WASHINGTON – University administrators from around the country yesterday argued that the Senate should not force them to spend more and save less money, saying a one-size-fits-all policy would be unfair to some schools, including this university.
Sen. Charles Grassley (R-Iowa) and Rep. Peter Welch (D-Vt.), who are leading a congressional investigation into how universities use their endowments, organized the Capitol Hill roundtable discussion. Grassley, the highest-ranking Republican member and former chair of the Senate Finance Committee, is the most prominent supporter of legislation that would require universities to spend a specified percentage of their endowments each year.
Grassley has said it is difficult to reconcile the growing size of college endowments with recent spikes in college tuition. He cited a Congressional Research Service statistic that in 2005 found the price of college consumed more than 70 percent of the yearly income of a household in the bottom fifth of the population. He said college endowments have a one-year average rate of return of 17.2 percent, while schools only spent about 4.6 percent of their endowment for fiscal year 2007.
In comparison, Welch said if the cost of milk had risen as fast as the cost of college since 1980, a gallon of milk would now cost $15.
Most private foundations are required to spend 5 percent of their endowments each year, and that number has frequently been cited as an amount universities could be forced to spend.
Presidents from Princeton University, Amherst College, the University of Vermont and Berea College, as well as other professors and education finance experts, aired their views on the matter.
But P.J. Hogan, a lobbyist for the University System of Maryland who attended the hearing, said the university’s and the system’s endowments were being “lumped in” with the much larger endowments of private institutions such as Harvard and Yale, both of which have endowments of more than $20 billion.
The university’s endowment was about $420 million as of last January, and the system’s is currently just under $1 billion, according to USM Chancellor Brit Kirwan.
“It’s just not a real fair comparison,” he said.
Hogan also said the system is successful in achieving Grassley’s main goal: keeping tuition down.
“That is unique across the country, to find an entire system where tuition has been frozen three years in a row,” he said.
Maryland, which once had the fourth highest tuition country-wide for a public university, is down to 16th, he said. Molly Corbett Broad, the president of the American Council on Education, cited the university as an example of what state funding could do to help keep tuition down.
The universities gave a variety of reasons for why required payout rules shouldn’t be enacted. Amherst College, for example, charges students $45,000 a year in tuition, room and board, but spends $80,000 per student every year.
“It is the endowment and gifts that make up the difference,” Amherst President Anthony Marx said.
Both Marx and Princeton University President Shirley Tilghman said their institutions had made great strides in making college more affordable for low-income students and their families. Adjusting for inflation, Tilghman said, the cost of attending Princeton has declined 25 percent over the past 10 years.
But Welch reminded them that college tuition costs were still “brutal on average families.”
Others at the roundtable said high tuition costs were keeping students out of college.
“As they’ve become wealthier, many institutions have become less accessible,” said Lynne Munson, an adjunct fellow at the Center for College Affordability and Productivity.
Another refrain from college administrators was that it would be difficult for a one-size-fits-all law to treat all university endowments fairly.
“It’s impossible to imagine a payout rate that applies to all universities,” said Michael Klausner, a professor at Stanford Law School.
While schools like Harvard – whose endowment passed $34 billion in January – frequently fared better financially than the stock market, schools like Berea College, a small liberal arts college in Kentucky, use most of their endowment funds for scholarships for low-income students. Many endowment funds also have strings attached; more than 98 percent of Maryland’s endowment is earmarked to specific projects or causes, many of which are scholarships for students or supporting departments that would directly benefit students.
“With very, very few exceptions, most universities have little discretion in how they spend their endowment,” Kirwan said.
The third main argument was that the required spending amounts would force colleges to waste money in what Tilghman called a “boom and bust” cycle.
Kirwan was originally scheduled to appear at the roundtable, but there was a scheduling conflict, he said.
Although Grassley helped to organize the three-and-a-half-hour meeting, he left after the first hour and only returned with a half-hour remaining, leaving Welch to run the discussion.
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