Administrators lower rates due to slowing economy

UA donors should expect to see their investments increase in value more slowly due to a half-percent drop in expected interest payouts for the university's endowments.

Administrators decided last month to lower the expected return rate on all University of Arizona endowments from 5 percent to 4.5 percent because of the slowing economy and statewide budget cuts.

The Alumni Association - which has the largest endowment of any university-affiliated organization - will receive $18,000 less per year once the 4.5 percent rate goes into effect, said Dana Weir, vice president of the office of communication and public affairs for the UA Foundation.

Money from the Alumni Association's endowment is used for scholarships, research, outreach, endowed faculty positions and faculty support.

Numerous other university departments also have endowments, which provide funding for programs designated by the donors. Departments typically receive endowments from private donors and use the interest from the investments to fund programs.

Although the recent decision means less money will go to the university in the short run, officials expect that, in the long run, endowments will grow faster and account holders will receive bigger payouts in 23 years and a dramatic increase after that.

"In terms of actual dollars received by our account holders, it translates into a minimum effect," Weir said. "We do need to be looking 30 to 50 years out."

The decision, although painful in the short term, will put the university in a positive position for the future, UA President Peter Likins said in a memo.

The changes in payout rates resulting from the cut are unknown because of many other factors that affect the budget, said Jay Rochlin, associate director of the Alumni Association.

"We all have to do our part to help the university get through these tough economic times," Rochlin said. "The Alumni Association may need to consider cutting back on services for alumni. But we are hoping that other sources of revenue will make up for any shortfall."

The 40-year-old UA Foundation raises funds for the sole benefit of the university. Last year, it raised $103.8 million.

Originally part of UA, the foundation separated in 1991.

Funds raised by the foundation helped open the Flandrau Planetarium in 1975.

It also helped build projects such as the Arizona Cancer Center and the Center for Creative Photography.