Here We Go Again

By Richard Vedder

The annual report from the National Association of College and University Business Officers (NACUBO) is in. More of the same -- colleges are getting richer.

Last year, American universities averaged a 17.2 percent rate of return on endowments. Endowments actually rose more than 20 percent ($71 billion), presumably reflecting new gifts and very limited spending from endowments. Over the last decade, the rate of return has averaged a respectable 8.6 percent. This is consistent with a five percent payout rate from principal and provision for inflation. Actual spending, however, is somewhat less, despite huge gains in new gifts with a generally prosperous economy.

To be sure, fiscal conservatism is desirable --but colleges may be going too far. However, I am somewhat dubious of a blanket one-size-fits-all spending rule imposed by the federal government. That would cause more harm than good.

However, I think the call for greater transparency is good. A reader, responding to a piece I had in the Washington Post last Sunday, said that the 990 forms submitted by universities should be posted on-line. The Senate Finance Committee is going to be asking colleges for more information than currently provided --what is your endowment size? How much is spent -- and on what? And other interesting questions. In return for privileged tax status, this is not too much to ask --or report to the public.

A week from now, on February 1, CCAP is working with the American Enterprise Institute to have a provocative little conference on endowment issues at the AEI conference center. If you are in Washington, come by (it starts at (9:30 a.m., at 1150th 17th Street N.W., 12th floor.) You can register by clicking here.