University Times

The market value of Pitt's endowment fell by 8.73 percent between July 1 (the beginning of the fiscal year) and Sept. 30, and now totals $1.04 billion.

The first-quarter loss followed a 5.56 percent decline during the 2001 fiscal year.

However, Pitt's endowment rebounded during the second quarter (Oct. 1-Dec. 31), said Assistant Treasurer Paul Lawrence. "We won't have the final numbers until February, but the markets performed very well and we should have a positive second quarter to report," he said.

Pitt's endowment losses during the last 18 months will not reduce the amount of endowment income that the University had planned to distribute to schools this year to support academic programs, according to Pitt's chief budget officer.

In fact, that amount — originally budgeted at $47 million — is likely to increase slightly, said Arthur G. Ramicone, vice chancellor for Budget and Controller.

That's due to Pitt's formula for endowment spending. Each year, the University spends income equal to 4.25 percent of the endowment's average market value during the preceding three fiscal years.

"Essentially, what we will do this year is add up the values of the endowment as of Dec. 31, 1999; Dec. 31, 2000, and Dec. 31, 2001. Then we'll divide that total by three, and spend 4.25 percent of that," Ramicone explained.

Even with the losses that Pitt's endowment has suffered, the endowment's value as of Dec. 31, 2001, will still exceed its value as of Dec. 31, 1998 — therefore, the three-year average will increase this year.

"We would have to suffer a substantial decline in our endowment for a minimum of two years before the budgeted distribution to our schools would be impacted," Ramicone said. "Even then, Pitt's spending policy guarantees that the schools' share of the annual endowment [income] distribution will not be less than it was the preceding year."

Unlike some schools, Pitt does not dip into its endowment to fund construction and renovation projects, Ramicone said. Therefore, Pitt's endowment losses will not affect projects such as construction of the Petersen Events Center and the Multi-Purpose Academic Complex.

— Bruce Steele