Spending spree catching up with Loyola

CHICAGO -- Loyola University, which has been plagued by financial woes, burned through $143 million of its endowment over the past eight years to erect buildings and plug a series of annual budget deficits, a university official said.\nLoyola pursued the unusual course of spending its unrestricted reserves during the 1990s, when the stock market carried most university endowments around the nation to record levels. Loyola's endowment dropped to $282 million last year from a high of $425 million in 1993.\n"It was a university that thought it had about $40 million more every year than it had," said the Rev. Michael Garanzini, Loyola's president.\nEducation officials say most universities guard their endowments by spending only a portion of the interest earned from principal because it is a crucial building block in the financial health of a university.\n"Anytime that the endowment is lower from one year to the next, the institution needs to prepare building the endowment back up," said Damon Manetta, an official with the National Association of College and University Business Officers in Washington, D.C.\nOther education officials say dipping into an endowment can help a school regain its financial footing.\nThe Jesuit school has had successive record freshman classes, including 1,635 new students this year -- up from 889 two years ago. Loyola expects a $17 million deficit this year, but Garanzini said that with a balanced budget planned for next year, the University will have erased a $34 million budget deficit in two years.\nLoyola's financial troubles began in 1995 when it was split into two units -- the medical center in suburban Maywood and a liberal arts university, resulting in the loss of about $40 million a year. To help the financial situation, the school's former president eliminated jobs and course sections while increasing tuition and fees.