Editorial Board: Legislation targets University endowment

By KANSAN

Tuesday, October 23, 2007

On Oct. 16, the Lawrence Journal-World reported that Congress, in response to constituents’ anger over increasing tuition costs, launched a proposal that would require universities with more than $1 billion (which includes KU) in endowment and positive annual returns to spend a certain portion of their funds each year. The Journal-World cited KU’s rate of return last year at 19.3 percent; the school spent 5.625 percent of total endowment. Meanwhile, tuition has risen 66 percent in the past five years.

Rosita McCoy, KU Endowment’s senior vice president for communications, said that it would be unwise to increase spending when returns are high, because money would not be available during down times. Endowment figures have peripheral benefits as well. U.S. News & World Report uses them when the publication annually ranks universities.

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However, it seems ironic that while students suffer the appalling state of desks in various buildings, vanity projects abound on campus whose presence is not even remotely utilitarian.

At current rates, KU will make roughly $193 million this year. At current rates, it will spend $56 million. This yields a tax-free profit of $137 million that’s ostensibly waiting for a rainy day. With tuition increasing at its current rate, it’s raining. Divided among currently enrolled students, this is a potential tuition and/or fees credit of over $4,500 per student. Endowment could provide substantial financial support to students without even touching the principal of the fund.

It’s understandable and reasonable for KU Endowment to seek protection against down years.

While Congress’ measure is targeted specifically at increasing tuition costs, there’s no reason why endowment couldn’t be put towards practical campus improvements. Many donors, especially on the high end of giving, earmark funds for specific projects such as professorships or buildings. It’s understandable that donors want name recognition for their generosity (and it is generous).

However, it seems ironic that while students suffer the appalling state of desks in various buildings, vanity projects abound on campus whose presence is not even remotely utilitarian. KU may come to increasingly rely on endowment assets as state funding declines; as such, donations for practical improvements are imperative.

Imagine hundreds of new desks, unmarred by graffiti, across campus. In the upper left corner of each desk would be a plaque indicating that, “This desk was donated by ___.” Stations in the various electronics labs may have individual donors recognized with nameplates at each workspace. Incoming freshmen and upperclassmen can receive more named scholarships.

These are ways for donors to explicitly benefit students’ everyday lives on campus, while retaining the recognition usually gained through higher-profile earmarks.

Until Congress’ measure passes (if it does), there’s no reason to think that Endowment will increase its current spending. As such, the impetus is on donors to mandate how they want their money to be spent. While it may be tempting to earmark funds for aesthetic projects, the real gift could be something a little less glamorous and a lot more sensible.

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