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Their strategic plan called for finally getting down to their targeted spending rate (5.5% from memory) by the current fiscal year. That obviously is not happening.
Normally, the boards of trustees of colleges and universities set a ceiling of 5 percent spending from the endowment each year to supplement an institution’s annual budget. In 2001-2002, the Middlebury board allowed the endowment spend rate to increase beyond the 5 percent limit for a period of seven years, rising to a high of 7.1 percent, to finance the building projects that were then under way or were recently completed (Ross Commons, Atwater Commons, Bi-Hall, the new library, athletic facilities). We have worked diligently since that time to bring the spend rate back down to the 5 percent level this fiscal year. Spending more than 5 percent of the endowment now when investment returns are at their lowest point in many years would jeopardize the College’s long-term financial viability. The option to raise spending from the endowment above the 5 percent ceiling once again represents a lever of last resort, taken only after measures to control costs have proven to be insufficient to balance our budget.
The problem is that endowment spending should be at its lowest percentage in a period of rapidly rising endowment value, such as we have seen for the last five or six years and should increase to the high end of the range when endowment values are falling.