at 1552 Highland St.
Currently, the foundation is leasing a 2006 GM Buick Lucerne for use by Lane.
“That lease is up in May and I don’t know what I will have after that,” Lane said. “We negotiate locally for that.”
Local car dealers will be asked to provide the foundation with a lease for a car that has been used by the dealer for special projects and could have some mileage on it, Heasley said.
“I don’t know of any presidents that don’t have a car as part of their contract,” she added.
Travel expenses and ‘Presidential Hospitality’ are also supplied within Lane’s employment letter.
“That’s money we spend when we are taking perspective donors out to dinner when we are asking them for money,” Lane said. “When we thank donors for giving us money, that’s what we use it for.”
However, Lane has contributed over $12,500 to the foundation in the last two fiscal years.
“My wife and I set up two endowed scholarships,” Lane said. “One will have a $20,000 endowment, that’s a leadership scholarship. The other is a $10,000 endowment that is a scholarship in memory of my brother-in-law.”
The decision to increase the salary of the Regent School Presidents for Fiscal Year 2009 was made in September of 2008.
Further decisions to increase the president’s salary for Fiscal Year 2010 will not be made until approximately September, Lane said.
“I would be very surprised if they raise it come September,” Lane said. “With this budget year I don’t think that there is any chance that they will be raising salaries.”