Two powerful senators cranked up the heat on wealthy colleges on Thursday, sending a detailed letter to 136 institutions requesting information about their endowment spending, financial-aid policies, and tuition increases over the past decade.
The move by Sen. Max S. Baucus, Democrat of Montana, and Sen. Charles E. Grassley, Republican of Iowa, followed the release earlier Thursday of an annual report showing that in the 2007 fiscal year, which ended last summer, college endowments enjoyed their biggest investment gains in nearly a decade, earning an average return of 17.2 percent (The Chronicle, January 24).
Endowments have grown sharply in recent years while tuition on many campuses has climbed. That has led to growing pressure on institutions to curb tuition increases and spend more of their endowment assets to help students pay for college.
“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” Mr. Grassley said in a written statement. “We need to start seeing tuition relief for families go up just as fast.”
University endowments receive generous tax breaks, the senators said, and they want to understand “how these tax benefits for higher-education endowments are improving education and making undergraduate studies more affordable for low- and middle-income families.”
Detailed Information Sought
The letter was sent to colleges whose endowments had assets of at least $500-million as of June 30, 2007. It requests answers to more than 50 questions, including many that will require institutions to dig up financial information from the past decade. The colleges have 30 days to respond.
Although the letter touches on the senators’ concerns about the rising cost of tuition, it focuses mostly on endowments: how much they have grown, how much they pay out, and what benefit they serve.
Most of the questions are straightforward, asking only for numbers, but in some cases, the senators seek more philosophical responses.
“If either the actual and/or targeted payout is below 5 percent,” they say, “please explain how this meets the needs of the current student body.”
Mr. Baucus, chairman of the Senate Finance Committee, and Mr. Grassley, its senior Republican member, also want to know how each university’s endowment is managed, including the cost of investing the assets and what role the institution’s governing board has in overseeing the money and how it is distributed.
The letter also asks for details about the money college endowments invest in offshore accounts and hedge funds. Those questions touch on Mr. Grassley’s concerns that college endowments invest billions of dollars in untaxed, offshore accounts (The Chronicle, May 18, 2007).
Focus on Rising Costs
Several questions deal with the rising cost of college and how much financial assistance institutions are providing their students. For example, the senators want to know the total cost of undergraduate tuition, including all fees, “both sticker and average, mean, and median” prices over the past 10 years. They also ask for the amount of tuition assistance that each college has provided to undergraduate students during the same period.
Mr. Baucus and Mr. Grassley also ask colleges how they determine their tuition, whether their boards vote on increases, and if students and parents are given an opportunity to comment on tuition increases before they are imposed.
Mixed Views on Senators’ Effort
The letter struck some observers as overly burdensome. When asked how colleges would respond to it, one lobbyist said, “Are you kidding me? They’re going to blow gaskets. The committee is asking for a lot of numbers colleges just don’t have.”
Others took the news more calmly. “I am certain that colleges and universities will be pleased to share the information requested by the Finance Committee leadership,” John D. Walda, president of the National Association of College and University Business Officers, said in a written statement. “I’m also confident that this information will strengthen the committee’s understanding of college and university endowments and will demonstrate the prudent practices through which higher-education institutions manage their endowments.”
Lynne Munson, a former deputy chairman of the National Endowment for the Humanities, who advocates a mandatory 5-percent payout from college endowments, praised the senators.
“This is an unprecedented and important request,” she said in an e-mail message. “It is necessary because colleges and universities routinely refuse to share endowment-spending information with the public.”
Goldie Blumenstyk contributed to this report.
