March 10, 2008

Senate Inquiries Analyze Endowment Spending of Wealthiest Universities

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In January, the Senate Finance Committee, led by Sen. Charles Grassley (R-Iowa) and Sen. Max Baucus (D-Mont.) sent letters to the presidents of 136 universities with the highest endowments requesting information about tuition, financial aid and endowment usage, among other issues. Of the universities who were sent inquiries, Cornell was the first to respond to the committee.
By the Feb. 21 deadline, only 30 universities had sent in their replies. According to a Baucus aide, responses are still coming in. Many universities reportedly requested an extension in order to give a more thorough response.
“I think in part [Cornell’s quick response] goes to President Skorton’s belief that transparency is a critical requirement from institutions that are given the public trust like Cornell and therefore when you get a request from Congress you take it seriously and respond in time and with comprehensive data,” said Stephen Golding, executive vice president for finance and administration.
Many of the materials used in Cornell’s response are already freely available on the University’s website or are published annually and shared with prospective students and their families on a regular basis.
Dartmouth College is also among the universities that have already responded. According to Dartmouth Vice President Adam Keller, Dartmouth wanted to be responsive to the senate and therefore provided all of the information the committee requested.[img_assist|nid=28677|title=|desc=|link=node|align=left|width=|height=0]
According to a Baucus aide, the committee’s concerns were based on the fact that the cost of tuition is rising at a faster rate than inflation. The committee hopes such thorough information will help to understand what the appropriate next steps may be.
Many university administrators feel universities should be left to manage their own endowments without government interference.
“We live in a world of volatile endowment returns and we need to have discretion and flexibility to manage that without government control. I don’t believe the government should be involved,” Keller said. “Also, at every major university the endowment is heavily restricted by the interests of the donors. A five percent uniform rule would not be equally effective.”
Golding acknowledged that no two institutions are the same, and therefore each institution has to develop an appropriate strategy that cannot be legislated.
In addition to being used for financial aid, endowments also have many other important purposes that differ amongst universities.
“As a research university, Princeton contributes to the public good not only through the undergraduates it educates,” wrote Princeton President University Shirley Tilghman, in her response to the committee. “There are thriving fields at Princeton today […] that were not even imagined 30 years ago. Princeton has been able to make substantial investments in these fields only because of the generosity of its donors and its careful stewarding of its resources over many years.”
According to Keller, it is an important social issue to make education affordable. The committee’s concerns about the affordability of higher education and the management of endowments are valid ones that Dartmouth is dealing with by the creation of a new financial aid initiative.
“Tuition has grown at 4.6 percent a year but financial aid has risen at about twice that rate. Tuition in fact doesn’t increase for low and middle income students. The only group that’s really affected is the full pay students and their income is rising faster than inflation anyways,” Keller said.
Many other universities, including Cornell, also have new financial aid programs that help to deal with the concern that the cost of tuition is rising faster than the rate of inflation.
“I think that Cornell has itself identified cost and debt as two significant issues in terms of barrier to students being able to attend, and that’s why we implemented the new financial aid proposal that was announced back in January,” Golding said. “The endowment is a critical element of deferring the cost of Cornell’s education.”