Throughout 2008, it has been my pleasure to announce many examples of progress and growing momentum at SMU, including the endowment of academic centers, the growing quality of our student body and faculty, and the construction of important new facilities. In addition, on September 12, we began the public phase of SMU Unbridled: The Second Century Campaign. In this letter, I want to discuss the implications of the economic downturn on our ability for continued progress toward our academic goals by reviewing the current status of our main sources of support: earnings from our endowment, private contributions, and tuition and fees.
First, SMU is fortunate to be a financially stable institution operating with a sound strategic plan and with extraordinary leadership from our Board of Trustees. In addition, our endowment has grown significantly over the past decade, and we achieved an overall return of 4.6% for the fiscal year ending June 30, 2008. SMU’s endowment is managed by the Investment Committee of the Board, composed of financial leaders with many years of experience in developing complex investment portfolios. The committee's work is guided by an experienced chief investment officer and professional staff. Our long-time treasurer and chief investment officer, Liz Williams, will be retiring December 31. Thankfully, our national search for her replacement attracted another outstanding professional, Mike Condon, who brings many years of success in managing endowments similar in size to ours at Georgia Tech and the University of Arkansas. Therefore, we will continue to have strong management of these crucial resources.
Since July, not unexpectedly, our endowment has experienced a decline of approximately 13.3% through October (as compared to a 23% decline for the S&P 500 Index July October). Our spending policy is designed to lessen the impact of such precipitous changes within the financial markets. However, decreases of this magnitude, combined with the projection of an extended recession, require that we carefully manage the effects of this endowment decrease, along with other budgetary challenges, for the immediate future. At the same time, we must do so within the context of maintaining our goals for advancing SMU among the premier private universities in the country.
Fortunately, the quiet phase of The Second Century Campaign was very successful, and pledges and contributions of all sizes have continued throughout the fall. We will continue to press forward, and we remain optimistic that over the full term of The Second Century Campaign, we will reach our announced goals. Strong alumni participation remains a high priority.
Tuition and fees furnish 66% of the total budget of the University. Therefore, it is encouraging that student applications for fall 2009 continue to be strong (up 12% for early admission). However, reports in the national media indicate that many students will look increasingly to state universities with lower tuition levels during the economic downturn. As a result, it is important that we maintain and even increase institutional sources of financial aid available to students for the coming year, while moderating the increase in our costs of attendance. This increase will be announced following the December meeting of the Board of Trustees. In addition, we are offering new payment plans to assist our students and parents. Fortunately, there has been some increase in the liquidity of sources for student loans available to new and continuing students. It is obviously important that we not only recruit an academically strong first-year class and a larger class of transfer students for the fall 2009, but that we also have a high retention rate for our current students. We will use our financial aid resources carefully to address these goals.
We have made tremendous strides in enhancing the quality of our student body and the research, scholarship and creative productivity of our faculty over the past decade. In this economic downturn, we must do everything possible to continue these advancements. A predictable 3% increase each year to the salary pool for our faculty and staff has been helpful in recruiting and retaining outstanding faculty and staff dedicated to providing our students with the highest quality educational experience. It also is important that current construction projects be completed; planning for the sophomore housing requirement continues.
In the almost 100 years of our history, there have been many economic cycles. Although this economic crisis is more serious than other recent downturns, we must deal with these developments proactively and not let the momentum of the past decade subside. It is our intent to utilize our resources wisely during the downturn and be poised to rebound robustly when economic conditions improve.
Ours is a remarkably cohesive University community. By maintaining this culture, we will not only respond most effectively to the current challenges, but also be ready to benefit from the recovery with the same positive outlook that honors the heritage of our institution and simply makes for a better quality of life. The current economic crisis will pass, but in the meantime, it will require diligent efforts throughout the University to maintain our momentum. However, with the assistance of the entire SMU community faculty, staff, students, alumni, parents, and friends I have no doubt that we will succeed.