Flatwater Explains: Why can’t NU use its giant endowment to stop budget cuts?

In the past decade, the University of Nebraska has cut about $130 million in recurring costs out of its budget. Jeffrey Gold, university president, predicts another $40 million more in the coming years. State appropriations lag behind inflation, university officials say, and federal research dollars are suddenly uncertain as the Trump administration overhauls higher education funding. 

Every time the university faces cuts, the question comes up: Why can’t the university spend more of its $1.9 billion endowment?

What is the University of Nebraska Foundation? 

The University of Nebraska started seeking private support as a way to financially survive the Great Depression. By 1936, the University of Nebraska Foundation was created with the goal of funding top-notch programs at the university that wouldn’t be possible through just state funding. 

Today, the NU Foundation is a nonprofit that supports NU by raising and managing philanthropic dollars. 

That can take a number of shapes. Donors can pledge money for specific construction projects or scholarships for students in a particular degree program. They can commit to gifting money to the foundation in their will, and can fund endowed faculty positions. 

The foundation takes the lead from university leadership on what to prioritize when fundraising, said Brian Hastings, president and CEO of the foundation. (Editor’s note: Hastings’ job title was incorrect when this story first published. It has been updated.)

Today, the foundation manages $3.6 billion in assets across more than 11,000 donor funds. The largest of those funds is the endowment, valued at $1.9 billion at the end of the 2024 fiscal year.

How does the endowment work?

Think of the endowment as a giant investment fund. 

Say you were to donate money through the foundation. That money could then go into the endowment. The money gets invested, and the annual return — the money that investment generated over the year —  is what goes to the university. 

Different endowments have different formulas to calculate how much that ends up being. For NU, about 4% of the initial donation gets returned to the university each year. 

For example, if you set up an endowed scholarship fund of $50,000, that would typically generate $2,000 a year for a student scholarship. 

The endowment’s investment portfolio is managed by the foundation, and the goal is to have it exist and grow in perpetuity. Essentially, your $50,000 donation would sit in the endowment, and would keep on creating a $2,000 scholarship year after year.  

On average, more than $290 million has gone from the foundation to the university annually over the last three years.

“The foundation is basically balancing the current needs of the institution with all of the future needs,” said Todd Ely, a professor at the University of Colorado Denver and expert on higher education finance. 

What can the university spend foundation money on? 

There’s limits to this. Money that comes into the foundation has to be spent in line with the donor’s intent. For example, if a donor gives money to fund a construction project, that money can’t go to scholarships or a professor. 

“Ninety-nine percent of the gifts that we get are restricted for a specific purpose,” Hastings said. “That’s not a very commonly understood thing.” 

And since most philanthropic gifts to the foundation go into the endowment, it’s only the annual earnings that get spent. The $416 million in committed funds the foundation raised last year isn’t immediately spendable cash. 

“You’ll most often hear (universities) say, ‘People don’t understand that our endowments are not a piggy bank,’” Ely said. “Endowed funds tend to be spoken for already.” 

Endowments also aren’t a quick fix for an institution’s financial challenges. They tend to be much smaller than a university’s operating budget. At NU, the operating budget is $3.6 billion. The endowment is $1.9 billion. 

And using the endowment to fill a structural deficit one year doesn’t solve the deficit in the long term — it just kicks it down another year. 

“The dollars are often enhancing and supporting the activities on campus,” Ely said. “They tend not to be a good tool for plugging holes in the budget or addressing long-term structural budget challenges. It’s really difficult to shift dollars from the endowment to different uses when things are changing quickly.”