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 4.7 percent for fiscal year 2012. For fiscal year 2013, we are increasing the per unit spending rate by 5.1 percent. The following example illustrates the spending guideline in practice: