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Stopping Universities From Hoarding Money
HughPickens.com writes: Victor Fleischer writes in the NYT that university endowments are exempt from corporate income tax because universities support the advancement and dissemination of knowledge. But instead of holding down tuition or expanding faculty research, endowments are hoarding money. Last year, Yale paid about $480 million to private equity fund managers for managing about $8 billion, one-third of Yale's endowment. In contrast, of the $1 billion the endowment contributed to the university's operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at Harvard, the University of Texas, Stanford and Princeton.
Fleischer, a professor of law at the University of San Diego, says that as part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal. According to a study by the Center for College Affordability and Productivity a minimum payout of 5 percent per annum, would be is similar to the legal requirement for private and public foundations. "The sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities," concludes Fleischer. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment."
Fleischer, a professor of law at the University of San Diego, says that as part of the reauthorization of the Higher Education Act expected later this year, Congress should require universities with endowments in excess of $100 million to spend at least 8 percent of the endowment each year. Universities could avoid this rule by shrinking assets to $99 million, but only by spending the endowment on educational purposes, which is exactly the goal. According to a study by the Center for College Affordability and Productivity a minimum payout of 5 percent per annum, would be is similar to the legal requirement for private and public foundations. "The sky-high tuition increases would stop, and maybe even reverse themselves. Faculty members would benefit from greater research support. University libraries, museums, hospitals and laboratories would have better facilities," concludes Fleischer. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment."
It isn't just education. It's everywhere.
In the past couple of decades, we've seen a rise in need for "administration" in the engineering field.
I've been to plenty of meetings where there have been more PMPs (or prior to the last five years, proto-PMP administrative types) than there have been engineers. I've been to technical interchanges that could have been cut down in attendance by half to two-thirds if the engineers in attendance could have been bothered to do their own damn reporting. I see that "meeting minutes" is a deliverable on any contract I'm working on.
I can't say that I get where this is coming from, whether it is because engineers don't want to be managers, or because the "everybody gets a trophy" generation required employers to start giving aspirational administrators more power for less qualification, or because contractors needed to pad out how many employees they needed on any given contract to establish perceived value, or maybe any combination of these.
But there's a perfect storm of "my small function, no matter how small, is worth an extra man-year and I will make a meal out of a nibble to justify it" going on here.
Some people don't believe in fairies. I don't believe in The Patriarchy.
It does seem nuts. But when I went looking for information I was surprised to learn that in 2014 Yale's endowment fund had a RIO of 20.2% (!).
While it is ridiculous that they end up spending more on management fees than they do on students from the endowment, it looks like the managers of the fund are doing pretty well.
.. economics... aka "throw money at stuff to make the problem go away"...
Look, you want education to be cheaper? You need to increase the competition for education. Yale and Harvard are always going to be expensive because they're Yale and Harvard and they can get away with that. Forget them.
Focus on the schools that educate the majority of college graduates. And if you look at them you'll see they basically increase their tuition whenever you increase the subsidies. government ear marks more money for education... and tuitions go up. why wouldn't they?
The same thing happened with housing. Government ear marked a lot of money to under right loans for poor people that otherwise couldn't afford homes because they're terrible credit risks... because they're poor. Well, what happened? Housing prices went up. Because people selling homes could charge more because people were showing up with these government loans. And beyond that, supply went down which also drove prices up.
now if you kept this going long enough... eventually... you get more housing. But you've got some time to wait for that AND in teh mean time prices are going up and they're going to stay up... they'll never go down... they just go up and up and up and up.
Now if you want prices to go down... you increase supply. Which means building more universities, expanding universities... what you want is EMPTY seats. A glut of supply. And that will drive prices DOWN. Making things MORE affordable instead of less affordable.
I know I know... I said "supply side" and I've made some idiots unhappy for reasons they don't even understand. But this is basic economics, kids.
You want the universities to charge less? Increase competition so they know that if they don't lower costs they lose your butt in their seats.
And while you're at it, consider making it harder for them to give subsidized educations to people that aren't even citizens. I know I know... I'm a bad guy. But consider that if they can't put those butts in their seats it also opens room up in the university for you and your kids etc.
What you want to do is get the university talking about "how are we going to get more people in our university"... and one of the things they're going to do right off the bat is NOT raise tuition costs if they're worried about attendance. With inflation alone that will cause tuition to fall back into equilibrium in about 20 years.
But don't stop there... we have the whole online education thing which some people think is shit because there are a lot of diploma mills that like to do it that way. But these education systems are entirely viable if taken seriously.
Especially for undergraduate classes that are mostly about people sitting in a lecture, writing down notes, and turning in some stuff that is graded by a teacher's aid. All of that stuff you can encourage into online classes. Possibly do it through the community college programs but push it really hard. Make federal funding for public universities/colleges contingent on their participation. Don't specify which software they have to use. By all means give them something they can use for free provided by the feds if you want. But whatever the feds come up with is going to be inferior to what some university either independently develops or contracts. Its theoretically possible that it won't work out that way but its historically unlikely.
The point here is drop costs. Just jack the supply up to hard that the universities have to cut fees to keep the crickets from taking over.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Colleges are being run like businesses, not education centers. That in of itself is not a problem. However couple that with the multiple other factors: they can milk state and local governments for gobs of money via "financial aid", they can charge their financially incompetent students (customers) a ridiculous amount of tuition and they rarely say no because they can just borrow it and pay later, and they themselves are often rated on how much they cost. Colleges and universities are not even expected to prove their "value". They just make some BS marketing and some numbers out of thin air or bending existing ones and then get in trouble for it by some government watchdog a half decade later. I mean, how can this freaking NOT end up as a disaster?
For Pete's sake, even the "non profit" "Catholic" college I went to, established in 1870, originally run by humble Jesuits, no longer has any Jesuits running the place. In fact 3-4 years after I graduated the replaced the damn Jesuit president with guess who? Mr. MBA man who has a background of being CEO of profitable businesses, a proven track record of raising tons of money, and making sound financial decisions and investments. I gave them a piece of my mind next time they called me and asked for donations, which I halted immediately. Their tuition has more more than doubled in a span of 10 years. When I went it was a tall $17K/yr... it's now a ludicrous $35K/yr. From what I've read, all of that money is not being spent on students nor faculty. No it's going to their precious endowment fund.
I know the government has done minor things like require colleges to post Net Price Calculators but that's almost pointless. You could have researched that information prior to that law being passed if you were determined enough to do it. IMHO, what they should really do is require them to create a ranking and scoring system they all have to abide by. Post entry-graduation rates, by year, by field/career, indicating how many attained jobs in each respective field or whether they had to leave their field, and how long it took. I'm sure prospective students would love that, especially if they could also see what graduates are getting paid as their salaries though that's a slightly too invasive. At least with this they could compare colleges apples to apples, on equal footing. Students could truly shop around and see what their dollar could get them.
College level should be 100% free
WHY?!?!?!
So a college degree will become as worthless as a high school diploma?
What's the point? If you didn't bother to learn in high school, you ain't gonna learn in college.
which means that the managers' efforts increased the size of the endowment by $1.7B.
No one is disputing that the size of the endowment increased by $1.7B. Was it really due to the managers' efforts, or could the fund have increased by $1.7B if invested in a lower cost investment portfolio that *doesn't* take 20% of that growth? Over the last couple years, the market has been strong, and many investments have done well. I could support paying the managers 20% of whatever growth they generate above and beyond some normative benchmark, like the S&P 500. That would be a measure of the managers true effect. Oh, and while we're at it, why don't we say that if the fund ends up doing worse than the S&P 500 due to the managers efforts, claw back some of that 2% fee too.
What GP clearly means is that University education should be at no (or little) cost to the students. You're being willfully obtuse here.
It will be little or not cost for them to attend, but they will pay for it the rest of their lives in the form of taxes. So will those who *don't* go to college. Meanwhile, Biff and Skippy get a taxpayer-subsidized 4 year frat party. People tend to not value things that they don't think costs them anything. Free sounds like a nice idea, until you consider the consequences. And yeah, I'm still paying my student loans.
Taking guns away from the 99% gives the 1% 100% of the power.