Endowment funds across all Claremont Colleges experienced decreases of up to 14.5 percent in fiscal year (FY) 2021-22, according to a TSL analysis of the colleges’ public financial statements.
Scripps reported the largest decrease of 14.5 percent in net endowment assets, while CMC’s endowment was the least affected, experiencing a decrease of 6.5 percent.
This is a stark contrast to FY 2020-21, which saw unprecedented growth of endowments: 30 percent on average nationally and up to 43 percent at the 5Cs.
Endowments consist of funds classified as either restricted or unrestricted. Donations with specified purposes, like funding scholarships or faculty-endowed positions, make up the restricted portion of an endowment.
Unrestricted endowment funds account for the rest of the endowment and are managed by a Board of Trustees in accordance with the Uniform Prudent Management of Institutional Funds Act (UPMIFA), a law regulating the amount of the endowment an organization is allowed to spend in a year. These funds are often designated to cover institutional operating expenses like student services, academic support and research.
Only 41 percent of Pitzer College’s endowment is donor-restricted, making it the least restricted endowment at the 5Cs. In contrast, 90 percent of Scripps’ endowment is restricted by donor specifications.
Despite significant endowment gains or losses across the 5Cs in the past few years, the percentage of endowment that is restricted or unrestricted has held constant.
Laura Schaefer, Pitzer’s chief operating officer and treasurer, described an endowment as a savings account in which you can only spend less than or equal to what the account earns in interest.
“For example, if you endow $100, and it earns on average 7 percent interest per year ($7), then $7 is the maximum you can spend,” she told TSL.
Endowments are invested and growth is achieved either through reinvestment of the returns earned or donor gifts. It is possible that endowment losses last year were the result of two main factors: losses on investments and endowments allocated to be spent.
Every year, each college at the 5Cs aims to spend anywhere from 4.5-5.5 percent of the average fair value of the endowment over the last 20 quarters. In accordance with this spending policy, once the school determines how much of the yearly budget should be covered by endowment spending, that money is taken out as long as it is within this established percentage range. Pomona’s endowment is the largest, meaning that they spent the most — in FY 2022, this number exceeded $104 million.
All 5Cs experienced losses on investments where they usually see gains. These positive returns normally bring in revenue for the college to either spend or reinvest, further growing their endowment. A percentage of each school's endowment was allocated for spending despite these losses. Not only were the 5Cs unable to reinvest as much back into their endowments, they had to spend some of it too.
Similar losses occurred nationally. The 2022 NACUBO-TIAA Study of Endowments (NTSE) estimates that college endowments across the United States decreased by 8 percent on average, with smaller schools seeing the greatest impact.
We took a closer look at each college’s endowment value, restricted/unrestricted ratio and spending below.
Pomona College
Pomona College’s endowment is the largest of the 5Cs and is currently valued at over $2.7 billion. This is an 8.8 percent decrease from last year’s value of over $3 billion.
According to Pomona’s website, 57 percent of the school’s operating expenses are covered by endowment spending.
The college authorized endowment spending of $104 million in 2022 and $102 million in 2021.
Many student groups are calling for disclosure of the sources of Pomona’s endowment investments. Divest 5Cs recently filed a legal complaint against the college asking California Attorney General Rob Bonta to review the school’s investments and force the administration to divest the endowment from fossil fuels. Students demonstrating in solidarity with Palestine have also organized a series of protests asking the administration to divest from companies and manufacturers that support the Israeli government.
Pitzer College
Pitzer College has the smallest endowment among the 5Cs, currently valued at $168 million. This is a 6.8 percent decrease from last year’s estimates of $179 million.
In 2017, Pitzer divested their endowment from fossil fuels and is the only Claremont college to have done so.
“Pitzer’s commitment is to invest wisely and responsibly to ensure financial responsibility, but also in ways that support our core values, such as social rights,” Schaefer said in an email to TSL. They accomplish this by screening out companies that violate the UN Global Compact Principles when deciding where to invest the endowment.
While Pitzer has the least donor-restricted endowment, they do not understate the necessity of endowed gifts. According to Pitzer’s website, endowed gifts allow the college to “operate with assured financial security and give donors the personal satisfaction of knowing they have made a permanent and lasting contribution to a world-class institution, the students we serve and the faculty who teach and inspire them.”
The endowment spending rate stayed the same at 4.3 percent for both FY 2020 and FY 2021. The college reported a loss on investments of $8 million in 2021.
Scripps College
In FY 2022, Scripps College’s endowment was valued at over $461 million. This is a 14.5 percent decrease from last year’s total at $542 million, the largest decrease across the consortium.
While Scripps experienced the greatest endowment losses in FY 2022, it reported the greatest endowment growth in FY 2021— almost 43 percent.
Previously, Scripps emphasized the importance of its endowment, naming it the college’s “financial anchor.” Endowment spending accounts for approximately 20 percent of the operating budget in any given year to fund institutional costs, financial aid and academic programs.
Notably, Scripps increased their endowment spending in 2021 to 6.6 percent to account for pandemic-attributed losses in the previous year. This is just below the 7 percent maximum endowment that a university can spend each year set by the UPMIFA. In an email to TSL, the Office of Business Affairs explained that “there were also numerous costs to keep our community safe upon our return to campus, including medical expenses, quarantine and isolation costs, outdoor classroom spaces and modifications to campus” which led to the increase in spending.
Claremont McKenna College
Claremont McKenna College currently has the second largest endowment at the Claremont Colleges, valued at over $1.1 billion.
However, in FY 2021, it was 6.5 percent larger at over $1.2 billion. The audited financial statement cites “investment performances and reclassification of endowed funds” as reasons for these losses.
CMC ended up spending less by percent of their endowment due to outsized gains experienced last year, dropping from 5.0 percent to 3.4 percent. Unlike Scripps, Pomona and Harvey Mudd College, CMC published their 2022-2023 financial audit. In the wake of investment losses during 2022, this number jumped back up to 4.4 percent in 2023.
Approximately 32 percent of the college's operating budget is covered by the spending of endowment funds.
Harvey Mudd College
The Harvey Mudd College endowment is currently valued at $401 million, 9.6 percent less than last year’s value of $444 million.
The ratio of restricted/unrestricted endowment funds at HMC is almost identical to CMC’s. According to HMC’s website,“ named Endowed Funds support lecture series, academic and extracurricular programming, student-faculty research, professorships and other important areas of activity and discovery at Harvey Mudd College.”
Overall, donors “invest in supporting what makes Harvey Mudd College unique.” The college highlighted the role of donor gifts in allowing students access to opportunities like research conferences and other academic and professional experiences.
Ambika Gupta contributed reporting.