Wednesday, February 13, 2008
If two senators have their way, the University of Kansas will have to start spending five percent of its endowment. The senators hope the mandate would encourage universities to decrease tuition and spend more of their endowed funds on financial assistance for students. But University officials said such a mandate is unnecessary and it ultimately would not benefit students.
“From our perspective, a federal regulation on the management of private endowments and mandating polices on what private donors contribute and they entrust to the Endowment Association, who they expect to carry out their wishes, would be an unprecedented and unnecessary intrusion,” said Dale Seuferling, president of the KU Endowment Association.
Last fall, a rumor began circulating among university administrators and newspapers that a new federal bill would force universities that had more than $500 million in their endowments to use 5 percent of those funds each year. If a university refused, the federal government would begin taxing those funds.
Last month, U.S. Senators Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) requested information about it from the University about KU Endowment Association and its spending patterns. Although a bill has not yet been created, the University is worried.
Seuferling said he understood the government’s concerns about the rising cost of tuition, but he said each university would be a better judge of how to use its endowed funds. He also said funding scholarships was already KU Endowment’s top priority.
Seuferling said such a policy would be aimed at schools such as Harvard, which have large endowments but weren’t spending those funds on increasing financial aid for students. He said he thought the policy unintentionally included schools like the University, which has a $1.2 billion endowment and has the 60th largest endowment among all universities and the 20th largest among public universities. The University was one of 136 universities that received information requests.
Seuferling said the association used to spend 5 percent of its funds, but that over the last four years it decreased the amount to 4.6 percent because of the dramatic change in the market. Seuferling said a mandated five percent payout could be hazardous to the University in the future and if so, it would be a hassle to get the policy changed.
Seuferling also said the congressmen did not understand the nature of endowed funds. He said donors, not the University, decided what specific programs and scholarships they wanted to support, so it is sometimes hard for the association to increase the amount of funding to a certain area.
Keith Yehle, director of federal relations at the University, said the University’s administrative staff, including the Chancellor, Robert Hemenway, and the Provost, Richard Lariviere, traveled to Washington D.C. last week to discuss issues like this one with the senators and representatives from Kansas. He said he thought the University’s message was well-received.
U.S. Rep. Dennis Moore (D-Kan.) said he understood the University’s concerns, but there was plenty of time to discuss the issue because the bill is just in the research stage. He said he was unsure when the bill would be finished.
“I’ve told people here sometimes congress identifies a very serious problem and in trying to fix it they overact,” Moore said. “I don’t think the have they expertise to be directing universities how to use their endowment funds. You pull one way and you can end up going too far sometimes.”
—Edited by Madeline Hyden
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