Look at all the money these universities keep in their endowments! Why do they need federal grant money at all?
Harvard is sitting on a dragon’s hoard of $52 billion, amounting to over $2 million per student. Why do they even charge tuition? Why should the federal government subsidize research at an institution already rolling in money?
Here’s a very good answer.
Despite the common terminology, there is not “an endowment” at universities large or small. The endowment is not a single pool of money, waiting to be used for whatever purpose the university deems fit, such as financial emergencies. In reality, the endowment is a collection of thousands of funds representing gifts from particular donors with a legal agreement attached. These gifts are generally for something specific: scholarships, support for a named department or center, or research on a particular disease. Moreover, the principal of the endowment can’t legally be spent down. A condition of the gift is that it is held to generate future income.
Harvard is a very old university and you could argue that their endowment is the product of inherited wealth — the rich get richer year after year. But they can’t touch the core endowment, only the profits generated by it, and even some of that gets reinvested in the endowment, where it’s locked away forever.
The article looks at a newer university, the University of Michigan, with it’s $19 billion endowment.
Let’s take the University of Michigan, where I work, as an example. It has one of the largest public university endowments, at $19.2 billion. Roughly three-quarters is legally restricted for specific purposes established by donors. Distributions from the endowment are spent in a variety of areas, with 28% going to student financial aid—sometimes quite generally, sometimes for very specific awards—25% to patient care at the hospital, and 15% to research. So while the unrestricted portion of the endowment does allow some room for maneuvering, most of “the endowment” cannot just be redirected to compensate for a reduction in NIH support for overhead costs or other federal cuts. Michigan estimates that the proposed change in NIH funding would create a $181 million annual hole in its budget. The endowment might help cover some of those costs in the short run, but it cannot fill the hole.
My alma mater didn’t make the list — the University of Washington endowment is “only” $5.5 billion, while the University of Oregon has $1.6 billion. The University of Minnesota has $5.9 billion. None of that money can be redirected to cover indirect costs, by law.
And how much money are these universities going to lose by the savage beancounters who plan to slash indirect costs to 15%?
Ouch. The UW is going to have an $86 million shortfall. All the major research universities are looking at budget cuts on the order of $100 million. Where’s that money going to come from? Not their endowments, we already determined that. Not from state funding — we’re all operating on shoestrings there already.
I guess in the process of destroying the federal government, American education and scientific research are going to be collateral damage.
Dunno about the scientific research part because I think there’s some research they like (weapons! AI to threaten replacement of workers, engineering tech generally esp toys for the rich & sports) as well as a lot they also don’t but given the Trump cult’s anti-intellectualism, I’d say American education is most likely a very deliberate target of the treasonous destruction the Musktrump regime is causing.
It’s not just the slashing of indirect costs. Right now, although few people seem to be paying attention, the entire NIH grant process is frozen. Study sections and NACs aren’t meeting and no proposals are moving forward. The brain-damaged Secretary of HHS has said he wants to redirect NIH funding — apparently he wants to stop infectious disease research — and we have no idea what exactly he intends. Meanwhile labs are facing closure, no K awards are moving so post docs are looking at unemployment, and we may soon be facing long-term damage to institutions.
Interesting that John Hopkins got the largest % increase, but also #2 in NIH funding.
Do they know something about which health-funds to invest in???
Finally, an episode of Clarissa Tells it All!
I contribute to two endowments I established at my alma mater through its foundation: scholarships for women in Chemistry, and a distinguished chair of Analytical Chemistry. Both endowments required legal beagles to set the terms and restrictions. For example, the university can’t peel off a slice to pay for a basketball coach or a margarita machine in the faculty lounge. Also, the university can’t dip into the principal, rather the fund is self-sustaining so long as the financial brainiacs who invest the endowment do their job well.
Snarki, I’m not sure I understand what your point is. This isn’t about “investing in health funds,” it’s about the indirect costs the federal government pays to grant recipients. Each institution negotiates its indirect cost rate separately, and the arithmetic says that JHU’s rate was higher than UCFS, which is why they lose more when every institution gets cut down to a flat 15%. JHU convinced federal negotiators that its research infrastructure was more expensive to maintain than UCFS’s, which requires very firm evidence. But really, the issue is not the dollar amount of the loss but whether the institution will even be able to continue its research enterprise at 15%, to which the answer is generally no. Certainly it would pretty much put my employer out of business.
Always interesting how framing affects a message. I’ve had this exacr discussion with people at a large Canadian university with a big endowment, and phrasing it as “so you want to spend the money donated and set aside for scholarships for X?” always changes the discussion.
That being said, there are some spectacularly STUPID endowment clauses. A friend who used to work in collections at Harvard told me of one funding a reading room in the library (so far so good)… where there is a book under glass that a staff member has to come every day and turn a page. Apparently a student who died suddenly and the family wanted to memoralize him as if he was still there studying. Eighty years later, its kind of silly, but it pays part of a salary and the upkeep for that room, so…
University tuition is a fraud. The ROI (return on investment) for those gold plated college degrees is negative. In the 1950’s and 1960’s you could go to a Community College in California for $7.50 per semester. You could go to a California State college for ~$200-$300 per semester. Even if you adjust for inflation (which itself is Crapitallist BS), it was still very affordable for the populace. Of course, they didn’t pour millions each year into sports programs that are now for-profit run by Corporate interests. and they didn’t have tens of millions of dollars sports stadiums. What they did offer was a good education.
Welcome to the new Dark Ages where money and power are worshipped while honesty, integrity and caring are portrayed by the Bullshit Billionaire Class and the Main Slime Media as evil weakness to be avoided
The endowment at the UW is further encumbered by the fact that all revenue from it must be used for capital improvements or expansion. This has lead to a bloated campus without the means to support itself.
For more information look up the,”metropolitan tract “.
1) Pitt places on the list of biggest NIH grant recipients? I mostly just know them as a more generalist college. (To be honest, if I had to guess a Pittsburgh college that would be on the list, I’d guess CMU–the jump from “tech” to “health” is pretty small.)
2) I think there’s an interesting analogue in the Cleveland Museum of Art. If you don’t know about it, it punches far above its expected weight, with 66,000 pieces.* Why? In no small part because of Leonard Hanna Jr. His bequest, $33 million dollars in 1957, specified that some of it could be used for the building’s maintenance, and so for many, many, years, Cleveland didn’t particularly need donors — or to charge admission — as they were fine operating from the Hanna proceeds. This has recently changed, but it still means they don’t need to fundraise as much, because overhead that would normally not be allowed by a big donor is covered by Hanna’s fund.
*For comparison, Kansas City’s (MSA, a Census measure that doesn’t just include city borders, larger than Cleveland) major museum, Nelson-Atkins, boasts “More than 40,000” works of art. Sacramento’s (bigger MSA) Crocker has “>25,000”. The Phoenix Art Museum has “more than 20,000” works. So: big.
cerata: Pitt is a leading medical research university.
A friend of mine is a physicist at the Johns Hopkins Applied Physics Lab, which gets over $1 billion a year from the Pentagon, the most of any university. MIT is 2nd.
It’s almost as if the strings-attached nature of private philanthropy can be used to manipulate institutions, sometimes to the point of being anagonistic to those institutions’ missions.
@8–
I would have hoped that smart interpretation of “capital improvements or expansion” could have put the money to better use, but it depends on the specific wording of the endowment.
Private philanthropy is private “soft power”. It’s the private flip-side of USAID. It’s not, or at least a lot of it is not, altruistic.