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November 25, 2008 4:13 am

Stock market decline hits NWC endowment

Written by Tribune Staff

Reserve money to keep scholarship commitment

While falling stock prices seem a long way off for some Wyomingites, their effects hit closer to home than many realize.

One of those effects is the erosion of the endowment fund invested by the Northwest College Foundation to help pay for scholarships at the college.

But college and foundation officials say they have no plans to reduce the number or dollar amounts of scholarships next year.

Foundation director Shelby Wetzel said the value of the college's endowment fund declined this year by 21 percent as of Oct. 21.

“At this point, those are just paper losses,” she said. “As long as you don't sell them, there's not an actual loss.”

But, she added, “You do have to reflect them (in reports).”

Wetzel said the foundation manages the endowment, since the college, by law, is not allowed to invest money.

The endowment fund consists of $6.8 million raised locally and another $6.8 million in matching money from the Wyoming Legislature.

“We manage it, but it technically isn't ours,” she said.

When the endowment is increasing in value, additional money from appreciation and interest on the account is available for scholarships after an adjustment for inflation, Wetzel said.

“If a fund goes technically underwater, and the market value is lower than the corpus value, then you can only spend earned income,” she said. “There is no appreciation.

“We're guessing that earned income may be around 3 percent,” she added. “That number will be run against the market value. The two combined mean lower scholarship value.”

But NWC President Paul Prestwich said NWC officials are prepared to use money from reserves to make up the difference and ensure the college retains its commitment to provide scholarships at the same level as planned.

Plans for the new Park County Promise and other scholarships remain intact at this point. The plan calls for using a combination of endowment earnings and institutional money, he said.

“We still have that commitment, and it's going forward smoothly, just as we drew it up. It's looking good, but we will look at numbers in January.

“We may need to put a greater percentage into the plan than we had thought,” he said, “but I think we're prepared to do that... All along, we have known we needed to be flexible and be prepared to inject more money,” Prestwich said.

He noted that the college is in a good position with reserve money, thanks to careful budgeting.

“The reason you have reserves is to enable you to prepare for things you hadn't planned that may come around, such as an economic downturn.”

He stressed, however, that plans still are fluid. If the 2009 Legislature were to approve partial funding for Northwest's proposed applied science and technology building, some reserve money likely would be needed to match it.

“Ultimately, I think our goal would be to use those reserves where it would have the biggest effect on our students ... to make sure we're using that as an investment in the college's future.”

Wetzel said this year's final investment numbers won't be available until Dec. 31. Using that information, college and foundation officials will determine whether any change of plans is necessary for awarding scholarships.

So far, the news isn't all bad, she added. Although the college's endowment had declined in value, it still fared better than the average investment.

She noted that Standard and Poor's benchmark had fallen 35 percent by Oct. 21 — 14 percent more than the endowment's loss in value.

“While we're suffering losses and following suit with the rest of the world, our advisers and asset managers are, so far, out-performing the broad market, and that's all you can ask for in this kind of a market.

“Our foundation feels we just have to weather this storm, and in the end, it will be fine,” she said.