The OU Foundation administering the endowment must determine the best long-term investment for the principal gift. Then it must decide how much to pay out each year so that the goal of the donor is accomplished while the principal continues to grow to keep up with inflation.

The OU Foundation, which administers about $693 million of OU's endowment, paid out about $35 million from endowments this past year, Patton said. It administers about 11,000 individual accounts, about 4,500 of which are endowed gifts, he said. The foundation developed a standard procedure to answer these challenges. It's really an extension of modern portfolio theory, Patton said.

"The philosophy in terms of how endowments are invested and produce earnings has changed dramatically in the last 30 years," he said.

Decades ago, the idea was to retain the principal precisely as it was originally given. Whatever money was made from that was used that year. So endowment money was invested in areas that produced income, which often constrained the gifts to lower rates of return, Patton said.

About 30 years ago, people began to question that line of thinking and began to try different investment strategies that would create higher rates of return. Now the OU Foundation -- along with most other foundations -- invests endowments in a blended portfolio of stocks, bonds and money markets, Patton said. The average return of those investments has been established to be in the low 6 percent rate.

About 1 percent of that is used to pay management costs, leaving the foundation's payout policy at 5 percent, similar to most other institutions.

To determine how much to pay out of the endowments, the OU Foundation figures out the average asset balance in all foundation accounts (endowment funds) for the past three years. Then it takes 5 percent of that and distributes it among the endowment projects annually, Patton said.

Taking an average of the past three years makes payouts more predictable. It also is intended to guard the endowment from short-term jumps or dips in the stock market, Patton said. But in the event of a long-term recession or depression, the principal paid out would decrease as the foundation continued to protect the principal sum for future generations.

In that case, scholarships or other programs funded through endowments would decrease along with the funding. But that wouldn't stop the university from moving forward with its general purpose, Patton said.

The university's regular operations are funded through state appropriations and tuition, so the state of the stock market will never shut down OU.

How OU uses endowments

Endowments at OU can be used for a variety of purposes. OU has endowments to support resources for the University Libraries, to care for paintings in the Fred Jones Museum of Art, to support computer labs and to fund faculty or student awards, Vice President of University Development Tripp Hall said in an e-mail.

OU fundraisers don't necessarily focus on raising funds for endowments because one-time donations can be used at the discretion of university administrators to fulfill immediate needs, Hall said.

Fundraisers do focus on endowments for two specific areas, however, he said. One of those is scholarship endowments.

"Of the $131 million raised by our Campaign for Scholarships, $112 million is for endowed scholarships, which will provide scholarships for generations to come," Hall said.