School adjusts as endowment drops

By Allegra Tepper

his summer President Thomas C. Hudnut wrote one of his first letters of the school year to the parent body, as he does every year as part of his pre-school ritual. However, this summer, Hudnut had new variables to keep in mind, as the economy’s downward spiral was only beginning.

“In this time of economic uncertainty and financial insecurity…education is about as good an investment as one can make,” Hudnut wrote.

And so began the 2008-2009 Opportunity of a Lifetime campaign, taking on a “very different, more sensitive tone,” Chief Advancement Officer Ed Hu said. Hudnut said Annual Giving provided the “soul” at school, a soul that provides about 10 percent of Harvard-Westlake’s annual operating budget. This school year, the budget is set at around $60 million.

“We are still continuing our asks [for donations], and still have to conduct ourselves as a business,” Hu said. “There are still bills we must pay, particularly for the middle school construction. We are 92 percent of the way there, in our fifth year of a five year campaign,” he added, as he wiped the proverbial sweat droplets from his forehead. Hu estimated a $16 million gap to finish the construction campaign.

The Office of Advancement is consequently making strides towards even greater efficiency with their donations, spending half a penny on every dollar for campaign expenditures. According to Hu, the standard is 10 to 20 percent spent on auxiliary expenses, and donors can rest assured that 99.5 percent of every dollar they donate is going to exactly where they intended. In his words, “we do not spend money to make money.”

The current state of the economy has most affected donations in the form of capital gifts, which are often donated as appreciated stock. With the stock market in its current state, the school simply cannot expect these anytime soon. Fortunately, most donations come from donors’ incomes, which have not been affected, he said.

Hu said he and his colleagues are lucky to have close friends of the school who they are comfortable continuing asking for donations from, and whose situations have perceivably been unaffected.

Not only have donations taken a hit in recent months, but the school’s endowment also plunged earlier this school year.

“Our endowment is not nearly as large as many think, and endowment performance this year has been not been very good, to put it mildly,” Hu said.

Harvard-Westlake’s finance managers placed large portions of the school endowment in investments in financial institutions that were hit particularly hard. The market value of the endowment dropped 20 percent last school year, and Chief Financial Officer Rob Levin estimates an additional 15 to 20 percent drop so far for this fiscal year. Essentially, the school is moving along the same trajectory as the broader market. Levin approximates the current endowment value to be $40 million.

However, Hu maintains great faith in the vigilance with which the Business Office conducts the school’s financial affairs, making reference to a keen move made last year when the annual budget was removed from the Common Fund. All money in the Fund was frozen in October, and the Business Office was pleased to have dodged the bullet.

And as the school struggles to maintain stability, families are facing similar problems. In past years, the school has received an average of 10 to 12 applications for financial aid from current families experiencing economic emergencies. In just the first two months of this school year, the number has shot up to 27.

Hu said the school expects more families to follow, and the school is prepared for the situation, maintaining financial aid as a priority in the budget. Approximately $6 million is budgeted for aid each year, and this year’s emergencies have exceeded it by $200,000.

“The Financial Aid program is a part of who we are,” Financial Aid Officer Geoffrey Bird said. “Not only does it give opportunity to deserving students, but it makes us a better school.”

Faculty members are working together to tighten costs of supplementary enrichment for students, like college tours and studying abroad, “seeking sensible savings that will not unduly compromise the quality of the Harvard-Westlake student experience,” Levin said.

“Here in particular, we are a family,” Hu said. Levin agreed that “the school will do everything it can to help families in need.”