Endowment hamstrings operational budget

With the flick of a fountain pen, James B. Duke transformed Trinity College into the Duke University that currently graces recruitment brochures and the pages of Sports Illustrated.

In his Indenture, dated Dec.11, 1924, James B. Duke signed over a slew of stocks and promised the fledgling university a bright future and near-unlimited growth.

He wrote that the funds should be used by the University's Board of Trustees in "defraying [Duke's] administration and operating expenses, increasing and improving its facilities and equipment, the erection and enlargement of buildings and the acquisition of additional acreage for it, adding to its endowment, or in such other manners."

Although the University's endowment helped boost Duke into the national spotlight and sparked rapid growth and campus development, the fund could only go so far.

Duke's endowment is currently $1.34 billion, a fortune by almost any standard. But relative to the endowment's of other preeminent institutions, like the $13-billion cache built up by Harvard, Duke's appears almost poverty-stricken.

"We are very much on the low end of things," said Robert Shepard, vice president for university development. "We are endowment-challenged, so to speak."

Many involved with the University and the on-going Campaign for Duke say the school's youth is responsible for its endowment woes.

"Most endowments of other universities have been the beneficiaries of bequests for centuries," Shepard explained. "And with our young alumni, we just haven't had that."

The size of the endowment has a limiting effect on almost all aspects of University life, where budgets are already streamlined and belts are already tightened.

"Each of our schools is relatively under-endowed compared to its peers," said James Roberts, vice provost for budgets and planning. "And that translates into a smaller faculty, somewhat higher student-to-faculty ratios, tighter financial aid budgets, more constrained library budgets and less flexibility for enrichment programs of various kinds that go beyond core, bread and butter activities."

Perhaps these limitations are most strongly felt in the undergraduate financial aid program.

Student aid policies have long been a priority for the University, said Jim Belvin, director of undergraduate financial aid.

"We could fill a class without any financial aid program," he said. "But I think that class would be vastly different in terms of diversity."

At many prominent universities, the schools' endowments support nearly all of the financial aid costs. At Princeton, for example, the endowment covers every penny that goes into undergraduates' financial aid packages. But at Duke, nearly 80 percent of these costs must be borne by the University's annual operating budget.

As such, the University must make some "real tough economic decisions," Belvin said. He added that he operates with the constant understanding that any increase in financial aid takes away funds from another area of the institution. "What ever money is in your pocket, you can only spend one place," he said.

Although Duke would like to expand its financial aid programs and remain competitive with the host of schools that recently announced massive financial aid increases, Belvin said Duke is simply not capable of keeping pace with Harvard, Princeton, Stanford and Yale. "Every single expansion we make has to be carefully considered," he said, "because we don't have the luxury of being backed up by an endowment."

Belvin added that it is increasingly difficult to maintain the University's current commitments to need-blind admissions and meeting 100 percent of a student's demonstrated need.

The Campaign for Duke, which should strengthen the endowment and raise about $100 million for endowed undergraduate financial aid, will secure that commitment and may allow for some significant improvements.

"Now, will the campaign get us to the point where all our financial aid spending is covered by the endowment?" Belvin asked rhetorically. "Probably not, but we're sure going to get a heck of a lot closer."

Although financial aid programs have been popular among donors thus far in the campaign, it can be difficult to convince alumni to support this less-than-flashy category. Fund-raising is further hampered, Shepard said, because many alumni do not recognize the University's financial needs.

"There is a general perception of Duke being a wealthy institution," he said, "and certainly the existence of the Duke Endowment in Charlotte contributes to that."

The Duke Endowment, with assets totaling more than $2 billion, is the largest charitable foundation in the Carolinas and among the top 13 in the nation. Since its founding in 1924, the Endowment has given more than half a billion dollars to the University.

David Robertson, the Duke Endowment's director of communications, agreed that there seems to be widespread confusion about the role the Duke Endowment plays for the University.

"A lot of people are confused about the difference between, and relationship among, the [Duke] Endowment, the University and the Duke Power Company," he said.

Although the University is the single largest beneficiary of the Duke Endowment, Robertson stressed that the two organizations function completely independently.

Shepard said he tries to dispel the illusion of wealth by giving potential donors the hard statistics on the University's limited endowment. Most notably, he said, he emphasizes endowment spending per student-in which Duke falls behind not only its peer institutions nationally, but also area schools such as Davidson College.

So far, Shepard said, the strategy seems to be working and alumni seem receptive. But the Campaign is not a cure-all for the University's ills.

"I don't know that we'll ever make up that gap fully, because obviously as we're out raising money, so are they," Belvin said. "But we certainly don't want that gap to widen."

In the meantime, Duke will continue to do what it has done all along-make the most of its scant resources.

"This is sometimes called, 'the genius of Duke,'" Roberts said. "I think it is the result of James B. Duke's founding vision, which has lead to a broad but focused array of important programs, outstanding administrative and faculty leadership and a spirit of youthful entrepreneurship."

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