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Money Issues Capture Attention

<em>Concerns with the president's budget and the endowment probe</em>
University Business, Apr 2008

NOTHING GRABS THE ATTENTION of savvy Washington insiders more than questions about how money is spent and managed, and two such issues are drawing the focus of the higher ed community in the capital-President George W. Bush's proposed FY 2009 budget and a Senate committee's exploration of how colleges and universities manage tuition and set financial aid policies.

As analyzed by the American Council on Education, the Bush budget continues a long-term pattern of cuts or level funding for most higher education programs. The budget tops $3 trillion for the first time but overall contains only a 0.3 percent increase in nondefense discretionary spending, including education.

Bush is asking for a Pell Grant program increase, but it's smaller than anticipated-only $69, for a total of $4,800 for the maximum Pell award. That's $300 less than the $5,100 promised in his 2000 campaign and "well below what we had hoped to see," ACE President David Ward wrote to other higher ed organization presidents.

Does a relationship exist
between endowment size
and what presidents and
endowment managers earn?

Historically black colleges and universities and Hispanic-serving institutions will face significant cuts, and the budget proposal would eliminate 47 Department of Education programs totaling about $3.3 billion in federal funding. The president wants to wipe out the Perkins Loan program, the Supplemental Educational Opportunity Grant program, the Leveraging Education Assistance Partnerships program, the Robert C. Byrd Honors Scholarships, and the Carl D. Perkins Career and Technical Education Act of 2006.

As Congress scrutinizes Bush's budget, many of the proposed cuts might not stand. Ward notes that Bush has made several of the same elimination requests before and Congress has repeatedly declined approval.

The Senate Finance Committee caused a stir with a letter sent in January to 136 colleges and universities with endowment assets of at least $500 million, seeking information on how the institutions manage their endowments and establish their tuition and financial aid policies.

The letter, signed by Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa), followed the release of a study by the National Association of College and University Business Officers that showed double-digit endowment growth at hundreds of colleges and universities over the past year.

"Congress has long looked to tax breaks, targeted spending, and loan programs to help families and students meet the burden of saving and paying for college," Baucus and Grassley wrote. They said the results have provided some benefits but not solved the problem of how low- and middle-income students and families will face rising tuition costs. "There is much that can be accomplished by colleges and universities, particularly those with significant endowments, to control costs and provide real relief [for these students]."

Baucus and Grassley also asked institutions to explain their fee arrangements with investment advisors and "what relationship, if any" exists between endowment growth or size and how much they pay their presidents and endowment managers.

The Finance Committee has jurisdiction over the tax-exempt policy that covers colleges and universities. Federal law requires most private foundations to pay out 5 percent of their assets each year toward their charitable purpose, but no such requirement exists for university endowments. Grassley has urged Congress to change that, with new reporting requirements and a minimum 5 percent payout on endowments above $500 million.

It's not clear yet whether the Finance Committee will hold hearings on the endowment issue. Ward told other organization presidents in a letter of background papers to help institutional leaders "set the proper context for a discussion of endowments and help you reinforce the vital role they play in supporting financial aid, teaching, research, and public service."

<em>Alan Dessoff is a former reporter for </em>The Washington Post <em>and a freelance writer based in Bethesda, Md.</em>

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