By Piper Rutherford | Staff Writer
Baylor’s record-breaking, $2 billion endowment surpasses the Ivy Leagues. At a 6.4% return rate, the endowment will provide the university with additional funding for the next five years of the new strategic plan.
President Linda Livingstone said in a Presidential Perspective email in May that Baylor’s status as a Christian Research 1 university gives it the opportunity to “shine God’s light around the world and serve others in even more significant ways.”
“Our world is becoming increasingly complex and challenging, and we must lead in emerging fields and remain competitive in academics and athletics…” Livingstone said. “Our students will always remain our top priority, and we must prepare them to lead now and into the future in an ever-changing global environment.”
Chief Investment Officer for Baylor, Dave Morehead, said while 2 billion dollars seems like an insane amount of money, the goal of his office is to grow this sum for the future, rather than spending it quickly.
“Many people get confused around an endowment and what it is,” Morehead said. “The reason why you can’t spend it is because it is a legally-binding agreement between the donor and the university, which allows the donor to provide further funds for an endowed account that will be spent for the betterment of today’s students and future students.”
Rather than a rainy day fund used for emergencies, Morehead said he likens the idea of an endowment to a retirement or restricted savings account. The more you save, the fuller retirement account you have over time, and the more trips you can go on when you retire.
“In this sense, from the university’s perspective, Baylor will spend 5% of those $2 billion, so the way we think about it — and the bigger takeaway — is that this next year, the amount of Baylor’s endowment sent to the university will be around $100 million,” Morehead said. “This is the most that has ever been given to the university from the endowment, and this amount will then grow over time.”
Morehead said this is based on a state law of intergenerational equity, which states that both current and future students must be equally benefiting from the endowment fund and how it is spent.
“For instance, if someone spent all of the money today, that would be great for today’s students, but not for future students,” Morehead said. “This is true on the flip side, in which if you save it, it will grow and help future students but not today’s students.”
As for what this money will be put towards and how it will be used, Morehead said that isn’t up to his office.
“Internally, in our office, we like to refer to ourselves as Switzerland,” Morehead said. “We have all of the money, but remain neutral in its distribution.”
Nevertheless, Morehead said he knows that in the absence of the endowment, funding for programs and projects would have to come from tuition instead. According to Morehead, it would mean an additional $6,700 per year for every student.
“That is why the endowment is such an important funding system for the school,” Morehead said.