An endowment fund is forever. And so, too, should be the fund’s interest earned.

Or that’s how it should work.

As the economy spirals into an abyss, some university endowment funds at schools such as Harvard and Southern Methodist University have shown double-digit percentage losses in the last month.

Some schools have lost billions, according to media reports.

Those private universities, which rely on the interest earned on endowment funds to pay for school operations, are now making cuts to their operational budgets to help alleviate those financial hits.

Although both the University of North Texas and Texas Woman’s University don’t use their endowment funds to primarily pay for operational costs, both schools are feeling the financial crunch.

The National Association of College and University Business Officers ranked UNT as having the 29th highest percentage growth in the country for its 2006-07 fiscal year endowment fund; but university leaders report that the endowment fund lost about $6.7 million over the 2007-08 fiscal year.

University operations haven’t been hurt seriously from the market losses because UNT draws only 1/2 percent of its operating fund from the en­dowment, said Andrew Harris, vice president for finance.

“Harvard lost $13 billion, which translates in hundreds of millions of dollars to run Harvard,” Harris said. “That’s a serious impact. They are affected and have taken steps to deal with it. UNT doesn’t rely on endowment, it has a tiny, almost unnoticeable affect [on the university].”

According to Harris, UNT’s endowment fund lost about 7 percent during the 2007-08 fiscal year, leaving its endowment fund at $85.7 million.

UNT’s endowment primarily goes toward the UNT Foundation Inc., separate from the university, to fund scholarships.

The UNT Foundation had a diversified portfolio in the national and international stock and bond markets, said Doug Chadwick, the foundation’s executive director.

As markets plummeted over the last year, the foundation hasn’t been hit as hard as other parts of the market, he said.

“We are basically better off than our indices and broad market,” Chadwick said. “In a nutshell, it all boils down to Texas law; governing fiduciaries must operate their funds in a prudent manner.”

And Chadwick said the foundation leaders have worked hard to act prudently.

Instead of affecting school operations, individual scholarship funds could feel some im­pact. But with reserves built up to cushion the rolling economy, that isn’t the case just yet, and only a few individuals would possibly feel the impact, he said.

The short downturn of the economy should have little effect on the endowment fund in the long term, and that’s because standards are in place to keep foundations intact, Chadwick said.

“There is no horizon for foundations, and so we invest it for a long time,” Chadwick said. “We will slow down our spending rate before we cut off [the investment]. We keep one eye to the university and one eye on the donor’s intent, which is to have a perpetual fund and preserve the principal.”

Instead of worrying about the endowment fund, officials should turn more attention to what the state Legislature will do in the upcoming session, said UNT regent Jack A. Wall, who previously served on the foundation’s investment committee for 15 years.

“If [state legislators] are unable to fund the university, that will bother everyone. But we just have to wait and see,” Wall said.

The Texas Woman’s University endowment fund is down about 18 percent, said Dr. Brenda Floyd, vice president of finance and administration at the university.

At the end of August, TWU’s endowment fund hit a low level of $7.5 million from market losses, she said.

“The endowment distribution goes primarily for scholarships and not the general operation of the university,” Floyd said.

In August, TWU’s Board of Regents recommended that the university support some scholarships with surplus tuition money because of the endowment’s poor performance.

“The direct impact today is the regents’ choice to augment from board-designated tuition,” Floyd said. “The impacts for future designations are what we’re worried about. Those future distributions depend on what next August and the following years look like. We are concerned, but not like TCU [Texas Christian University] and SMU, where [the endowment fund] contributes to day-to-day operations of the facility.”

CANDACE CARLISLE can be reached at 940-566-6889. Her e-mail address is ccarlisle@dentonrc.com .