Harvard's decision may lead other top schools to make similar moves. Harvard's decision may lead other top schools to make similar moves.The Associated Press That's a sizable leap for any university, but with an endowment hovering near $13 billion -- the largest in the world -- it translates into a whopping $95 million yearly budget boost for Harvard. When it comes to university endowments, Harvard is in a league of its own. And when Harvard makes a shift in how it uses its endowment funds, other schools may listen. "One reason why we're investing as much is because it really costs that much to stay excellent," said Harvard President Neil Rudenstine. The additional money for the 1999-2000 school year will contribute to the university's undergraduate and eight professional schools, and will be used to recruit new teachers, lower class size, improve technology, and preserve threatened library books. About $9 million will go toward financial aid for needy students. The increase, however, won't mean any reduction in tuition, Rudenstine said. A year at Harvard now costs an undergraduate $31,132 in tuition, room, board, books and other fees. At Penn, officials earmark about $2.3 million annually for financial aid, about 4.6 percent of the $50 million the school allocates for aid. Penn's endowment stood at about $2.7 billion at the end of August. Despite recent fluctuations in the stock market, the last few years have been booming investment times for Harvard and other universities. At Harvard, the endowment returns have yielded close to 20 percent for five years. "We've just plain been lucky in how well the markets have done and so we want to share that," said Beppie Huidekoper, Harvard's vice president for finance. Colleges and universities typically use anywhere from 3 percent to 5 percent of their endowment money-- the stocks, cash and real estate that schools receive as gifts -- to help fund their annual operating budgets. In higher education, the endowment money spent each year is known as the payout or spending rate. For the last decade, Harvard has tried to keep its payout around 4.5 percent. But in the last fiscal year, it dropped to 3.7 percent. While the actual money contributed from the endowment increased each year, the rate of spending held steady as the stock market soared. The increase announced Wednesday will put the spending rate back into the 4.5 percent range next year, depending on how the stock market does. In dollar terms, Harvard will now be committing $500 million of its endowment money and putting it into its operating budget -- currently $1.7 billion. In 1988, Harvard spent $150 million of its endowment money. Universities typically are cautious about how they spend their endowments, higher education experts said. The fact that Harvard is now dispensing it more liberally could make other schools consider doing the same, observers said.
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