Annual Payout Rate

The primary purpose of the Endowment is to provide a predictable and permanent source of funding for the University's teaching and research mission. The spending guideline balances our current and future resource needs. Our guideline also calculates the amount of the Endowment the University spends on these purposes each year. Starting with the average market value of the Endowment for the previous 12 months, the spending guideline incorporates the following weighted components in setting the annual endowment payout:

The Market component is calculated by multiplying the long-term target-spending rate of 4.35 percent by the Endowment's average market value for the prior 12 months. This component carries a 30 percent weighting in the spending rate calculation.

The Spending component includes an inflation adjustment over the prior year's endowment payout plus the annual projected growth budget. This change in the annual endowment payout carries a weight of 70 percent.

The calculated payout rate was 4.8 percent for fiscal year 2013. For fiscal year 2014, we are increasing the per unit spending rate by 2.2 percent. The following example illustrates the spending guideline in practice:

Payout Calculation For Fiscal Year 2014

Market Component (30%)
12- Month Average Market Value $200.93 Actual             
Target Spending Rate          
4.35%
Weight for Market Component 30%
Total $2.62 Actual
Spending Component (70%)
Prior year's spending (FY 2013) $8.74
Long-term inflation (CPI) 1.69% Actual
Budget growth 101.5%
Weight for Spending Component 70%
Total $6.13 Actual
Payout Rate per Unit
$8.93 Calc                      
Increase Over Prior Year 2.17% Calc