Regulation of College Endowments Has Support in House

February 06, 2008

Washington — A controversial idea to require colleges and universities to pay out more from their endowment assets annually seems to be gaining traction among both Democrats and Republicans in the House of Representatives.

Rep. Peter F. Welch, a Democrat from Vermont, proposed two amendments this week to be considered in the debate on the House version of legislation to reauthorize the Higher Education Act. Lawmakers are scheduled to begin considering the bill (HR 4137) on Thursday.

Mr. Welch decided today to withdraw an amendment that would have required institutions to pay out at least 5 percent of their endowment assets each year and direct those funds toward “efforts to contain college costs.”

In offering the proposal, Mr. Welch said in an interview on Wednesday, “my goal was to get the attention of the higher-education community.” He said he wanted to spur college administrators to respond more aggressively to Congress’s calls to rein in costs and help keep tuition down.

He said that he succeeded in getting the attention of many college administrators in Vermont and elsewhere, and that he would follow up to make sure they developed plans to contain costs. On that basis, he said, he withdrew his proposal.

But he is pressing ahead with the other amendment, which would require colleges to report annually on how much of their endowment they had paid out that year and how the money had been spent. The reports would include information on the ways the funds were being used to contain college costs.

The general proposal to direct colleges to pay out more of their endowment assets, first raised in the Senate, is fiercely opposed by colleges, which say the government should not be meddling with their endowments.

Sen. Charles E. Grassley, the top Republican on the Senate Finance Committee, has proposed requiring well-off colleges to spend at least 5 percent of their endowments, as private foundations are required to do, or lose their tax exemptions on endowment earnings. Many of the wealthiest colleges spend closer to 4 percent than 5 percent of their endowment assets.

Mr. Welch said he would wait to see any legislation Mr. Grassley proposes before saying whether he would support it.

The top Republican on the House education committee, Rep. Howard P. (Buck) McKeon of California, said today that he did support the principle of requiring colleges to spend more of their endowment assets. But the rule should apply only to the wealthiest institutions, he said. —Sara Hebel