Stern Heartland
Probity
Iowa Senator Charles Grassley helped bring down American University President Benjamin Ladner, and has continued to investigate corruption at that institution. Other universities, and university-related entities like the NCAA, may be hearing from the scarily upright Grassley soon as well.
Grassley explains:
"The taxpayers subsidize university endowments in two ways. One, the taxpayer’s donation to the endowment is tax deductible. Two, the endowment itself isn’t taxed. So big tax breaks make the big endowments possible, and taxpayers at large pay for those tax breaks,” Grassley said in a statement. “Since tax breaks for charitable donations are supposed to contribute to the public good, it’s fair to ask whether the tax breaks that lead to big university endowments are serving the public. That’s especially true when low- and middle-income working families are struggling to pay college tuition."
Inside Higher Ed reports other details of a recent congressional hearing:
...'[T]he issue that garnered the most attention, both from senators and critics in the higher education establishment, was the question of how much universities should dip into their endowments each year to offset rising tuition costs.
“Senators, what would your constituents say if gasoline cost $9.15 a gallon? Or if the price of milk was over $15? That is how much those items would cost if their price had gone up at the same rate that tuition has since 1980,” said Lynne Munson, an adjunct fellow at the Center for College Affordability and Productivity, which supports increased transparency at universities.
Munson argued in her testimony that the public is not benefiting enough from “massive” higher education endowments, noting returns that averaged in the double digits (referencing data from the National Association of College and University Business Officers), but “miserly” payouts, averaging 4.2 percent. She outlined the concentration of wealth in a minority of top colleges — both public and private — with 62 institutions boasting endowments of over $1 billion, up from 39 in 2004.
But private foundations — which tend to have smaller endowments — still pay out more, she said, averaging 7 percent in 2005, 2 percent above the legal requirement.
Munson’s solution is twofold: to mandate that colleges make available statistics about their endowments and, if that does not produce results, to mandate a minimum payout, similar to that currently required of nonprofit organizations. “Possibly the most significant challenge for policy makers will be to make sure that any newly directed monies actually go toward aid or tuition reduction and don’t become part of a shell game,” she concluded.
... Sen. Jim Bunning (R-Ky.) asked explicitly why, given high compounded growth over two decades, “are we allowing our endowments to remain tax-free?”
The other panelist who spoke on the issue, Jane G. Gravelle, a senior specialist in economic policy at the Congressional Research Service, noted that educational endowments totaled at least $340 billion last year, with an overall return of 15.3 percent, or $52 billion — “earnings that are generally tax-exempt.”'...
|