The Oklahoma Legislature’s commitment to match private donations for endowed faculty chairs just got more difficult with an Ohio couple’s $2 million gift to OU to create a chair in anthropology and archaeology.

OU Public Affairs announced Arnold and Wanda Coldiron’s gift to create the Robert E. and Virginia Bell Endowed Chair in Anthropological Archaeology on Thursday. The Oklahoma Legislature is obligated by law to match the $2 million donation.

The state began matching private endowments to higher-education institutions in 1988 with the Endowment Fund Program, according to the Oklahoma State Regents for Higher Education policy and procedures manual.

However, in response to the 2008 financial crisis, the Legislature put a temporary stop on the endowment-matching program because the state accumulated a debt of $364.8 million to Oklahoma’s higher-education institutions.

Three years later, the debt has been reduced to $267 million, according to the regents’ November budget proposal.

Currently, the Legislature has no money to address the remaining backlog, and it won’t for some time, said Rep. Denney Lee, Oklahoma House’s Appropriations and Budget subcommittee on education chairwoman.

“To be quite honest, it won’t happen this year,” said Denney, R-Cushing. “We’re hoping times will be better.”

The Legislature can’t match the donations because of the ongoing recession and Oklahoma’s $500 million budget shortfall, Denney said. Basic functions of government are the Legislature’s primary concern at the moment.

“I feel confident that eventually we will get the debt paid,” she said.

Multi-million dollar backlogs

As of 2010, the state’s endowment debt to OU is $116.8 million, said Chris Kuwitzky, administration and finance associate vice president and chief financial officer for the university, in an email.

OU and Oklahoma State University have the largest share of the state’s $267 million backlog. OSU’s backlog is about $148 million, according to OSU spokesman Gary Shutt.

Of the $163.8 million OU had waiting to be matched in 2008, the Oklahoma Legislature matched $47 million in 2010, Kuwitzky said in an email.

This was possible because Gov. Brad Henry signed a bill in April authorizing the Legislature to issue a $100 million bond to address the state’s then-$364.8 million backlog, according to an April 15 Associated Press article. Most of the money went to OU and OSU, according to the article.

Bonds are similar to loans in that borrowers — the Legislature in this case — sell bonds to investors to finance operations. The Legislature must pay the money back with interest at fixed intervals.

The Legislature won’t issue another bond to fund the backlog because it would put the state further in debt, Denney said.

When the Legislature has available funds, state money is given to the Oklahoma State Regents of Higher Education to invest, according the state regents’ policy and procedure manual.

The state regents receive allocations from the Legislature to match endowment money. The state regents create accounts that mirror donor accounts and invest the money. The interest earnings are made available to the universities with donor accounts.

Endowed chairs and professorships are created using private donations of at least $500,000 and $250,000, respectively. These donations are then matched by the state. A chair requires a minimum of $1 million to be fully funded and a professorship requires a minimum of $500,000.

Working with donors

There are no time constraints on the Legislature to allocate money, which means donors can end up waiting years to see their funds matched.

While waiting for matching funds from the state, the university and the OU Foundation have worked with donors to ensure their money is put to use, Kuwitzky said in an email.

Private donations to OU are given to the OU Foundation, a private, nonprofit corporation of which OU is the sole beneficiary, according to the Foundation’s website. The OU Foundation invests donors’ money and uses the investment earnings to compensate a chair holder’s or professor’s expenses.

“We continue to believe the funds will be matched by the state in the future,” Kuwitzky said in an email. “In the meantime ... a number of strategies are assuring donors that their investment is serving the university.”

One way the university and foundation have worked with donors is asking donors who have provided endowment money for multiple chairs to combine those funds to establish at least one endowment, Kuwitzky said in an email.

Most endowed faculty position agreements between donors and the Foundation include a clawback provision, which grants donors the right to refund their entire donation if the state fails to match donor funds “on or before three years after the date of the agreement,” according to the Foundation’s audit report from June 2010.

No donor has asked for a refund as a result of delayed fund matching, said Guy Patton, OU Foundation president and CEO. The Foundation was able to remove clawback provisions or significantly extend the deadlines to match funds in all but a few cases, after working closely with donors and the OU Office of Development staff, Patton said.

The state would be in a worse financial situation now if the Legislature were bound by time limits to match endowments, Denney said.

“If time limits had been in place, we could be in really serious financial difficulties at the state [level] if we hadn’t had the flexibility to spend on the core areas we need to spend during these tough economic times,” Denney said.

The OU Foundation endured losses during the financial crisis as well. After investment returns of 17.1 percent in 2007, the foundation was hit with 10-percent and 17.5-percent losses on endowment investments in 2008 and 2009 respectively, according to documents on the OU Foundation website. However, the investment returns rebounded to a 12.7-percent return in 2010.

OU’s endowed faculty positions history

Since Boren became president of OU, endowed chairs and professorships at the Norman campus and the Health Sciences Center have increased from 116 in 1995 to 483 in 2010, according to documents provided by Boren.

Donors have created 10 new endowed chairs since July 2008 with gifts ranging from $1 million to $3 million and one new professorship with a gift of $500,000, said Tripp Hall, vice president of development.

Endowed backlog

Twenty institutions and branch campuses have 712 accounts awaiting state funding

Number of accounts awaiting funding at OU:
» OU-Norman: 154
» OU Health Sciences Center: 180
» OU-Tulsa: 44

— Source: Oklahoma State Regents for Higher Education