For university endowments, stock market isn’t the only risk

Photo | Contributed Yale’s multibillion-dollar endowment has come under political scrutiny.

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By Matt Pilon and Sean Teehan

For higher-education officials, a good year of stock market returns and fundraising is cause for celebration.

But investment gains do sometimes come with another risk for schools to manage: public perception.

The high cost of college, or even a state budget shortfall in a given year, have tended to draw lawmakers’ attention to how much money schools are holding in the bank.

Martin Van Der Werf, Education Policy Researcher, Georgetown Center on Education and the Workforce

“With the biggest of endowments, I think people could look at them and say, ‘Jeez, what are you gonna do with all that money?’ ” said Martin Van Der Werf, an education policy researcher at the Georgetown Center on Education and the Workforce. “And I think there’s some public policy questions that could be asked there.”

Yale University is among those elite institutions, boasting an endowment of $29.4 billion as of fiscal 2018. Yale declined to comment for this story, but the school has faced political pressure to spend more of its money.

In 2016, for example, as the state was facing a multibillion-dollar deficit, some lawmakers proposed a bill that would have taxed investment returns earned by Yale’s endowment, unless the school invested more of that money locally.

The bill faced major backlash and ultimately didn’t gain traction.

Meantime, Yale is among a handful of Ivy League schools facing a new 1.4 percent excise tax on endowments — a provision slipped into the federal tax cuts passed by Congress in late 2017.

Sandy Baum, a senior fellow in the Income and Benefits Policy Center at the Urban Institute, said no matter your viewpoint, wealthy schools use at least some of their endowment distributions for social good.

Sandy Baum, Senior Fellow, Income and Benefits Policy Center, Urban Institute

“A lot of people are really angry that Harvard and Yale have all this money, and don’t think about all the things that those institutions do,” Baum said. “If you’re asking what am I going to do with my money, I’m not going to give it to Harvard or Yale, because they have plenty of money, and that’s fine. But that doesn’t mean that they’re not doing socially beneficial things with their money, because by and large, they are.”

Of the 802 colleges and universities included in the National Association of College and University Business Officers’ most recent endowment survey, about 100 had $1 billion or more in endowments assets.

With $423 million in endowment assets, UConn still has a ways to go to reach the $1-billion mark, but that doesn’t mean the state’s flagship public university has been immune from criticism.

Photo | Contributed

State Sen. Len Fasano (R-North Haven) is calling to halt state raises amid the COVID-19 pandemic.

Last month, state Senate Minority Leader Len Fasano (R-North Haven) called for the UConn Foundation to foot the $20.5 million bill associated with moving the school’s sports teams to the Big East conference.

In a letter to UConn President Thomas Katsouleas, Fasano, who has publicly excoriated UConn leaders for raising tuition while seeking additional state budget funds, said students and taxpayers shouldn’t have to pay any part of the conference move.

UConn’s endowment has grown 82 percent over the last decade. Over that same time, the school raised tuition by nearly 40 percent for in-state students who live on campus, HBJ’s analysis of higher-education data found.

“If additional money exists, why does UConn continue to ask the state for more taxpayer funding year after year to cover growing expenses such as fringe benefit costs?” Fasano asked Katsouleas.

Asked for a response, UConn said that while some donations are given with no strings attached, the vast majority of donors specify a purpose for their support — say, new uniforms for the football team, or a professorship in the communications department.

“Ninety-nine percent of the existing donations made to the UConn Foundation are restricted for a specific purpose, and by law the money can’t be used for any other reason,” UConn said in a statement. “The university has said it would welcome any donor interest in helping UConn to defray the costs of the conference change, and the UConn Foundation is of course deeply involved in that conversation.”

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