The nation's financial crisis is taking a toll in the halls of higher education, including colleges here in Lancaster County.
Wachovia Bank last week limited access to a short-term investment fund used by Elizabethtown College and some 1,000 colleges, universities and private schools across the country.
Wachovia — which has been battered by its exposure to "toxic" subprime mortgages and will be taken over by either Wells Fargo Bank or CitiGroup — announced Monday it would no resign its role as trustee of the $9.3 billion Commonfund Short Term Fund. In addition, Wachovia limited the ability of the colleges to withdraw money to 10 percent of the account's value. That figure was increased to 34 percent Tuesday, and 37 percent by Thursday.
Wednesday, Commonfund restricted withdrawals from a second, $1 billion intermediate term fund also used by about 200 colleges and universities.
Elizabethtown College Vice President of Finance Rick Bailey said the school had about "half" of its liquid operating assets invested with Commonfund, though he declined to specify an amount. Other college funds are deposited in local financial institutions, Bailey said.
He said he didn't think the restricted access to its money would affect the college's day-to-day business.
"It was a surprise," said Bailey, "but it was a surprise to Commonfund and a surprise to Wachovia," which made the move to prevent a run on the funds in the wake of doubts about the company's future.
Colleges should be able to access 57 percent of their money by the end of the year, according to an Associated Press report. Bailey said he's sure the school will get all of its money back, but "we need to look at alternatives and options" for future investments.
Millersville University also had a "relatively small amount of funds" in a different Commonfund investment, said Ken Dearstyne, the university's associate vice president of finance and administration, but that funding has not been frozen, and the money isn't needed to run the school's day-by-day operations.
Franklin & Marshall College does not have any investments with Commonfund, but the world of higher education is in such an uproar over the issue that college president John Fry felt moved to send an e-mail to all faculty and staff last week, telling them that "the college is not affected by this development at Wachovia."
"We are very fortunate to enjoy a widely diverse investment portfolio for the college's assets, a great advantage during a period of volatility in the financial markets," Fry wrote.
In an interview Friday, Fry predicted that some schools wouldn't be able to meet payrolls because of the Commonfund freeze.
"It's a mess," Fry said.
A Pittsburgh Tribune-Review story last week reported that Penn State University was affected, but spokesman Jill Shockey said she couldn't say how much money the university had in the fund, and that the school doesn't "expect to have problems in meeting liquidity needs."
The New York Times reported that the University of Vermont had half its liquid operating assets — $79 million — tied up in Commonfund. The Philadelphia Inquirer reported that the Community College of Philadelphia had $22 million invested in the short-term fund.
The Allentown Morning Call reported that Muhlenberg College had about $3.7 million in the fund.
Kenn Marshall, a spokesman for the Pennsylvania State System of Higher Education, said each individual university's foundation makes the decision on where to invest its funds, and few were involved with Commonfund. "We're aware of the strains this has placed on higher education, but it looks like it shouldn't impact our universities," Marshall said.
But F&M's Fry said that even beyond Commonfund, the country's economic problems are taking a toll on colleges.
F&M, he said, was planning on a major fundraising effort to boost its endowment this year, but will likely push that back a year, Fry said.
The college has undergone a major building boom in recent years, but it's nearly over — with a few exceptions.
The college is redeveloping the old Armstrong World Industries site in conjunction with Lancaster General Hospital and the Economic Development Co. of Lancaster County, and proposes to relocate the Norfolk Southern Rail Yard from Harrisburg Avenue to a site behind the college's athletic fields.
The funding for work on the old Armstrong site is entirely in place, said Fry; funding for the railyard relocation, which hasn't yet been approved by various regulatory agencies and has generated controversy among residents near the proposed site of the relocation, is about "three-quarters" sewn up.
The recently announced expansion of the college's Marshall-Buchanan-Thomas House, a student residence, is being paid for largely with a $2.5 million gift from a college trustee and his wife.
"Certainly there are other things we'd like to do," Fry said. "But unless we get a big gift, in this environment, we just can't do them."
Gil Smart is associate editor of the Sunday News. E-mail him at gsmart@lnpnews.com, or phone 291-8817. 