Is Harvard's endowment just too big?
Case Western Reserve University's endowment is at a respectable $1.8 billion (as of June 2007). If you did not know, an endowment is a gift that is held in perpetuity and invested in a manner that protects the principal from inflation. The investment income would provide a stable funding source for scholarships, professorships, lecture series, and research centers.
In most cases, university endowments are quite important to have. They provide an income stream, promote excellence, and is a secured source since they are held for the financial long-term.
As for spending, universities will try to spend a portion depending on performance, rate of inflation, and other factors. For FY '05, Case's endowment contributed $72.8 million, or 10%, of their operating budget.
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But when folks compare Harvard Univeristy, their endowment is at a staggering $35 billion, the largest in the country. While they are enjoying good investment returns and pay no taxes, the school has raised tuition costs, citing rising expenses as the need to keep the fees on the upswing.
Of course, being a Harvard student now costs more than $47,000 per year. Just imagine if Harvard spent less than 1% of their endowment, every student that year would not have to pay tuition, room, and board.
Yes, folks will say that donors will give donations with restrictions; money earmarked for a particular discipline, or for a buildings fund. Others may say that big number may look great, but it is the many funds that make up that number.
But you do have to agree with Financial Adviser Christiane Delessert (link) who believes that "endowments were created to supplement tuition to pay for all of these wonderful things that colleges wanted but could not afford based on tuition alone. They were given tax-free status because the colleges were perceived as being poor and needing help."
If these endowments are performing in double-digits, then we should expect a higher-than-average spending to take advantage. Especially during not-so-good economic periods.
Perhaps alums and other donors should give without any restrictions.
Maybe it would be interesting to know if the endowment managers at Harvard are manipulating the oil price.
Comments
Posted by: Bernd
Posted on: May 29, 2008 12:00 PM
I must admit that I've already known that such donations are important to colleges and universities and that they're always looking for new donors but I didn't know that spending money to a university or college may give you the right to give money just with restrictions. That would mean that some faculties and their students gain from that money while others may always loose and that's just not fair because every faculty is an important one.
Posted by: Annika Pantro
Posted on: July 6, 2008 09:28 AM
interesting facts about havard and their endowment. that sounds like a multi-billion-company. anyway i think havard is also to powerful its not only a universtity anymore... i mean they have to come back to their roots and TEACH nothing else!