NU’s assets, investments gain in value

Sheila Burt

After two years of decline, Northwestern’s net assets increased by 8.3 percent in the 2003 fiscal year, and its investments grew by 6.6 percent, according to the university’s upcoming annual financial report.

NU’s total net assets — or what the university owns in land, bonds and other resources after paying off its liabilities — totaled more than $4.2 billion for the 2003 fiscal year, compared to about $3.9 billion in 2002.

Also, the university’s revenue sources — which include what NU earned from tuition, gifts and investment returns — exceeded $1 billion for the first time in university history, increasing from $988 million.

Eugene Sunshine, NU’s senior vice president for business and finance, said surpassing the $1 billion mark in revenue has symbolic significance.

“That’s a staggering number when you step back and think about it,” Sunshine said. “It’s an eye opener to just how big this place is.”

The report, which will be publicized in coming weeks, details the financial conditions at NU during fiscal year 2003, which ended Aug. 31, 2003.

Overall expenses were up 4 percent, and NU’s liabilities — or what the university owes — increased from $857 million to $896 million. Officials said they considered these jumps normal.

Financial officials said the report reflects a better fiscal state primarily because of higher investment returns and general market improvements. During fiscal year 2002, net assets decreased from $4.1 billion to $3.9 billion. The year before that saw assets declining 6.6 percent.

This year, however, NU’s investments received a boost. The market value of total investments, including stocks and bonds of different classes, increased from $3.2 billion to $3.4 billion. Investment returns designated for operations, or the spendable money the university earns from buying these stocks and bonds, increased from $191 million to $201 million in 2003.

“When the markets were under stress, our financial statements reflected the decline in market value. And this year there wasn’t a great increase, but it certainly wasn’t down,” said Ingrid Stafford, NU’s associate vice president controller. “Overall it was a pretty normal year, and the stabilization of the investment performance kind of makes the year look pretty good overall.”

Stafford said the construction of new buildings, such as the Pancoe-Evanston Northwestern Healthcare Life Sciences Pavilion, contributed to the increase in assets.

The new buildings allow the university to increase instruction and research, and they typically generate more tuition revenue, Stafford said. But in conjunction the cost of the buildings contributed to a slight increase in the amount the university owes to outside bond holders.

In October 2003 the university incurred $150 million in new debt after it issued $185 million in revenue bonds to construct or renovate many new buildings. The remaining $35 million was used to refinance outstanding bonds. Sunshine said the university is in a stable position to pay off the debt.

Despite facing the possibility of budget cuts for the current fiscal year, officials said NU has been able to keep spending at a steady rate even when markets fluctuate. The university uses a spending rule that emphasizes long-run growth to minimize loss in times of economic downturn.

“This was a good example this year of those investment strategies paying off,” Stafford said. She added that many of the changes were neither unusual nor unexpected.

Tony Pals, a spokesman for the National Association of Independent Colleges and Universities, said he thought NU’s investment rate of return is high compared with other universities, but he added that financial comparisons between universities are not always easy.

“There is some cautious optimism out there that if the economy continues to improve over the next year, so will the financial situation of colleges and universities,” he said. “But very few people are willing to make the statement now that college finances are in a full upswing.”