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DrBenCarson

Reminder that endowments are highly illiquid and typically are not used to fund budgets

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What should they be used for the ?

Used? The university is what is used to grow the endowment.

So what's the point of the endowment then? To make the green numbers go up?

To be invested and generate returns which can fund the university's programs. As I said in another comment, it's a long-term investment, not a spending fund. You don't eat your seed corn.

I believe most endowments have conditions. So whatever the donator say?

Universities use the interest and dividends to pay for operating expenses.

Actually drawing down the fund would just ruin future finances.

endowments are the tail wagging the dog in many educational institutions

that's just misinformation.

> In particular, the endowment supports roughly two-thirds of the budget for undergraduate and graduate financial aid, as well as a significant portion of faculty salaries, research, and key programs like libraries and student services.

from https://news.stanford.edu/stories/2025/02/staff-hiring

The returns from the endowment are used to support university programs. The endowment itself is not spent - it's a long-term investment which produces dividends, not a spending fund.

Universities will dip into endowment funds if the returns are worse than expected. They will pretty much never make plans to dip into endowment funds, though.

Yeah, $500M (a 5% return) is still a lot of money.

To add, money is fungible. $100 for one department just means that $100 is freed up for a different department.

Money in university budgets is most certainly not fungible. Endowments are for the most part directed for specific uses and cannot be used outside of the restrictions. Education and General (E&G, terminology varies between institutions) includes tuition (only part of the yearly budget) and cannot be used for research. Unrestricted funds are as rare as hens teeth and doubly so outside upper admin.

The “color of money” is perhaps the most misunderstood aspect of university admin but explains so much about how things operate.

It only matters if the restricted money covers more than what it's intended for.

If you have 500M allowed to cover education and require 700M total for it, then the restriction doesn't matter at all.

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