How large is the budget gap caused by the financial crisis and the economic recession in 2008 and early 2009?
One way of defining the budget gap is to calculate the amount used from the endowment to cover annual operating expenses as a percentage of the market value of the endowment and compare it to a percentage (from 4.5% – 5.5%) of use that is sustainable over a long period and maintains the strength of the endowment for future use. Using that measure, for the 2009/10 budget, the budgeted use of the endowment is $50.6 million, or 7.6% of the market value of the endowment ($660 million) on June 30, 2009. A sustainable use of 5.5% would be $36.3 million. So the gap for the 2009/10 year is $14.3 million. In comparison with the use of the endowment in 2009/10, it is also useful to look at the most recent previous years in which the endowment was close to this $660 million market value to see what spending was used from the endowment in support of operating expenses in those years. On June 30, 2005, the endowment’s value was $672 million, and we drew $38.4 million (5.7%) to support the 2005/06 o
