Friday, August 5, 2016

Critics Want Wealthy Schools to Stop Hording Endowments.

Twin Cities Pioneer Press reports that two private colleges alone in Minnesota have combined endowments of over $1.5 billion. This seems wonderful in a time where education budgets are on the chopping block. However, critics of the colleges and universities contend the institutions need to be less scrooge-like and spread the wealth to meet the financial needs of their students. “Private foundations with nonprofit status must spend five percent of their fund’s value each year under federal law.” But, this requirement does not apply to colleges and universities.

As of 2013, there were 138 educational institutions with over $500 million in endowment. A study of 67 private schools revealed that just over half of those schools did not meet the 5 percent mark required by other nonprofits. With an estimated 40 percent of college students receiving Pell grants, it is clear that there remains unmet financial needs for students.

An official from one of the colleges studied said “it’s unfair to expect colleges to spend their endowments at the same rate as charitable nonprofits. If a college’s endowment earns 7 percent but they spend 5 percent, it won’t grow fast enough to keep up with inflation.”

Time will tell if the Legislature will require colleges and universities to meet the five percent mark as their nonprofit peers must. With the rising cost of education, one can assume debate will arise sooner than later.

David Brennen

http://lawprofessors.typepad.com/nonprofit/2016/08/critics-want-wealthy-schools-to-stop-hording-endowments.html

Current Affairs, Federal – Legislative, In the News, State – Legislative | Permalink

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