Phillips Exeter Academy’s endowment has reached $1 billion, according to The Exonian, still ahead of Phillips Academy’s endowment, which is now worth slightly more than $800 million. Phillips Academy’s endowment grew 21.1 percent through stock appreciation, interest and dividends, and alumni gifts during the 2007 fiscal year. Donations to the endowment totaled $14 million last fiscal year, according to Chief Financial Officer Stephen Carter and Chief Investment Officer Amy Falls. Exeter’s endowment is the second-highest of any secondary school in the country, behind the Kamehameha School’s endowment of $7.7 billion. The value of Phillips Academy’s endowment has increased nearly every year recently, said Carter, except during the stock market slump in 2001 and 2002. Last year, Phillips Academy drew 4.9%, or approximately $34 million, of its endowment value. This endowment draw represents almost 40 percent of the school’s revenues, which cover the school’s operating expenses. Approximately a third of the endowment draw, or $10 million, goes toward financial aid. The endowment draw also defrays the cost of tuition. The approximate cost to educate one student at Phillips Academy totals approximately $60,000, paying for academics, dining privileges, facilities and more. The current tuition of $37,000 covers less than 40 percent of the total cost for each student. The endowment and annual giving cover the difference. At Exeter, the exact endowment value will be released after Exeter’s trustees meet later this month. Phillips Academy’s Investment Office, in New York, and Investment Committee, composed of alumni who have investing experience, monitor stock market performance to minimize the probability of losing value. Phillips Academy’s strategy is to balance how much return PA would like from its endowment with how much risk the school is willing to take in investments. Falls wrote in an email, “The endowment does have a meaningful exposure to global equities because they are the best long-term source of return. It is, however, broadly diversified and we have seen that the returns on the endowment are significantly less volatile than the returns on the S&P.” Senate Finance Committee Considers New Endowment Regulations The Senate Finance Committee discussed the concept of higher-education endowment hoarding in September. College and university endowments continue to grow significantly each year, at an average of 17.7%. Last year, 126 schools had endowments, which together totaled more than $500 billion, according to Lynne Munson, Fellow at the Center for College Affordability and Productivity. Some members of the Senate committee expressed concern that universities were not utilizing their endowments enough to benefit the public. Colleges and universities aggressively invest their endowments, profiting with returns as large as 16.7 percent at Harvard and 22.9 percent at Yale in the 2006 fiscal year. On the other hand, endowment spending averaged only four percent in 2006. The endowment draw of large universities such as Harvard and Yale is around 3.7 percent, compared to around five percent at Phillips Academy. These low percentages cause people to ask why universities do not raise endowment use and reduce tuition, according to Carter. Carter said, “People are beginning to wonder, are [colleges and universities] doing all that they should be doing? They are getting a lot of benefit from public stock market – are they giving back to society?” To curb this possibility, the Senate committee suggested possible reforms, including a required endowment expenditure of at least five percent. In effect, this larger endowment draw would reduce tuition and, therefore, revenue. Falls said, “The debate so far, however, strikes me as being misguided on a number of issues. For example, the connection between spending more of endowment funds and lowering the costs of tuition seems spurious to me…The large universities spend considerable time and thought on the appropriate size of the draw and how to ensure that future generations of students have comparable levels of resources to today’s students.” The Senate Finance Committee has not yet made any final decisions nor created any legislation regarding a regulation or limit for endowment expenditure. Carter said, “[The Senate Finance Committee] is just beginning to talk about it. Universities are going to come in with lot of arguments about why they are doing what they’re doing.” Falls and Carter acknowledged the possibility that Phillips Academy may be affected if the Senate committee does create new regulations. However, Falls said, “At this time, legislation along these lines would not affect us much in practical terms as we are already drawing at or above that [five percent] level.” Carter said, “I do not think [Phillips Academy] is in any danger that way, just because we have been pretty aggressive with the program we’ve been trying to run.”
