Dive Brief:
- The Chronicle of Philanthropy reports that nonprofits are increasingly growing their substantial endowments, with a significant portion of that growth occurring at colleges and universities: Harvard University added $11.1 billion from 2010 to 2015, a 44% increase, while Princeton University saw its endowment grow 90% in the same period with the addition of $10.5 billion.
- Though a large endowment is not necessarily a sign that cash is being hoarded, critics like CharityWatch President David Borochoff said nonprofits that hold onto money make it not freely available to spend on services, which can be increasingly problematic when the federal government may cut back.
- Sen. Orrin Hatch (R-UT), who chairs the Senate's Finance Committee, has pledged to investigate large university endowments when the tax code is reconsidered this year, as the investment returns for endowments are not taxed, and some are concerned that schools continue to grow their endowment coffers when college is becoming increasingly unaffordable for many students.
Dive Insight:
With state and federal funding for higher ed institutions in an overall state of decline over the years, it is possible that colleges and universities have responded by trying to ensure they have sizable enough reserves to sustain themselves in the event of more drastic cuts. However, college administrators, particularly at public institutions or those with smaller endowments, should be increasingly concerned about the type of equity gap that can manifest between schools dependent primarily on tuition revenue and those that can rely upon the semblance of security that can come with the existence of a large endowment.
A growing endowment can indeed mean the difference between success and facing the possibility of closure. In 2016, Hollins University in Virginia paid off its debts after increasing its endowment by nearly $100 million, while Sweet Briar College, another women's college in Virginia with a $68 million endowment, nearly closed.
Public universities and colleges without large endowments will likely be the most immediately and drastically affected by cuts in state and federal funding, so administrators should seek ways to cut costs and potentially raise tuition (though that should be a last resort) before such cuts can come to fruition.
A recent report detailed, for example, how schools could consider cutting down on ballooning administrative costs, though small public institutions tended to not be the most onerous administrative spenders. A continuing investment in alternative credentialing and education programs could inject additional revenue from student populations interested in shorter-term professional learning opportunities, while partnering with MOOC providers like Coursera could enable those higher ed institutions to get their classes online while relying on the expertise of a third party for marketing and a platform to host the content.