March 3, 2008
By Amy Rolph
Congress is inspecting the spending habits of wealthy universities across the country, and the University of Washington is on its watch list.
The UW is one of 76 universities that reported endowments totaling more than $1 billion in 2007, a trend some members of Congress have labeled disturbing in the face of constant tuition increases. Now Washington, D.C., lawmakers are toying with the idea of requiring universities to spend 5 percent of the burgeoning endowments each year.
The UW has an endowment (money given to it for the purpose of investment) of more than $2 billion, bolstered by a long fundraising campaign, and has kept raising tuition. The cost of an undergraduate year at the UW last year would have paid for three years 20 years earlier.
“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” Sen. Charles Grassley of Iowa, the ranking Republican on the Finance Committee, wrote in a recent letter to the colleges. “We need to start seeing tuition relief for families go up just as fast. It’s fair to ask whether a college kid should have to wash dishes in the dining hall to pay his tuition when his college has a billion dollars in the bank.”
Universities — the UW included — are fighting back against the assertion that they’ve become greedy. But if recent student-aid packages are any indication, they’re not entirely resisting congressional demands.
UW President Mark Emmert says Congress is reacting to the tens of billions of dollars stored away by Ivy League schools such as Harvard and Yale, and he points out that most universities can’t come near to matching those numbers. He says the system isn’t broken and thinks government mandates aren’t needed. “The notion that most universities are sitting on massive endowments and not spending them is just not true,” he said in an interview last week.
“This is just not an area where congressional action is needed.”
Other university leaders around the country are in line with that way of thinking, saying a one-size-fits-all approach to endowment spending could hurt schools with smaller bank accounts.
Last week, 136 colleges across the country with endowments of $500 million or more were scheduled to respond to a congressional request for detailed information on their endowment and financial aid spending. A Senate committee sought the information last month after the release of a national survey that said the number of institutions surpassing the $1 billion mark had nearly doubled since 2003, when there were 39.
Harvard topped the endowment-totals list for 2007 with $35 billion, followed by Yale with $23 billion and Stanford with $17 billion. Princeton and the University of Texas system have the fourth- and fifth-largest endowments, each with about $16 billion.
When the UW makes an appearance on the list, it’s at number 29 with about $2 billion reported at the end of 2007. Washington State University is listed at 116 with $651 million, and the University of Oregon comes in at 150 with $456 million.
The UW is in the last leg of an eight-year fundraising campaign, which passed the $2.5 billion mark last month. With just a few months remaining in the campaign, UW officials announced they would be emphasizing the need for student scholarships to potential donors.
Most donors make endowments to a specific part of a university, and that money can’t be invested in other areas, Emmert said. He estimated that 95 percent of contributions to the UW come with a specific use attached.
Even without a government mandate, universities with an endowment greater than $1 billion tend to spend 4 percent to 5 percent of those assets annually, according to a study conducted by the National Association of College and University Business Officers. The UW’s payout is consistent with those figures.
But critics aren’t letting the increasingly profitable universities off the hook so easily.
Some who want universities to spend more generously say the concentration of wealth runs counter to colleges’ legal status as nonprofits.
“They are allowed to collect and invest money tax-free, and that should be done toward a public good,” said Lynne Munson, an adjunct research fellow at the Center for College Affordability and Productivity who testified before Congress on endowments last fall. “Hoarding isn’t a public good. If the Gates Foundation was allowed to do this, there would be a great deal of suspicion.”
Washington, D.C.-based educational consultant Steven Goodman said university defenses are falling flat.
He acknowledged that the UW’s endowment is small compared with Harvard’s or Yale’s.
But he added, “The growing movement toward encouraging universities to spend more of the endowment income is not about who is rich and who is poor. It’s about are students maximally benefiting from the fundraising efforts that are taking place in their name?”
Whether or not Congress passes legislation mandating fixed endowment payouts, the attention they’re giving student tuition has been widely credited for spurring some change already. Most recently, Stanford, following similar actions by Yale and Harvard, announced last month that families earning less than $100,000 will no longer pay tuition, and families earning less than $60,000 won’t have to pay for room and board.
That may make Stanford more affordable to middle-class families in Washington than their own state university.
The “high tuition, high financial aid” model isn’t a new concept in Seattle. Shortly after Emmert assumed the UW presidency in 2004, he unsuccessfully championed a plan that would have doubled tuition over the space of a few years by using a sliding scale based on family income for rates.
The cost of attending the UW (like many universities elsewhere in the country) has tripled during the past 20 years.
In 1987, in-state tuition and fees for one year at the UW added up to $1,731. In 2007, the yearly cost was $6,385.
The university has increased student aid recently with a “Students First” matching fund connected to the $2.5 billion fundraising campaign. And over a year ago, the university announced tuition would be free for in-state students from families who are at or below 65 percent of the state’s median income — another example of the “high tuition, high financial aid” model.
“It’s sure working for us at the UW,” said Emmert, noting that the UW ranks third among major universities with the highest percent of low-income students enrolled.
But he acknowledged more needs to be done for middle-income students.
Some members of Congress don’t think universities are doing enough, even going so far as to propose an annually updated “watch list” that would name schools where tuition costs outpaced their sector’s average rate of increase.
Jake Stillwell, a Central Washington University student and spokesman for the Washington Student Lobby, said he’s suspicious of Congress’ recent interest in university spending. Instead of mandating endowment payouts, he thinks the federal government should be expanding financial aid programs.
“It’s shifting the responsibility of lowering the cost of college away from the government and onto the individual schools. It’s really Congress’ responsibility to make college affordable.”