We told you so: Universities lost 50% this year - right out of the pockets of students and faculty

Posted last year on 1/25/08. We warned you. (Lots of other people were squawking too.)

We told you - Spend the endowments. Did you listen? No! You lost 50% of your value. Why? So your endowment managers could collect big bonuses. So your presidents could get enormous salaries. And you threw away money that should have gone to students and faculty.

That was a crime. So here is the repost. Read it and weep.

Times: Politicians to Universities: Greedy Pigs! Spend Your Endowments

Somehow Universities lost their way. They amassed piles of capital in their endowments and began to think they were capitalists. They turned off the spigot for the students, wept to the faculty about the severe budgetary constraints that they faced, and turned on the bonuses for the fund managers and presidents, and now they must answer to congress for their blatant exploitation of the citizenry of our republic.

When I was helping to raise an endowment for our tiny department at the University of Minnesota, I was told that we had to spend 5% a year on programs and we planned accordingly. Apparently that rule has been ignored by the big boys and now the stuff is hitting the fan.

And I remember scratching my head for days after the University of Minnesota announced record fund raising success for its endowments out of one side of its mouth and pleaded poverty to the public out of the other side of its mouth, insisting on zero salary increases for faculty and tuition hikes for students.

Twenty years ago this behavior across the academic industry was unethical, immoral and criminal. It has continued unabated. Millions of dollars tucked away in endowments has now increased to billions of dollars. The real question here is how much has America suffered with inferior education for its students, with faculty research and teaching that never took place, because of the greed of University administrators and endowment managers?

An entire generation of students has been cheated out of tuition. An entire generation of professors have been exploited with sub-par wages, labs and budgets. All this so that dozens of universities can amass piles of capital and make millions of dollars for the administrators and money managers.

This is a corruption of an industry that goes far beyond the Enron or Worldcom scandals. It's a perversion of the entire concept of the non-profit organization.

It's high time that we begin to see some university fund managers and presidents marched off in handcuffs to serve their time in prison for cheating the public - students and teachers - out of the charitable donations that were meant for them.

And while you are locking up those crooks, you might also start sending some hefty bills to the donors who took tax write offs for money that never went to non-profit purposes.

A curse is descending on all the sleazy donors, all the avaricious endowment managers and all the greedy university presidents.

You know who you are and you will all rot in hell for what you have done.
Senate Looking at Endowments as Tuition Rises

The Senate Finance Committee, increasingly concerned about the rising cost of higher education, demanded detailed information on Thursday from the nation’s 136 wealthiest colleges and universities on how they raised tuition over the last decade, gave out financial aid and managed and spent their endowments.

The committee also asked about endowment-related bonuses paid to college presidents and endowment managers.

The move came as a record 76 colleges and universities achieved endowments of $1 billion or more in the last fiscal year, according to a report released this week. Harvard’s endowment, the largest, grew 20 percent, to $34.6 billion, while Yale’s, the second largest, grew 25 percent, to $22.5 billion.

“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” said Senator Charles E. Grassley of Iowa, the ranking Republican on the committee. “We need to start seeing tuition relief for families go up just as fast.”

The committee, which has a central role in setting tax policy, has been pressuring universities to use more of their wealth for financial aid and threatening to require them to spend a minimum of 5 percent of their endowments each year, as foundations must. The committee pointed out that donations to universities and their endowment earnings were both tax-exempt.

Seeking to head off Congressional action, wealthy universities have been rushing in recent months to expand financial aid, in some cases using more of their endowments to increase assistance to low-income and upper-income students alike. Harvard recently said it would increase aid for families earning up to $180,000 a year, and Yale said it would help families with annual incomes of as much as $200,000.

The request for information came in a letter, signed by Mr. Grassley and the committee chairman, Senator Max Baucus, Democrat of Montana. It provided a strong indication that the committee was not backing off the idea of requiring colleges to spend more of their endowments.

Mr. Grassley said that the information gathered in the next 30 days “will help Congress make informed decisions about a potential pay-out requirement and allow universities to show what they can accomplish on their own initiative.”

University officials expressed surprise at the broad information request and concern about Congress mandating how they use their endowments.

“I believe that Senator Baucus’s and Grassley’s intentions may be admirable,” said Robert J. Birgeneau, chancellor of the University of California, Berkeley, “but understanding university finances is an extremely complex matter, especially in public colleges and universities.” Berkeley’s endowment is roughly $3 billion.

Henry S. Bienen, president of Northwestern University, in Evanston, Ill., said that while he believed that putting more information into the open “will help eliminate many myths and misunderstandings,” he rejected the proposal that universities be required to spend 5 percent of their endowment assets each year.

“Universities are not like foundations,” Dr. Bienen said. “They have operating budgets which they cannot easily adjust with the ups and downs of markets. They cannot easily turn off spigots.” Northwestern, thanks to a recent cash infusion, now has a nearly $7 billion endowment.

University officials noted that an economic downturn would reduce the returns on endowments while creating more demand for financial aid. “People have got used to the last few years of wonderful endowment growth,” Dr. Bienen added. “It does not always happen.”

Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity and a vocal critic of college spending practices, said the committee’s request was “unprecedented but important, because colleges and universities have kept endowment spending secret for so long.”

“Parents, donors and all taxpayers deserve to know how these tax-free endowment funds are being spent,” Ms. Munson said.

Although the Senate letter is not a subpoena, a spokeswoman for the committee said that it was rare for a nonprofit entity not to cooperate with a request for information.

College tuition has been rising faster than inflation and colleges have adopted complicated aid programs and discounts that have made the pricing of an undergraduate education at an elite college as complicated and varied as the pricing of airline seats.

Most colleges have far lower endowments and charge less than the ones the committee is addressing.

The committee’s letter, asking for detailed financial information from the universities and colleges across a decade, signaled that lawmakers plan to get deeply into pricing policies. It asks for both the sticker price of tuition and the average and median prices paid by students year by year for 10 years.

The committee questioned how the colleges recruit low-income students and how much they spend on these efforts. It also asked who decides when tuition increases are necessary.

In the matter of endowments, lawmakers sought year-by-year growth and investment returns, and fees paid to investment advisers.

The senators moved a day after the National Association of College and University Business Officers released its annual endowment study, which showed that the 76 colleges and universities with endowments of $1 billion or more had seen their value rise 21 percent over the previous year. Despite good returns, however, they spent on average only 4.4 percent of their endowments.

Mr. Baucus and Mr. Grassley noted the “explosive” growth and said, “That is good news because much good can be done now.”

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