Most people have heard us say that Cornell’s endowment is an essential financial bedrock, it is the financial foundation for our institution and its future, as it may be for any school. It is intuitive that institutions with large endowments—large investment accounts, so to speak—have a greater ability to support students and programs, as well as to financially weather significant ups and downs.
While many of our alumni and friends have heard that the endowment is an important financial resource, they still have questions about it. What is it precisely? What does it really do? Is it really that important? (Yes! Really.) These are all great questions and reveal how complex endowments are.
Everything begins with our students
Everything we do begins with our students and their needs. As one example, 36% of our students are Pell-eligible, which means that they come to Cornell with exceptional financial need. All of these students receive Cornell scholarships (in addition to the federal Pell Grant and state aid they might qualify for), and without this support, these students would not be able to attend Cornell. It is really that simple.
As we often say—Cornell can transform a student’s life, but not if that student can’t afford to attend Cornell in the first place. Access is the gateway to opportunity and upward financial mobility for our students. It thus follows that our total financial aid budget for fiscal year 2025 is almost $37 million, representing 47% of Cornell’s entire budget. Thanks to many alumni and friends, Cornell has hundreds of endowed scholarships that support a part of the financial aid budget. Without those funds, far fewer students would be able to attend Cornell.
This article is a condensed version of President Brand and Vice President Flege's February 2025 white paper “Putting the Important—Cornell’s Endowment—before the Urgent.”
What is an endowment?
Think of an endowment as a pool of funds, donated by people to an organization, that does not get spent by that organization. Instead, it is invested and grows in value over time. The organization only uses a small percentage annually.
Endowed funds can be grouped into two main categories. First, there are restricted endowments, which can only be used for the intent of the donor. Such endowments include those that fund specific initiatives, programs, and services, such as a scholarship, an internship, off-campus study, a faculty position (a chair), and even the maintenance of our campus.
Second, unrestricted endowments are the result of a gift to the endowment without a specific intent from the donor and, thus, are not restricted to a specific purpose. As a result, these endowed funds can be used to support the changing priorities of Cornell and the changing needs of our students, as we determine them, as those needs and priorities change over time.
And, here is what is important: many alumni and friends create these sorts of endowed funds at Cornell—both restricted and unrestricted—and these different endowed funds, together, are THE endowment. In fact, we have over 700 distinct endowed funds which, collectively, comprise the endowment.
Why is an endowment so important?
Cornell’s endowment funds every aspect of the college, from general support of Cornell’s every day operating expenses to restricted programming such as scholarships for students, and academic and co-curricular programs like internships or academic research undertaken by students.
See these stories on how the endowment affects students and faculty:
Cornell College pays its bills from funds that largely come from three sources: student revenue (tuition, housing, and food), gifts from alumni and friends, and the endowment. Generally, net tuition (tuition, less scholarships and financial aid), housing, and food represent the largest portion of revenue. Approved spending from the endowment and gifts comprise the other material sources of revenue. Per Cornell’s 2023-2024 financial statements, student revenue represented 72%, gifts were 11%, and the endowment contributed 13% of the college’s $38,292 million revenue. Other auxiliary revenue generated the remaining 4%.
Within this context, the general purpose of an endowment is to generate income and growth to meet the short-term spending needs of an institution while also ensuring that that institution is viable in perpetuity. After all, the goal for the principal of an endowment, as opposed to its growth over time, is that it is not to be touched. This financial stability is particularly vital for colleges and universities because our horizon is so distant, and a predictable ongoing stream of income is essential.
In any given year a college can have a drop in student enrollment, which means an immediate reduction in available revenue. The same can happen with annual gifts. When there is such a drop, a college can be forced to make cuts. Here, the endowment provides an additional source of revenue—and ideally an increasing source of revenue—that can provide support for the school and offset some of the other revenue reductions.
How much can we spend and how is it managed?
Endowments are intended to be long term and to be spent like your retirement fund once you have retired—a small percentage is drawn annually so that it lasts as long as needed.
For endowments colleges establish spending rates, typically between 4.5% and 5% annually, to govern endowment spending. Spending in that range is intended to meet the current needs of an institution while also growing its endowment, above inflation, to protect that institution’s long-term financial strength.
It falls to a board of trustees to decide what spending amount makes the most sense in light of the circumstances surrounding a given institution. When the Cornell College Board of Trustees supports an increase to the financial aid budget for students or to salaries for faculty and staff, it pays attention to maintaining a proper balance between Cornell’s current short-term spending needs and its long-term financial strength (the growth of the endowment).
Achieving a healthy balance between the needs of today and the anticipated needs of the future advances the goal of intergenerational equity of the endowment.
At Cornell we spend 5% of the three-year average of the endowment’s value on an annual basis. The Board of Trustees can deviate from this plan, as needed, when external factors affect tuition revenue or costs.
The stewardship of the endowment falls to the Board of Trustees, which it delegates, in part, to its Finance Committee. The Board sets investment policies, and the Finance Committee reviews the endowment’s performance and the work of the college’s investment advisor/manager (BOK Financial) to ensure that it is following the Board’s policies and reaching performance targets.
What is the size of our endowment, and how does it compare to our peers?
As of June 30, 2024, Cornell’s endowment eclipsed $100 million for the first time in our history and is at $100,874,800. Bravo! Let’s keep building it!
In 2023, 688 colleges and universities participated in a National Association of College and University Business Officers endowment survey. According to the survey, the average market value for all participating institutions was $1.2 billion, while the median value was $209.1 million. We fall below that median, as well as below nearly all of the endowments of other colleges in the Associated Colleges of the Midwest (ACM). These data only point to the importance of our focus on the growth of our endowment.
What role does philanthropy play?
An endowment gift is fundamentally different from other gifts because it provides alumni and friends the opportunity to support something now AND in a manner that will ensure the endeavor can exist forever—because the gift is placed in a permanent endowment fund.
In Cornell’s case endowment giving reflects a belief that Cornell will exist forever and that future generations of Cornellians should enjoy the same quality or better opportunities and experiences as the current one. Further, many alumni make endowment gifts to Cornell because they wish to “pay forward” the support they received.
It is philanthropy that is at the heart of the endowment. The enduring and deep affection that Cornellians have for Cornell is represented in the over 700 different endowment funds that we maintain. The names of the funds reflect that Cornellians over the decades have invested in Cornell’s future through their endowment gifts. There are funds named for classes going back to 1907, funds named in honor of beloved faculty members (Professors Deskin, Kollman, and Lane, to name just a few), and funds named in memory of classmates, spouses, parents, and grandparents.
The endowment is a snapshot of Cornell’s history and individuals’ hopes for its future. It reflects the love and commitment that Cornellians have for our special corner of the world.
Does our endowment really need to grow?
Yes! As we now begin to feel the impact of the “demographic cliff,” a roughly 15% drop in the number of high school graduates nationwide over the next 15 years, we know that enrollment (and student revenue) will not resolve our financial pressures. Nor is it realistic, practical, or feasible to expect or ask our alumni and friends to give more every year to make up the difference via the Cornell Fund.
This means that we need to focus on building the endowment. As our endowment grows, so does the actual dollar amount of allowable annual spending from it, which can offset the reduction in student revenue. As they say, the best time to plant a tree was 20 years ago. The next best time is today. The time to grow the endowment is now so that we can realize the benefits sooner.
We are focusing on the important
Both in good times and in challenging times, the endowment helps to ensure steady financial backing for the college’s superior and expensive level of education. The key to progress is focus. And, that is what we are doing—taking strong steps to build the endowment.
We are in an enviable position with our distinctive and dynamic academic program, our unique focus on students, our updated campus facilities, and our low debt load. Because of this we are now able to focus on the important: the endowment and the promise and commitment that it holds for our future students.