Wed January 21, 2009
Research Institute Navigates Through Uncertain Economy
Kansas City, MO – The recession is bearing down on everything from factories to schools...even basic medical research. Across the country many research institutes have stopped hiring, but one of the biggest in Kansas City is still looking for help. The Stowers Institute boasts one of the largest medical research endowments in the country. That's helped a lot recently, but it doesn't mean the institute is immune from the national economy. KCUR's Elana Gordon reports.
The current economic decline and the mounting competition for federal research dollars has left many scientists and research organizations worried about their future. Kei Koizumi is with the American Association for the Advancement of Science, a professional association and journal publisher. He says one of the main sources of funding for basic research - the National Institutes of health - has been receiving more and more grant applications lately, but that its budget has remained flat for the past five years.
Koizumi: "And that means that all the research institutions and universities that receive federal funds for research have been struggling to come up with enough money to keep their research going - and on top of that, a lot of institutions in the last few months have lost a lot of money in the market, so their endowments have shrunk."
The Stowers Institute for Medical Research says it's in a better position than most right now because of its unique financial structure. Laurie Roberts is a spokesperson for the institute and says its founders, Jim and Virginia Stowers, left the private non-profit with a two billion dollar endowment. Roberts says this support has given the institute enough financial padding for scientists to pursue research without any dependence on federal research dollars.
Roberts: "They are one of just a handful of medical research organizations in the United States that have an endowment large enough to have a lot of cash reserves on hand - and that has helped them during these tough economic times."
[outside] "I'm standing directly across the street from the Stowers Institute in Kansas City. And I'm looking up at this towering fortress of a structure. It's about a six story research complex where a lot of scientists at the Stowers institute are studying genes and stem cells. If I turn around and look a little bit towards the west, towards the plaza - I can also see the top of these two twin brown buildings. That's American century investments - it's a pretty big mutual fund company. But American Century and Stowers are pretty closely - for one, the Stowers institute, and its endowment, owns a lot of stock in American century investments."
Doyle:"The market turmoil we saw last year was the equivalent of a 100 year storm - it's the kind of thing you don't see very often."
Chris Doyle is a spokesperson for American Century, which was started up by Stowers Institute co-founder, Jim Stowers. Doyle says the entire mutual fund industry was hit hard last year by the huge drop in the stock market. American Century cut nearly 300 jobs in November and its total assets under management last year fell almost twenty percent. Still many consider American Century to be one of top performers in the industry, and Doyle says the company is doing a lot better than most right now.
Doyle: "Minus 20% was enough to be considered an all-star."
The Stowers Institute owns about forty percent of American Century's stocks. The stock market collapse is sure to hurt the endowment in some way, but its scope won't be known until a public filing later this spring.
David Renz is chair of public affairs at UMKC's Bloch School of Business and Public Administration. He says he's not familiar with the Stowers Institute's specific financial situation, but he says if the value of an endowment were to change, it could have mixed or delayed affects. He says that in large part depends on how immediately an organization needs money.
Renz: "I think it's analogous to average person's retirement nest egg - if you're at a point where you want to retire in 6 months, obviously the drop in the market right now is bad news - but if you're going to retire in 6,7,10 years- you've got time to let the market come back."
The Stowers endowment also has a lot of cash savings. Spokesperson Laurie Roberts says that really came in handy earlier this year when the auction rate bond market collapsed. The institute had used those types of bonds to pay for the past construction of its midtown campus. When the market crashed last spring, bond interest rates shot up to near double digits. It forced places which used those bonds to pay out a lot more money. Roberts says the institute was able to avoid those higher costs by using its large cash reserves to buy back more than $200 million dollars in its own bonds.
Roberts: "The amount of money that the institute would have been paying in very high interest rates has been reduced to about 1% or just a little over, so a truly was a cost savings in this economic turmoil that's surrounding us."
Roberts says the institute now has about half a billion dollars in cash reserves.
Bill Duncan is President of the Kansas City Life Sciences Institute - an organization that coordinates area research efforts. He says research expenditures have tripled throughout the region since the Stowers institute started up about ten years ago. But Duncan says that like most other places throughout the country, medical research in this area is being affected by the current economy.
Duncan: "Everyone has suffered some, no question, but it hasn't been - we haven't fallen off the cliff. We're still doing pretty well. Now maybe a year from now I won't be saying that, but we're holding our own I'd say."
Duncan says the impact has been pretty minimal at this point. Meanwhile institutions and scientists across the country are keeping an eye on the economy and on federal research funds under a new administration. The Stowers Institute says it plans to expand its current research projects. It's hiring for least ten positions, but the institute also says its previous plans to build another campus and start more research projects are still up in the air. It initially put expansion plans on hold because of efforts in the state to legally limit certain kinds of stem cell research. Now, the institute says it's also taking the economy into consideration.
Funding for health care coverage on KCUR has been provided by the Health Care Foundation of Greater Kansas City.
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