THE WALL Street boom is producing dividends - literally - for universities and colleges in the United States in the form of record contributions from investor-donors and unprecedented growth in endowments.
Harvard and Yale universities both reported record-breaking growth in their wealth this autumn. Harvard's endowment has grown to $11 billion, up $2.2 billion in one year, thanks mostly to the bull market. Yale raised a record $1.7 billion over the past five years, the most ever collected by a university from private contributions in a comparable period.
Nationally, gifts to universities totalled $14.25 billion last year, a 12 per cent increase over the year before, according to the New York-based research group, the Council for Aid to Education.
Their apparent prosperity is a little awkward for the schools, which once again this year increased tuition fees at double the rate of inflation and insist they have been struggling to get by. When word got out of the endowment performance at Harvard, school administrators were deluged with demands that fees should be lowered and salaries raised.
"Spending goes up and that makes everybody happy," said Jack Meyer, president of the Harvard Management Co. "But the long-term objective has to be to maintain the value of that endowment into the indefinite future."
Officials said they try to protect the endowment and each year pour much of the investment return back into the fund. The rest - $315 million last year at Harvard - covers about one-fifth of the university's annual operating expenses.
As at other universities and colleges, much of the money contributed to Harvard comes with strings attached.
"These are restricted funds for restricted purposes," said Elizabeth Huidekoper, finance vice president. "I can't move a scholarship fund over to a faculty salary. We can't spend income from a book fund on a facility. Harvard's endowment has been given over 300-and-some years by donors who have specified the purpose of each individual fund."
The Council for Aid to Education reports that 28 per cent of contributions to universities, about $4 billion last year, came from alumni, who often earmark the money for specific purposes. Non-alumni gave about 24 per cent, while companies and foundations each accounted for another 20 per cent.
Harvard realised a return of nearly 26 per cent on its investments in the year to June 30. It raised another $4.6 million, the most ever in one year, from contributors as part of its ongoing five-year $2 billion fundraising campaign, the biggest ever in American higher education.
The smaller Yale had set out to raise $1.5 billion in its own five-year campaign, the same amount Cornell raised in a similar period. More than 100,000 donors contributed $641 million for programmes, $636 million toward the school's endowment and $424 million to renovate the ageing campus.
Yale earned about $1 billion in investment income last year, boosting its endowment to $5.8 billion. But that only earned it third place in endowment size, behind Harvard and the University of Texas system, which benefits from rent and oil royalties on land it owns.
But Yale beats Texas in one important distinction: Yale, Harvard and New England's other elite private universities alone control 21 per cent of all US higher education endowment funds.