Student Life Archives (2001-2008)

Senate examines higher education endowments

Scott Bressler

The U.S. Senate Finance Committee hopes to determine whether universities are using their endowments to ensure that low- and middle-income students have access to higher education.

In order to conduct that analysis, run in conjunction with higher education trade publication Inside Higher Ed, the committee requested that the nations’ wealthiest 136 colleges and universities submit their endowment information. The request, with which Washington University complied, came in response to a study conducted by the National Association of College and University Business Officers, which indicated double-digit endowment growth rates at hundreds of colleges in 2007.

“It’s fair to ask whether a college kid should have to wash dishes in the dining hall to pay his tuition when his college has a billion dollars in the bank. We’re giving well-funded colleges a chance to describe what they’re doing to help students,” Senator Charles Grassley of Iowa, the ranking Republican of the Senate Finance Committee, said in the January press release.

Pending the results of its findings, the committee may require each university to spend at least five percent of its endowment every year, a federally mandated spending minimum that is already required of many not-for-profit foundations.

If the five percent minimum is enacted, it could have significant ramifications on universities since many of them do not currently meet the five percent mark.

Of the 19 responses received by Inside Higher Ed, 15 schools have spent less than five percent of their endowment on average over the last 10 years.

In an article in The Chronicles of Higher Education, Chancellor Mark Wrighton said that the senators’ approach of applying the same regulations to the University that are applied to grant-making foundations is simplistic. Washington University consistently spends less than five percent of its endowment per year.

“[Non-profit] foundations don’t have the enduring obligations that we do,” Wrighton said in the article. “Foundations don’t have the physical and human resource commitments.”

Hoping to analyze the endowment spending information for public use, Inside Higher Ed requested the data from the 25 universities with the largest endowments. The University did not release its information in time to be included in the article, though it has since made that data available.

According to Steve Givens, associate vice chancellor and executive director of University communications, the University’s delay in releasing the information came because the administration was waiting for official permission from the Committee of Senate Finance. As a result, the University’s information was not included in Inside Higher Ed’s report.

“We did not release the information to Inside Higher Education when requested because it is correspondence between the University and the Senate Finance Committee, and it is not appropriate to release correspondence without gaining the approval of the recipient,” Givens said in an e-mail.

Emory University and Northwestern University, the only two universities that still have not released their information, issued similar statements to Student Life.

According to the letter to the committee, released on March 31, in 2007 the University spent $197.2 million-4.2 percent at market value of its $5.7 billion endowment. Over the last 10 years the University has spent an average of 3.8 percent of its endowment per year. This average has increased to 4.48 percent over the last five years.

Despite the fact that the University has never met the recommended five percent spending threshold during the past 20 years, in the report Wrighton said that the University is meeting the financial needs of its students.

“While there have been years in which the payout on a current basis has been less than five percent, the needs of the student body, faculty, research programs, academic programs and other activities supported by the endowment have been met as the spending from the endowment has always increased,” the report stated. “Over the past decade total endowment spending has increased 120 percent, which is more than any other source of University operating revenue.”

The report also stated that two-thirds of the University endowment’s assets and earnings are restricted, and consequently can only be spent on certain projects.

“Approximately $3.7 billion, or 67 percent of the endowment, is subject to restrictions by the donor. Restrictions include designated functions, programs, specific expenses or a particular school within the University,” the report stated.

Included in last year’s list of the University’s top 10 major expenditures from the endowment are supporting academic programs, capital projects (new building and renovations), student financial aid, salaries and benefits for professors who hold endowed chairs, research, graduate fellowships, library, student activities, lectureships and seminars and museums.

Harvard University, with the largest endowment of $34.6 billion, spent an average of 4.20 percent over the last 10 years on financial aid; Yale spent 3.8 percent. The lowest mark came from the University of Minnesota, which spent an average of 2.80 percent of its endowment on aid.

Pedro de la Torre, an organizer for education advocacy group Campus Progress, stressed the importance of universities keeping their information open.

“Transparency is key, it’s the best policy. We think any school should be able to release this information without any negative side effects,” de la Torre said.

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