Lawrence Today magazine, Summer 2009
Like the majority of its peer institutions, Lawrence is facing challenges in the wake of the ongoing economic crisis. Lawrence Today recently spoke with Lawrence University Trustees Bob Anker ’64, chair of the finance committee, and Terry Franke ’68, vice chair of the board and chair of the investment committee, about the financial condition of the college.
LT: What impact has the economic crisis had on the college’s endowment?
TF: In 2008 there was no asset class that had a positive return, so Lawrence’s endowment, like almost every institution’s, had a negative return. It was the first negative return year for the endowment since the early 2000s. While the return was negative, our returns did outperform our benchmarks. The university’s annual budget relies on the endowment to provide a portion of its income each year — and the economic crisis has put pressure on the endowment to continue to provide the same level of distribution as in recent years. While the purpose of the endowment is to provide long-term financial security to the college, it also provides short-term operating income. It is challenging to balance short- term operating needs with the need to ensure the academic mission of Lawrence for future generations of students.
BA: The largest operating impact from the endowment will come during the next academic year when the available distribution will be reduced by $2 million.
LT: Has Lawrence taken any steps to reduce expenses?
BA: The performance of the Lawrence community in finding ways to control and reduce expenses has been remarkable — so remarkable that Lawrence will complete its current fiscal year without a net loss from operations. Actions have ranged from staff position reductions, salary freezes and pension contribution limitations, to improved cash management, reducing energy consumption and a wide range of small but significant steps. There is literally no category of expense that has not shown the results of effort and sacrifice. It should be noted that the income side of the equation is getting equally strong scrutiny. While it is much more difficult to gain revenue in the short term, efforts to increase our revenue over the longer term are also actively underway.
LT: Has the college’s endowment investment strategy changed?
TF: In the mid 2000s, we revised our investment strategy to gradually diversify our portfolio among broader asset classes and shift to include global as well as domestic investments. We are continuing in this broader diversification initiative but have not substantially changed the investment strategy in face of reactions to the recent economic crisis. We believe that this diversification has helped our performance results. We take a long-term perspective on asset management, as the endowment’s purpose is to provide long term security to Lawrence. We have a very active investment committee composed of business and investment professionals — and we work very closely with President Jill Beck and Vice President for Business and Operations Brian Riste. We meet regularly to review investment policy, evaluate the performance of investment managers and hire and fire managers, as well as to review asset allocation. We also work closely with an outside investment consulting firm, Ennis Knupp. The focus and intensity of our work has certainly increased over the last several years.
LT: The goal in doing all of the things you’ve talked about was to protect the academic and artistic mission of the college. How has Lawrence been able to achieve this?
BA: From where I stand, it is clear that every decision has been made with the mission of the university front and center. Nearly every aspect of the operation has been put in context based on its importance to the delivery of the mission. People will not always agree on the prioritization process but, in the deep tradition of a liberal arts institution, they have been discussed and debated, assuring that when President Beck and her staff must make the extraordinarily difficult decisions, all dimensions have been heard and considered.
LT: One of the items identified by the trustees to strengthen the college’s financial footing is to increase annual revenue to cover current operating costs — specifically soliciting increased gifts to The Lawrence Fund. Why is regular giving to The Lawrence Fund so important?
BA: As we all know, tuition alone is not enough to operate the school. We need help from the other two primary sources of revenue, our endowment and The Lawrence Fund. We already know the funds from the endowment will be significantly smaller. It is also true that much of the endowment draw is committed in advance for critical things like scholarships and specific academic programs. Amid all of this, the current economic environment heavily impacts many of our students and their families. The only source we can realistically look to for growth is The Lawrence Fund.
LT: The trustees have recently announced a $3 million Trustee Match for The Lawrence Fund. Can you explain how this program works?
TF: The Trustee Match was created to build on the momentum of the very successful Trustee Triple Treat, which ended in June. Both emphasize the importance of annual giving and encourage alumni and friends to continue or increase their support for Lawrence at this critical time. The success of the Trustee Match program indicates the strong support for Lawrence’s mission by the trustees and the strong support for the leadership and momentum under President Jill Beck. Lawrence trustees have been very generous with their support for The Lawrence Fund and this increased level of support is intended to provide a match for any new or increased giving club level gifts to The Lawrence Fund.
LT: Finally, how would you describe Lawrence’s financial picture today?
BA: Our position is certainly admirable in comparison to many, perhaps most. However, at the risk of sounding flippant, we need all the help we can get. Lawrence’s momentum under President Beck’s leadership is too precious to lose. These difficult times, and the difficult actions they require, imperil us. Increased support from alumni and friends, in combination with the continued prudent stewardship Lawrence has already demonstrated, will make the difference for both current and future generations of Lawrentians.
TF: We are on solid ground and probably better off than some of our peer schools. But we are making some sacrifices that we know cannot be sustained in the long term. We are blessed with strong support from alumni and friends, and that continued support is critical to our mission. We are making good progress toward our goal of our More Light! capital campaign — and meeting or exceeding our goal will definitely help strengthen our financial picture — to continue our mission, hire and retain excellent faculty, provide financial assistance to students and maintain and improve our facilities.
GAME, SET, MATCH!
Who All Lawrence Alumni, Parents and Friends
What Make a gift to The Lawrence Fund
Why Lawrence trustees will double ?your money
How Get in the game!
• New gifts will be matched dollar-for-dollar
• If you’ve already given, add to your gift to reach the next Giving Club level and your new gift will be matched
• Magnify your donation by making a three year pledge — and all three years will be matched
Lawrence trustees have pledged a $3 million match. Together, we can generate $6 million for The Lawrence Fund.
To give, use the envelope in this magazine, visit
morelight.lawrence.edu or call 800-283-8320.
