Why not spend more of the endowment to make up for any budget shortfall?
The typical spending rate for a higher education endowment is 4.5 percent. The underlying principle for this spending approach relates to the long-term strength of the institution. The endowment was established to help support the University in perpetuity. We much prefer to pay expenses with existing income rather than drawing upon what is in a sense an institutional savings account. Otherwise, in time, spending resources beyond revenues depletes the savings. Particularly when markets are down, we want if at all possible to avoid selling investments at depressed prices as doing so would deplete investments that will strengthen the University and increase income over the long term.
