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June 19, 2006 issue

Mennonite college endowments lag behind

By Paul Schrag Mennonite Weekly Review

When Jim Elliott, vice president for advancement at Tabor College, came to Tabor in 2002, he was told the college had a small endowment because, historically, Mennonite Brethren did not believe in “storing up treasure on Earth.”

Officials at every Mennonite college would like to store up a lot of treasure — tens of millions of dollars — to fund what’s considered an adequate endowment.

Only one has actually done it.

Goshen College’s $95.8 million endowment leaves the other U.S. Mennonite colleges far behind.

In a distant second tier are Eastern Mennonite University, Bluffton University and Bethel College, each with an endowment between $18 million and $20 million.

Which sounds like a lot of money. But not by college endowment standards.

Even Goshen’s endowment “is not anywhere near as large as it needs to be,” said Jim Histand, the college’s vice president for finance.

Elliott described Tabor’s $4.2 million endowment — the smallest among Mennonite colleges — as “woefully inadequate.”

Ahead of Tabor but behind the others are Fresno Pacific University at $9 million and Hesston College at $8.3 million.

There are different ways to measure how far these figures are below par.

One fairly modest standard is that an endowment should have assets of two to three times the value of the college’s annual operating budget, Elliott said. For Tabor, that would mean an endowment of $22 million to $33 million.

Elam Peachey, Hesston’s executive vice president for advancement, said he “would set a goal of twice the value of the Hesston College physical plant, [valued at about $25 million]. The goal then would be $50 million.”

Peachey’s experience at Hesston parallels what Elliott was told about Tabor — the college and its supporters were slow to recognized the importance of an endowment.

“When I began at Hesston College in 1990, there was considerable debate regarding the efficacy and the correctness of raising dollars for endowments,” Peachey said. “There had not been much effort put into growing the endowment.

“Today there is the assumption that endowment growth should be a growth strategy.”

Hans Houshower, vice president for advancement at Bluffton University, attributes Mennonite colleges’ small endowments partly to a lack of wealthy alumni.

“Historically and culturally, Mennonite institutions have emphasized service to others over the accumulation of wealth that would then be accompanied by philanthropy,” he said.

Colleges typically spend 5 percent of their endowment funds per year for purposes ranging from student financial aid to maintenance of facilities.

Endowments build long-term financial stability, “ensuring that future generations receive similar benefits as current generations,” Histand said.

Though Mennonite colleges generally got late starts in putting a lot of emphasis on their endowments, Goshen was an exception.

Histand credits J. Lawrence Burkholder, president from 1971-84, with setting Goshen on a course toward its position as the Mennonite college endowment leader.

Burkholder “had the vision and foresight during his presidency to recognize the importance of endowment to long-term institutional health and sustainability,” Histand said.

The other key to Goshen’s success was a big gift — $28 million in 1993 from the estates of Harold and Wilma Good. Most of the gift came in the form of stock in the J.M. Smucker Co. Wilma Good’s parents founded the company. The stock was sold, and most of the money went into the endowment.

The Good estate gift boosted Goshen’s endowment to a new level of fast growth. Goshen’s endowment in 1995 already was $44.7 million, more than double the amount any other Mennonite college has even today. With earnings on investments, its value has more than doubled in the decade since then, opening a huge gap between Goshen and the others.

As a result, Goshen is the only Mennonite college that can say it has a strong endowment for a college its size.

According to a survey by the National Association of Colleges and Universities, Goshen ranks 114th out of 515 independent colleges and universities in endowed dollars per student. Goshen has $111,615 in endowment per student.

This is still far behind the most prestigious schools on the list. Harvard, Yale and Princeton have endowments of well over $1 million per student. In total value, Harvard’s $25.47 billion endowment is the nation’s largest.

Goshen’s endowment is “above average for a school our size, but not outstanding,” Histand said.

Other Mennonite colleges’ endowments don’t always compare poorly with their peers. Bethel ranks second among the 12 independent colleges in Kansas in endowed dollars per student. Bethel has $33,882 in endowment per student.

Bluffton’s in-state comparison is not so favorable, though its endowment is slightly larger than Bethel’s. Among Ohio private colleges, Bluffton’s endowment is near the bottom, Houshower said.

Eastern Mennonite University’s endowment is one-third of the average for its peer group of private colleges in the southeastern region.

In the past decade or more, Mennonite colleges have made endowment-building a higher priority and seen good results.

In 1993, Fresno Pacific University’s endowment was valued at $350,000. Growth to $9 million today is significant progress, said Mark Deffenbacher, executive director of the endowment.

At Tabor, Elliott sees a brighter future in more than $10 million in gift commitments that donors have made with Mennonite Brethren Foundation.

In the past decade, Houshower said, Bluffton has increased its emphasis on planned giving — helping donors give large amounts from accumulated assets.

“I feel very good about our recent endowment growth, but we need to continue our efforts,” Houshower said.

Endowments, Histand said, “have enormously enhanced the educational environment and opportunities for students.”

Spending 5 percent of their endowment funds per year, colleges divide that amount in various ways. EMU spends 47 percent on student financial aid, 38 percent on academic programs, 8 percent on facility maintenance and 7 percent on other expenses.

Mennonite Education Agency, a part of Mennonite Church USA, manages an endowment fund pool for four institutions — Bluffton, EMU, Goshen and Hesston — and 17 other entities, including Mennonite secondary schools. The pool has assets of $145 million.

College officials say their institutions today are thoroughly convinced of the need for stronger endowments.

Kirk Shisler, EMU’s vice president for advancement, describes endowments as “a lasting legacy that will bless future generations.”

Lowell Peachey, Bethel’s vice president for business affairs, calls endowments a “foundation on which to build academic programs and life experiences that will benefit students and graduates for years to come.”

To strengthen that foundation, Mennonite colleges are “all on the same path of opening up conversations about planned giving,” Houshower said. “This is the part of our program that we’ve come to realize we need to emphasize more.”

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