College funding

I could probably go on for hours about the cost of college - not to mention the actual value of college (what you get for what you pay), but I'll save my ranting about not learning anything in class for another post.  Aside from the hassle of student aid and the know-nothings who fill the student aid office (at least where I'm taking classes at the moment) there are the endowments.

Lynne Munson of the Center for College Affordability and Productivity goes into some detail about those endowments in her U.S. Senate testimony. 

So here's the thing.  The state of Michigan has no money.  One of the cuts made to remedy that problem was to education - to Michigan's public universities.  The universities, of course, became hysterical.  Tuition just had to be increased.  Irvin Reid, president of Wayne State University, needed a pay raise (he's resigning next year).  The University of Michigan - Dearborn had to install foot baths.  Etc. etc. etc.

From Munson's testimony:

The University of Pittsburgh, Purdue, Michigan State, and little 1500-student Grinnell College each have endowments larger than a billion.

(P)lenty of public schools also have impressive endowment-to-student statistics. The University of Virginia and the University of Michigan bank $322,000 and $150,000 per undergraduate, respectively.

According to this list at Wikipedia MSU had an endowment of $1,483,000,000 and U of M had an endowment of $5,652,000,000 in 2006 (no information for either for 2007, but the endowments for every other university on that list with 2007 information increased).  So why the hysteria over funding cuts - especially when the state is in such dismal fiscal straits that coin-operated lockers now 'have' to be taxed?

Interesting article at CNBC from September 4, 2007:

University endowment managers may be little-known, but they invest more than $340 billion and have an uncanny knack for beating the market.

Over the last four years, endowments and foundations as a group have beaten both the S&P 500 and a mix of the S&P and the Lehman Aggregate Bond Index. Over the last 10 years, endowments worth more than $1 billion averaged returns of 11.4 percent per year compared with the S&P’s 8.3 percent.

“The endowments and foundations don't have the incentive to go public in quite the way that other investments managers do,” said Brett Hammond, chief investment strategist for TIAA-CREF. “Their job is to work behind the scenes to develop options, asset allocation alternatives that can do well for them.”

As such, these managers lead the push into alternative investments like private equity, hedge funds, real estate and natural resources, helping them earn an average one-year return rate of 10.7 percent for fiscal year 2006.

I realize endowments generally come with strings attached - the donor has earmarked his donation for some specific purpose within the university.  That doesn't make me anymore sympathetic to these hysterical institutions that peddle a product whose price far out paces inflation.

And get this (from this post at the CCAP blog):

I looked at three schools --Harvard, Yale, and the University of Virginia. At all three schools, less than four percent the average daily endowment base in the 2006-7 school year was spent. If Harvard and Yale had spent 5 percent and dedicated the increased spending to tuition reduction, they could have eliminated undergraduate tuition charges altogether --easily. If Virginia, which is a less well endowed public school, spent 5 percent and dedicated the added spending to tuition reduction for all students from families with less than $100,000 annual income, I would guessetimate that tuition could have been reduced well over $5,000 on average per student --an amount equal to about 60 percent of the in state tuition charges.

CCAP's non-blog website can be found here.

h/t Instapundit

Posted by: Jason at 10:15 PM in Edukated | No Comments | Add Comment
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