By Justin Pope
The Associated Press

College endowments last year turned in their worst performance since 1974, a stark contrast to the investment boom of the 1990s and a financial blow at a time when many public schools are losing state aid.

The average college endowment shrank 6 percent in fiscal 2002, according to a survey of 660 institutions to be released today by the National Association of College and University Business Officers. The findings matched those of another study released last month by Commonfund Institute.

THE RANKINGS

U.S. educational institutions' fiscal 2002 endowment rankings, value and percentage change from 2001. Values given in billion of dollars.* 1. Harvard University - $17.2 (-4.4 percent) 2. Yale University - $10.5 (-1.9) 3. University of Texas System - $8.6 (-7.8) 4. Princeton University - $8.3 (-0.5) 5. Stanford University - $7.6 (-7.7) 6. Massachusetts Institute of Technology - $5.4 (-12.6) 7. Emory University - $4.6 (5.5). 8. Columbia University - $4.2 (-2.0) 9. University of California - $4.2 (-10.7) 10. Texas A&M System and Foundations - $3.7 (-7.1)   * Figures may differ slightly from those announced by universities.   Source: National Association of College and University Business Officers

It was the first back-to-back decline since Washington-based NACUBO began its survey in 1971. The 2001 survey showed an average decline of 3.6 percent.

Belt-tightening is evident at schools such as Boston University, with 29,000 students, which is laying off faculty, and tiny Hillsdale College in Michigan, which is cutting four varsity sports teams. Even wealthy schools such as Dartmouth, Duke and Stanford have been forced to cut costs.

"It's forcing academic leadership throughout the country to really think about what's most important," said Scott Malpass, vice president and chief investment officer at the University of Notre Dame, where the endowment fell nearly 10 percent, to $2.55 billion, in fiscal 2002.

The average school's investments (not accounting for donations and spending) lost 6 percent.

The best-performing endowment earned 10.1 percent; the worst lost 19.8 percent. NACUBO did not identify the schools.

Colleges typically spend about 5 percent of their endowment per year.

The 6 percent decline outperformed all of the major stock market indexes, however. And while the bear market has made it more difficult to raise money, two-thirds of the institutions in Commonfund's survey said they expected donations to be at least as strong this year as last.

Many schools have found a silver lining to the slump: They are refinancing debt at lower rates.

And, schools insist, recent losses are a small price to pay for the enormous gains between 1992 and 2000, when endowments enjoyed double-digit investment growth every year but one, according to NACUBO. Those gains funded scholarships, research and an unprecedented campus building boom.

"You had the greatest expansion probably in the history of higher education in terms of scholarship aid, new facilities and new programs," Mr. Malpass said.

For now, most such projects are on hold.

A few schools have laid off faculty members. Many are reducing staff through attrition.