EDITORIAL: U. endowment is for present, too

Fiscal planning is always a balancing act between present and future needs. In recent years, the balance has tilted too far in favor of saving for the future. It is time to spend more of the present windfall at the present time. Tuition costs continue to rise as Penn embarks on a new series of building and renovation projects. Spending more of the money Penn's endowment earns would help to hold down such increases and infuse much-needed capital for a range of needs. In the current bull market, many institutions -- including Harvard and Yale universities -- have increased annual allocations to about 5 percent of their endowment's value. Most universities -- two-thirds of those responding to a recent survey -- multiply that percentage by a multi-year average of the endowment's value to ensure a stable pattern of allocations. Penn's fairly typical formula uses an average of the three years previous to the immediately concluded fiscal year, and multiplies that average by 5 percent to determine the total allocation. But Penn does not actually pay out 5 percent of its multi-year average. In 1997, the University allocated $58.3 million from its endowment -- only 3.7 percent of the multi-year average and 2.8 percent of the $2.1 billion total endowment at that time. In 1998, the allocation came to only 1.7 percent of the $3 billion total endowment. In announcing the decision to change its formula, Harvard said it could no longer justify its existing formula as fiscally prudent -- it had become stingy. At a time when institutions across the country are adjusting outdated allocation systems, Penn has held the course for too long. It is time to re-evaluate.