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.