The number of scholarships funded by Sonoma State University's endowment has fallen by 40 percent for the upcoming school year because of the prolonged slump in the economy and the stock market.

Students will receive 247 scholarships, down from 409 last year, and the outlook is bleak for 2004-05.

Most of the scholarship money comes from dividends, interest and gains from stock sales in the university's $17 million endowment fund. But as that revenue has declined, so have the scholarships.

About $157,000 in scholarships is being awarded to full-time students for 2003-04, less than half of the $346,000 awarded last year, said Laurie Ogg, SSU scholarship coordinator.

"I know times are hard, but we're glad to be able to provide something instead of nothing," Ogg said.

The loss of an endowed scholarship, which this year averages $643 and requires at least a 3.0 grade-point average, comes as students are facing a 30 percent tuition increase. As a result, more students may be forced to take out loans, and some may even skip a semester and scramble to save up money for future semesters.

"It's one less option, and there is nothing we can do about it. It's frustrating," said Jason Spencer, SSU's associated student body president.

Spencer, 25, who is working toward a degree in sociology with a minor in political science, said he was shocked when he found out that he will not be awarded a scholarship from his school for his senior year.

"I was told by people who won scholarships in the past with worse grades than me, that with my kind of resume, there was no question I would get something," Spencer said.

Spencer said he is working extra hours this summer waiting tables and will take out more student loans to pay for his education, rent and bills.

The endowment problem has been unfolding over several years.

Two summers ago, about $1.1 million was available for distribution from endowment earnings, about one-third to scholarships and two-thirds to campus programs.

Last summer, that amount dropped to about $700,000, and part of that money went to this year's endowed scholarships.

At the end of June, the close of the university's fiscal year, the endowment fund was down 3.6 percent, according to Stuart Jones, vice president for development at Sonoma State.

Although the endowment has lost value and could lead to further cuts in funds available for scholarships, university finance officials are cautiously optimistic about its future. They are carefully watching the stock market, which has been on an upturn, to determine if any endowment revenue will be made available over the course of the year, said Sonoma State Treasurer Bill Engels.

The fund has about $17 million earmarked as endowment and an additional $7 million as a long-term commitment to the Green Performing Arts Center.

A recent study by the National Association of College and University Business Officers shows the overall market value of higher education insti-tutions' endowment funds is down by an average of 6 percent.

"We are not unique; the money isn't coming in. And our story is no different from what colleges and universities across the country are going through," Jones said.

As of May 31, the endowment funds were invested: 1 percent in money-market cash; 53 percent in fixed income, half of which is in bonds; and 46 percent in stocks, approximately 5 percent is in high-tech stocks.

Investing school endowments in high-tech stocks became increasingly popular during the late 1990s, when that market was strong, and has come back to bite some universities' endowments, said John Griswald, executive director of the Commonfund Institute, an education finance resource company in Connecticut.

But according to Engels, SSU managed to evade major losses.

"We have lost money through high-tech stocks, but have already made all of it back. We have been quite conservative," Engels said.

Jones and Engels said that the scholarship foundation did not invest any of its funds in stocks of major contributors to the university.

With the exception of the delay in building the Green Performing Arts Center, expansion plans and general academic goals of Sonoma State remain within reach, Jones said.

"We're still focused. But I think that in a slower economy, things just take longer," he said.

Meanwhile, Daryl Duncan, an SSU senior majoring in psychology, said he has gotten used to the annual rejection of his endowed scholarship applications.

Now, with only four classes left before he graduates with a bachelor's degree, he said, "I'll get by like I usually do -- by eating a lot of peanut butter sandwiches."