Tuesday, November 20, 2001

Endowment losses force increased tuition hikes
By Sarah McClellan
Staff Reporter

TCU’s endowment, which is valued at about $900 million, has decreased approximately eight percent as a result of rising inflation and deprecations in the stock markets due in part to the Sept. 11 attacks, said Chancellor Michael Ferrari. The 8 percent loss mirrors the overall loss of the stock market.

The $72 million loss will cause tuition to increase from 6 to 8 percent for fall 2002 because the endowment’s earnings, which make up 27 percent (or $51.3 million) of the $190 million annual operating budget, have gone down, Ferrari said.

Carol Campbell, vice chancellor of finance, said undergraduate tuition increased 6.6 percent for fall 2001. The figure is slightly higher than the expected yearly increase of between 4 and 6 percent, which is based on a more stable economy, she said.

Five and a half percent of the endowment’s total earnings contribute to the operating budget each year, Ferrari said, and that amount will be lower this year.

“Because we will expect less from the endowment than we’re accustomed to, there will be greater pressures on tuition levels,” Ferrari said.

The endowment’s earnings subsidize tuition, Campbell said.

“The lower the market falls, and the longer it stays down, the larger the effect on our budget,” Campbell said. “A piece of income that should subsidize tuition isn’t keeping pace with always-increasing costs because of the slowing economy.”

Ferrari said he does not think enrollment will decrease as a result of the rising tuition.
“As the economy goes more into a recessionary mode the demand for higher education goes up,” Ferrari said. “The job market gets more competitive and people realize they need more skills.”

Kathie Little, executive director of financial aid services for the College Board, said public and private universities have experienced significantly higher costs for health insurance, utility bills and faculty salaries due to inflation.

“Tuition and fees go up every year because costs go up every year,” Little said.

Campbell said TCU’s tuition increases annually because of the rising costs of higher education materials, such as library materials, research equipment, technology equipment, faculty salaries, insurance and utilities.

“This is like running a small city,” Campbell said.

Tuition increases are compared to the Higher Education Price Index, which is based on a mix of goods typically purchased by colleges and universities, such as research equipment and library materials, Campbell said.

The Higher Education Price Index’s inflation rate is higher than that of the Consumer Price Index, an index developed by the federal government to measure inflation, because the prices of the products increase faster than prices of typical consumer goods, Campbell said.

“(Higher education goods) are sold to a much smaller market than the goods produced for the mass market,” Campbell said. “So they don’t benefit from the productivity gains or competitive forces that hold other prices down.”

Though tuition continues to rise, students should still plan on getting a degree, Little said.

“The issue, in terms of the impact of Sept. 11 on the economy, is more fear from families that college is out of their reach financially,” Little said. “It will be important for colleges to look at how much they have in financial aid dollars for needy students.

They need to look at the affordability of their college.”

Financial aid, however, has also increased as a result of the struggling economy, said Mike Scott, director of student scholarships and financial aid.

“There’s always been a commitment to increase the financial aid budget at least the same percentage as the tuition increase,” Scott said.

He also said as the tuition increases, eligibility for financial aid increases.