College Endowments

On Tuesday, the New York Times ran a brief article, “College Presidents Defend Rising Tuition, but Lawmakers Sound Skeptical,” (9/9/08, A18) that inquired into the question, “Should colleges be required to spend more of their endowments?” Of course they should is the only logical answer. It all seems so reasonable. Together Harvard and Yale are sitting on endowments of approximately $60 billion. Universities earned an average of 17.2 percent on their assets but spent less than 5 percent. And they are tax exempt! Does this make any sense? The average tax payer is subsidizing universities with billions of dollars in assets.
One of the clearest indications that these elite colleges are just scamming the public are the comments from the wealthy universities that if they were required to spend a certain portion of their endowments, it would “interfere with their ability to manage economic downturns.” Surely these people must think we’re idiots if they expect us to swallow that level of argument. What kind of economic downturns would pose problems for universities with billions of dollars earning double digit interest?
This is not to say that colleges should not have large endowments but it is to say that if they have endowments in the billions, they should spend a substantial portion for the general good and they should not be tax exempt. After all, why should every citizen in this country subsidize universities that have assets of 10, 20, and 30 billion dollars? It just doesn’t make sense.

Rockefeller, Harvard, and Elitism

The comment on my post about Rockefeller and Harvard deserves a response. Basically, 3 items: First, Rockefeller did not profit from Harvard in any meaningful way; Harvard, on the other hand, profited from Rockefeller. Rockefeller profited from a family fortune--Harvard probably had little to do with it. Rockefeller was probably well educated before he went to Harvard and would have been as successful as he was had he gone to any city or state college. Second, I don't think the motivation for giving should be based on where you went to school or what organization you're a member of, but rather on where your money can do the most good. And, Harvard, isn't the spot, IMHO. Third, this type of giving is just an example of the elite giving to the elite to perpetuate their own elitism. Having said this, I believe that Rockefeller has the right to give his money where he wants, but I don't have to believe there was such noble purpose to this gesture or that the money could not have been spent more wisely or more honorably. Success--whether financial or academic--entails responsibilities and I don't see this $100,000,000 gift to Harvard as meeting the responsibilities of someone so enormously wealthy.

The Misuse of Money

I see that David Rockefeller has pledged to give $100 million to Harvard University, a university that has an endowment of $28 billion and that spends only an infinitesimal part of this endowment (rumored to be about 5%) while it earns interest in the double digits (close to 17% in 2006). Education is surely a worthy cause and I’d be the last to suggest that education is not the place for philanthropy. And I think it’s a good thing that a large part of this $ will go to cultural studies. But couldn’t that money have been better spent on colleges and other educational institutions that really need it? Does a university with an endowment of $28 billion really need another $100 million? I think not. And I think that donations like this should not be viewed positively (as does the press and, I fear, the general public) but rather as the poor use of money that it is.

Endowments and Free Tuition

Well, Brown University has joined the list of those elite colleges—like Harvard, Yale, Stanford, and Dartmouth—in “reducing” tuition. Students whose parents earn less than $60,000 annually will have free tuition and those whose parents earn less than $100,000 will receive grants (rather than loans). These 5 Universities, btw, have a combined endowment of $57 billion. And this is in addition to the real estate, equipment, publishing contracts, government grants, and whatever else they own. And so I want to ask 2 simple questions:
1. How many students will this help? How many current students at Brown, for example, have parents earning under $60,000? Is there anyone from Brown who’d like to respond? I suspect the answer would be zero or at least very close to that. If I’m wrong, Brown University, please correct me.
2. How much money will these schools be “giving up”?
The media are reporting these seemingly grand gestures but they don’t mention any specific numbers or amounts.
This is very similar to the advertisements that try to get you to buy their product by saying they’ll donate a portion of the purchase price to breast cancer research or to help abandoned dogs and cats. But, how much will be given to these causes is never spelled out—at least not in the ads I’ve seen. And so I’d like to know and to see in the ad, exactly how much money will be given to charity. Further, I would expect that a responsible charity would demand that an advertiser list the exact amount it will donate. But, then, I suspect, the charity would receive nothing. A sad situation.
Shouldn’t the organizations concerned with accuracy in advertisements and communication generally (like NCA and ICA, for example) be concerned with this kind of deceptive advertising—and I think it’s deceptive not because it makes any false claims but because it is designed to mislead people into believing that the amount to be denoted is significant when it likely isn’t (though I may be just overly negative here). Publishing principles for ethical communication—as NCA and ICA do—is a step in the right direction but certainly not sufficient for the premier organizations in communication. NCA and ICA and related organizations would serve a valuable service by pointing out such deceptions and raising public awareness.