The uses of endowment dollars fall into several categories, including named chairs and other faculty positions, undergraduate scholarships, graduate fellowships, and funding to run the academic departments. Many gifts to the university endowment are specifically earmarked for these purposes. But many gifts to the endowment are “unrestricted,” meaning they can be used for any project and can, as a recent Rensselaer report states, “meet the most pressing needs of the university at any given time.” Such donations form one of the basic rationales for an endowment: Money in the bank to be used when demands arise, for improvements in the physical plant, programs aiding student life, and many other purposes.
“We’re at a bit of a financial disadvantage to many of our peer and aspirant institutions, which is one reason it’s very important for the endowment to grow,” says Virginia Gregg, Rensselaer’s vice president for finance and Chief Financial Officer.
Rensselaer is building its endowment through the $1.4 billion capital campaign in a climate of ambitious fund-raising for American colleges and universities. According to the Chronicle of Higher Education, at least 25 universities are currently conducting billion-dollar capital campaigns. Moreover, even universities famous for humanities or social science programs have been emphasizing new investments in the sciences. The University of Chicago is committing half of the money raised in its current $2 billion fundraising effort to science programs, and Harvard, which has by far the world’s largest university endowment at $29 billion, is developing a vast new science campus adjacent to its current one.
Rensselaer is among the major universities attempting to fund ambitious research programs while also offering a strong undergraduate experience. But while students and their families are well aware of the expense of higher education, not all of them realize that tuition and fees do not cover Rensselaer’s annual expenses.
“We actually subsidize the cost of education for our undergraduates, and that subsidy is covered by the endowments and gifts,” Gregg says. Every year, 5 percent of the endowment’s earnings (income and appreciation) is turned over to the university’s budget to help with this. Thus, “continued growth for the endowment is really critical for maintaining and enhancing our financial foundation,” she says.
Building on the Past Rensselaer was founded in 1824 thanks to the wealthy landowner and prominent New York political figure Stephen Van Rensselaer, who provided financial support for the new school.
Rensselaer’s founding documents do not refer to the modern idea of an endowment, and the school had no real funds before a $6,500 cash gift arrived from the Van Rensselaer family in 1844. Not until the 1880s did Rensselaer’s leaders make a serious fundraising effort. In 1881, alumni formed a donor group that produced $22,000, and Rensselaer’s trustees set up a money-management committee to handle contributions. In 1883, Rensselaer received its first endowed chair, the William Howard Hart Professorship of Rational and Technical Mechanics, named after the son of an early trustee and based on a gift of $60,000 from its namesake’s wife, Mary Elizabeth Hart.
By the mid-1890s, the university’s assets were worth about $325,000, well behind competitors like Lehigh University, whose endowment already had reached $3 million. To expand into mechanical and electrical engineering, Rensselaer launched its first concerted capital campaign for the school’s 75th anniversary, but as a trustee of the era named P.C. Ricketts put it, Rensselaer had only “a beggarly income from endowment.”