photo by: Chad Lawhorn/Journal-World

KU Endowment's offices on West Campus in Lawrence are pictured April 16, 2021.

In a better-to-laugh-than-cry sort of way, University of Kansas Chancellor Douglas Girod often jokes during his updates of higher education that they’ll likely be out-of-date before he’s done talking.

After all, you could argue that nothing is in greater supply in today’s world of higher education than new threats.

The commodity that may be in second place, though, also is notable: Unsolicited advice.

A fashionable piece of it is that universities should start spending money from their flush endowments to make up for millions of dollars in federal grant cuts that many schools are facing.

Voices from both the right and the left have been making that argument recently, although with different spins. On the right, the argument often comes in the form that universities have been unfairly hoarding money in endowments, and relying on the American taxpayer to fund too much of their operations. On the left, the argument has been that strong endowments should be the weapon to fight back against Trump administration bullying.

The argument from the left has the benefit of being delivered through a megaphone that has been known to cause members of that end of the political spectrum to stop and applaud — former President Barack Obama.

“If you are a university, you may have to figure out, are we in fact doing things right?” Obama said of the threats facing universities while speaking earlier this month at Hamilton College in New York. “Have we in fact violated our own values, our own code, violated the law in some fashion?

“If not, and you’re just being intimidated, well, you should be able to say, that’s why we got this big endowment.”

photo by: Journal-World

President Barack Obama speaks at the University of Kansas in Lawrence, Kansas, Thursday, Jan. 22, 2015, about the themes in his State of the Union address.

Many leaders in higher education are not applauding the comments. Count Girod among them.

“It is a bit naive to think that endowments are bank accounts,” Girod said in an interview with the Journal-World when asked about Obama’s comments. “Those are committed. Most all money is given for a specific purpose. Short of bankruptcy, you can’t really violate that trust. It is easy to say, instead of using federal money, use endowment money. It is not really a true option.”

It is true that KU’s endowment is largely committed to specific projects, including scholarship funds, building projects, endowed professorships and other such functions. In total, more than 90% of all assets held by the KU Endowment Association have donor restrictions attached to them, meaning that KU can’t simply spend the monies for any purpose it desires.

But it also is true that just less than 10% of KU Endowment’s assets are free of any donor restrictions. When you have total assets of about $3 billion, even a small percentage adds up to a sizable number. In the case of KU Endowment, it ended its 2024 fiscal year with $296 million of assets that were free from donor restrictions, according to the association’s audited financial statements reviewed by the Journal-World. That was up from $282 million in unrestricted assets in 2023.

KU leaders have openly been worrying about a $30 million to $40 million budget problem if proposed restrictions on how universities can spend National Institutes of Health grants become reality. Back-of-the-napkin math would suggest nearly $300 million in unrestricted assets would give KU some runway to avoid to a crisis while figuring out the new funding realities.

The simplest of calculations would suggest KU Endowment would have nearly a decade’s worth of funds to help KU weather a change in the environment surrounding federal research grants. However, the numbers are almost certainly not that simple in reality.

The unrestricted assets shouldn’t be thought of as dollars sitting in a savings account. A spokesperson for KU Endowment told the Journal-World via email that many of the association’s unrestricted funds aren’t readily available because they are held in the form of a long-term asset. That could be land or property that can’t be quickly sold for its full value, or shares of a hedge fund that have limitations on how quickly and fully the association can divest. For example, of the $2.7 billion of securities held by KU Endowment — which includes funds with and without donor restrictions — 52% of the securities were in hedge funds and other “private investments,” according to the association’s 2024 financial report.

The financial reports, however, also provide other ways to look at Endowment’s options for unrestricted funds. The 2024 financials list that unrestricted assets produced nearly $14 million in investment income, meaning there were funds from dividends, capital gains or interest income that could be easily spendable by the association.

The financial statements also show that the amount of unrestricted assets and the income they produce for the Endowment Association have been growing over the years. Since the 2019 fiscal year, the amount of unrestricted assets held by KU Endowment has grown by 48%, or about $96 million. The amount of investment income those unrestricted assets have produced has grown by 58%, or about $5 million.

The amount of investment income those assets produce is important because those dollars theoretically could be leveraged if KU Endowment ever wanted to take out debt to acquire a large amount of cash to give the university more flexibility to adjust to the changing federal funding environment. It may seem odd that a $3 billion organization would ever use a portion of its investment earnings to pay for debt that would be used essentially as a rainy-day reserve fund.

However, some of the country’s richest private universities are taking that path currently. Reportedly, Harvard is in the process of issuing $750 million in bonds, while Northwestern recently issued $500 million in bonds, and Princeton is moving forward with a $320 million bond issuance.

There are no indications that KU leaders plan to tap their endowment for emergency cash or use it to issue debt for emergency uses. A KU Endowment spokesperson didn’t answer a list of specific questions the Journal-World asked, but rather issued a general statement that highlighted the need for Endowment funds to be available in perpetuity.

“KU Endowment was built to ensure long-term sustainability, designed to support the university’s mission in perpetuity — not to fill short-term financial gaps,” Daryl Bell, senior director of marketing and brand communications for KU Endowment, said via an emailed statement from the organization. “Drawing unplanned sums, especially at significant levels and on a consistent basis, could jeopardize its long-term sustainability and the support it provides to future generations of students and faculty.”

The fact that other schools may be taking certain actions to accumulate emergency reserves doesn’t mean that KU should take that path. Girod emphasized that “everybody’s experience is different,” when it comes to the situation they are facing from the federal government.

So too, is everybody’s endowment. KU has a sizable and particularly historic endowment. KU was the first public university to establish an endowment in the U.S. Its longevity and history of investment success has grown KU’s endowment to one of the largest in the Big 12 Conference. An annual ranking by the National Association of College and University Business Officers listed KU’s endowment as the 63rd largest in the country, and third in the Big 12 Conference behind Texas Tech and TCU.

However, KU’s endowment is far smaller than the mega endowments that have drawn scorn from politicians who allege they are excessive. The federal government, for example, has decided to tax university endowments when they have holdings that are greater than $500,000 per student. There are about 55 of those endowments, according to the NACUBO report. KU isn’t in that group, and is not particularly close. KU has about $95,000 in funds per student, ranking it about 210th in the country. For comparison, Princeton’s Theological Seminary has the highest per student amount at about $5.1 million, while the general Princeton University is next at $3.7 million.

While the numbers at those elite institutions — Harvard, Yale, Stanford and MIT all have more than $2 million per student — are creating some political flashpoints, most higher education leaders have remained united in their belief that tapping endowments to deal with the changing federal environment is a bad idea.

For one, most universities don’t have endowments that at all resemble those of the largest universities. The median endowment in the NACUBO report had about $52,000 in funds per student.

For another, some higher education leaders have argued it could be a tremendous strategic mistake to start tapping endowment funds now. If universities show they can absorb the cut in federal research funding, what is the incentive for the federal government to change course and restore the federal funding in the future?

Steven Bloom and Jack Nicholson, a pair of executives with the American Council on Education, recently wrote in an edition of Higher Education Today that the debate over whether endowments should fill the federal funding gap had become dangerous.

“Misconceptions about endowments aren’t just misleading — they threaten the very people and programs that they were created to support: scholarships, research, academic excellence, and the futures of countless students and faculty,” the pair wrote. “And they divert attention from the real issue: an unprecedented assault on American higher education.”

photo by: Chad Lawhorn/Journal-World

University of Kansas Chancellor Douglas Girod speaks at the FBI and KU Cybersecurity Conference on April 4, 2025.

Girod said he remains committed to focusing on KU’s particular situation rather than letting the reactions of other schools guide him.

“Obviously, we are who we are, and our mission is what our mission is, and we are committed to meeting those,” Girod said. “All we can really do is try to position ourself to be ready to react if we need to react.”

Girod said he is very much a believer in the importance of the perpetual nature of an endowment fund, and he knows another group that feels the same way — the many donors who he’s met and interacted with over the years.

“The donors don’t feel it is their job to fill the holes created by the state or federal government. They really don’t,” Girod said. “They feel their role is to advance the university in specific areas, not make up for the shortfall of others.

“And that is fair.”