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Archive for Monday, February 18, 2008

Leaders urge Congress to stay out of endowments

Iowa senator wants money used for more tuition relief

February 18, 2008

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— Some state higher education officials say they hope Congress keeps its hands off the college endowment business.

In a briefing last week to the Kansas Board of Regents, Kansas University Endowment President Dale Seuferling said, "We don't see that there is any reason to overreact to a short-term situation."

But some in Congress see a problem.

"Tuition has gone up, college presidents' salaries have gone up, and endowments continue to go up and up," said U.S. Sen. Charles Grassley, R-Iowa.

"We need to start seeing tuition relief for families go up just as fast," Grassley said.

U.S. Sen. Max Baucus, D-Mont., who is chairman of the Senate Finance Committee, and Grassley, the ranking Republican, have a proposal that would require university endowments pay out 5 percent of their assets each year.

Endowments are made up of funds established by donors, which are invested to support a university.

In recent years, endowments have enjoyed significant investment growth. Harvard University's endowment is nearly $35 billion, while Yale's is at $22.5 billion.

KU's endowment is at $1.24 billion and grew by 18 percent in 2007, driven by a record number of donors and a 19.3 percent return on investment. It disbursed $94.9 million to students, faculty and staff last year.

Meanwhile, tuition costs have exploded. In the past five years, tuition at KU has doubled.

But Seuferling said it's difficult for the endowment to respond directly to that situation because approximately 95 percent of donations made to the endowment are restricted by purpose.

And many endowed gifts specify that the principal cannot be spent. The donor expects the gift's value will increase through investment and that growth will be expended, Seuferling said.

"Our objective is to make sure we can, as much as possible, smooth the volatility in the markets so that spending is dependable for university needs, so that the fund that is supporting a freshman scholarship doesn't have to be reduced by 20 percent in the student's junior year," he said.

Several regents members seemed sympathetic.

Jarold "Jerry" Boettcher of Beloit, who has been an investment analyst, said Congress seems to point toward large investment earnings over the past several years and forgets about investment problems in 2000 and 2001.

But Regents Chairwoman Christine Downey-Schmidt said the proposals in Congress should put university and endowment officials on notice that the public has questions.

"Are we doing what we want with our endowments? Are our donors being encouraged to increase scholarships based on what we are seeing with tuition? That's their responsibility to follow up on those questions," she said.

Grassley asked the question this way: "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."

Comments

Richard Heckler 6 years, 11 months ago

I'm with Charles Grassley a seemingly smart republican on this issue.

Mr_Missive 6 years, 11 months ago

Endowments are the dirty little secrets of Universities. Their mission is to get more money very little time is spent on how to distribute the money. They care very little about the students. I have been on the Board of a College Foundation and resigned in disgust.

justthefacts 6 years, 11 months ago

The theory of endowments (which by the way are accumlated from private contributions, not tax dollars) is to get a big enough nest egg so that the school could run off its interest, as much as possible and if need be. The principal amount looks (and often is) like a lot of money. And it's hard to understand why that isn't the first thing spent in hard times. But the theory of an endowment is often to build up the principal enough to allow that interest to get so high. How that is done and for what things the interest should pay is often an issue that people can argue about. But it's really helpful to know that most endowment funds are not intended to pay directly (by the donors). They are intended to create that giant nest egg providing interest for rainy days.

Third_Wave 6 years, 11 months ago

The idea of a non-profit endowment is a joke. Universities, as this town should know, operate much like large corporations. KU isn't the problem though; its endowment is run of the mill compared to the top tier schools of the nation that have $1 million plus per student. Those are the schools that can stand a little taxation hit. They are also the schools that seem to spend the least percentage of their endowments and horde their tax-free gold mines like a dragon on top of treasure.

Wouldn't it be nice if we had an educational community that was egalitarian and supported those "other" struggling colleges out there as opposed to sucking resources away from them by using the smallest portions of their endowment to create unbeatable offerings for the best students, professors, and faculty? Where's the love?

toefungus 6 years, 11 months ago

Endowments should be heavily taxed if they do not disburse 5% a year on tuition assistance.

Tristan Moody 6 years, 11 months ago

So you're basically saying that endowments should eat their seed corn. That's fine. What happens to tuition costs in 30 years when there's nothing left?

akuna 6 years, 11 months ago

I think we need to examine what is really happening. Tuition costs are going up because states are reducing their funding of institutions of higher education. If the state's did the job that they did back in the 70's, tuition would be lower.

According to an article in the Boston Globe, "... state funding for higher education is at its lowest levels in 25 years." Furthermore the Boston Globe predicts that "states gave $21 billion less in 2000 to their public institutions of higher learning than they would have had they maintained their higher spending levels of 1977."

If there is a problem with tuition rates, this is where it really lies. Let's fund all of our institutions of eduction better so our main export can be knowledge and not war. Reduce DOD funding and increase DOE spending.

Congress and the regents need to stop trying to pull the wool over our eyes and point fingers at those whom are truly to blame, our political leaders.

Cite: http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/10/18/the_squeeze_on_college_funding/

Dorothy Hoyt-Reed 6 years, 11 months ago

I understand the universities not using the principle, but are the effectively using the interest, or are they just letting the interest build? If they are hoarding the interest, then I say make them use it to lower tuition. It's getting too hard for low and middle income families to afford tuition.

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