The goal of endowment spending is to:
- Balance the objectives of fully supporting the College today and reinvesting to support the College in the future;
- Generate a smooth and predictable increase in endowment budget support;
- Separate annual budget discussions from short term investment results, whether positive or negative.
Endowment spending is defined as a per share dividend to be paid to endowment accounts based upon the number of shares held by each.
The annual spending in any fiscal year shall be calculated as follows:
- Seventy percent of the allowable spending in the previous fiscal year, increased by 2.0%; plus
- Thirty percent of the long-term spending rate of 5.0% applied to the 12 quarter market value average of the endowment unit value for the period ending June 30 of the year, one year prior to the start of the fiscal year (e.g. as of June 30, 2011 for the fiscal year 2012 - 2013).
Previous year’s allowable spending = $10 mm
12 qtr average endowment value = $200 mm
Current year spending = ($10 mm * 1.02) * 70% weight = $7.14 mm PLUS ($200 mm * 5%) * 30% weight = $3 mm for total spending of $10.14 mm
The allowable spending dividend in a fiscal year’s budget shall be limited to not more than 5.75% or not less than 3.75% of the market value of the endowment unit value for the period ending June 30 of the year, one year prior to the start of the fiscal year.