Read more: Local, State, Economy, Education
COLUMBIA -- University of Missouri system President Gary Forsee sent the following letter out Thursday to a variety of parties concerned about how the status of the economy may impact the UM system:
October 9, 2008
To: Students, faculty, staff, retirees and friends of the four campuses of the University of Missouri
From: Gary D. Forsee, President
Re: Impact of the financial markets situation on the University
As you are no doubt aware, our nation is in the midst of a significant financial event, the full ramifications of which, frankly, are not known at this time. During the last few weeks several major banks, investment banks and insurance companies have declared bankruptcy or received loans from the U.S. government to help them through this difficult time. The supply or extension of credit from one party to another has been severely curtailed, limiting the ability of companies, including universities, to expand and grow. The question that we all have is: how does this affect the University of Missouri? I would like to share some of my own thoughts regarding how best to respond to the financial news stories.
To our students:
I would advise you to stay focused on your studies. That is your number one "job," and staying on track to earn a college degree is important for both you and Missouri's future. Many of you receive scholarships, obtain loans and work part-time jobs, which are vital to your success. We will make every effort to ensure that these opportunities continue for you. Be sure to contact your financial aid office if you have any questions or concerns.
You can continue to have confidence in the University endowment funds that support the individual scholarships many of you receive. These funds are very well diversified and not concentrated in any one company, sector of the economy or even type of security (stocks, bonds, etc.). The overall diversification of the fund and the formula used to determine the amount to distribute should minimize any disruption in the funding of scholarships and academic programs.
To our faculty, staff, and retirees:
The financial markets have been hampered by a lack of liquidity. The University, however, has ample liquidity at this time and has not been
affected as much as other institutions. Our exposure to troubled institutions such as Lehman Brothers, Washington Mutual and AIG has been minimal. We also have no exposure to the Commonfund Short Term Fund, an investment product used by many colleges and universities for their operating funds that is undergoing an organized liquidation.
We are monitoring the impact of the financial markets' turmoil on Missouri's economy. The economic downturn will ripple through the nation, and Missouri will not be immune from this impact. It is important during times like this that we are especially careful in our resource use.
Several questions have been raised by faculty, staff and retirees about the financial stability of the UM Retirement, Disability and Death Benefit Plan. The plan is a defined benefit plan for which the University bears all financial risk meaning that the retirement benefits you receive are determined by a formula that takes into account your salary and years of service. This plan represents the single largest financial resource invested by the University, with a market value of more than $2.7 billion as of June 30, 2008. The plan is invested similarly to the endowment funds. The University is a long-term investor and does not overreact to sharp swings up or down in the market.
Certainly, the recent market turmoil has affected the value of assets in the retirement plan. It is important to remember that the fund is designed to exist over many generations. Accordingly, the investment horizon for a plan of this type is quite long, and the plan will experience many fluctuations in market value over such an extended period. The funding, design, administration and investment strategies employed by the University for the 50-year history of the plan have resulted in a financially stable plan that has always met its benefit obligations and will continue to do so.
The retirement plan's investment portfolio also is well-diversified, allowing us to avoid selling assets to meet benefit payment requirements. It is also important to remember that the University continues to make ongoing contributions to the plan and remains committed to properly funding the pension plan and fulfilling each and every commitment that is due under the provisions of the plan.
To our alumni, citizens of Missouri, friends and supporters:
Your support of the University is and always will be critical. The problems in the financial markets will take time to work themselves out. There will continue to be volatility in the markets for some time. The University of Missouri is well positioned to weather the problems and uncertainty. We will continue to carry out the responsibilities that have been entrusted to us with diligence and prudence.
