Why don't we tax large college endowments?

[stahleyp]

I think it's in poor form for colleges to have $20+ billion endowments and not pay taxes on it while taxpayers are on the bill for other student loans.

 

How about something like this?

 

We tax college endowments over a certain size, relative to the average/median or tax them based on a ratio tied to number of students to endowment. So if have 20,000 students and a $100 million endowment, no tax but $40 billion and 20,000 students, then you get taxed.

 

Now, rather than the government spending the money in some irresponsible fashion, the huge endowments would "pay back" society by using that tax money to fund of 1) a lottery system where random student loans would be paid down $10,000 (or some other amount) 2) to fund public service loan forgiveness (I like this one better).

 

 

[cameronfen]

I think this is a good idea, the only problem is a disproportionate number of politicians are Harvard or Yale grads. 

[rogermunibond]

This already happened in 2018.

 

https://www.chronicle.com/article/A-Tax-on-Endowments-Became/242774

[Parsad]

As a capitalist, you want capital to be utilized in the most efficient manner possible.  Do we really believe it's most efficiently used in the hands of government?  Or an institution that spends it on increasing intellectual capital that will go on and produce millions, possibly billions, in taxable revenue either through the creation/leadership of a terrific business or idea.  Taxing endowments is the lesser notion!  Cheers!

[Gregmal]

Politicians and university level folks actually have quite a bit in common and share the same sort of lifestyles. Most haven't accomplished shit but love to tell everyone else what to do and dictate how others need to live their lives. There is a reason they get away with whatever they want.

 

In a vacuum I agree with Sanjeev, but thats just not the way it really works. These people are taking money and directing it where it suits them in many cases. Its excess money, given to them by people who dont need it. I would be perfectly fine seeing it get taxed. At the least I fail to see an argument why this money is more deserving of being tax exempt than the wages of a middle class family...

[boilermaker75]

Politicians and university level folks actually have quite a bit in common and share the same sort of lifestyles. Most haven't accomplished shit but love to tell everyone else what to do and dictate how others need to live their lives. There is a reason they get away with whatever they want.

 

In a vacuum I agree with Sanjeev, but thats just not the way it really works. These people are taking money and directing it where it suits them in many cases. Its excess money, given to them by people who dont need it. I would be perfectly fine seeing it get taxed. At the least I fail to see an argument why this money is more deserving of being tax exempt than the wages of a middle class family...

 

I don't know the situation at Harvard with their huge endowment, but at most universities the endowments are not unrestricted. There are endowment agreements that dictate how the earnings are used. It might be for scholarships,  fellowships, support teaching assistants, distinguished professorships, support study abroad programs, support teaching and other awards to faculty and students, etc. (I'm mentioning ones I am aware of at the university where I teach.) It is a little different if you endow a program, such as the College of Engineering at a university. Then the dean has the say, but believe me faculty closely watch what is done with this money.

[stahleyp]

Politicians and university level folks actually have quite a bit in common and share the same sort of lifestyles. Most haven't accomplished shit but love to tell everyone else what to do and dictate how others need to live their lives. There is a reason they get away with whatever they want.

 

In a vacuum I agree with Sanjeev, but thats just not the way it really works. These people are taking money and directing it where it suits them in many cases. Its excess money, given to them by people who dont need it. I would be perfectly fine seeing it get taxed. At the least I fail to see an argument why this money is more deserving of being tax exempt than the wages of a middle class family...

 

I agree with Greg.

 

I think the government should get out of loans more or less completely. However, if they're going to stay, then wealthier colleges should foot the bill rather than taxpayers since they're all on the same "mission" together.

 

Look at the efficient use of capital!

 

https://www.cbsnews.com/news/as-states-cut-funding-for-higher-education-universities-use-lavish-perks-to-compete-for-students/

 

Economically, it wouldn't be better to reduce the cost of college than this?

 

 

[Read the Footnotes]

So Stahleyp and Gregmal are in favor of wealth taxes? I have to admit I am a bit surprised by that.

 

You can read more about wealth taxes here: https://elizabethwarren.com and here: https://berniesanders.com

 

The idea that the money is a tax free gift to some lazy administrator is flawed in many ways.

 

When that endowment is spent, taxes will be generated. The endowment will go to purchase goods, services or labor. That spending will generate sales taxes, payroll taxes or other taxes. In some ways you could argue that a wealth tax would be double or triple taxation.

 

The endowment does not belong to the college or the administrators as some have implied. It is a separate legal entity.

 

Foundations have minimum annual spending requirements of at least 5% per year. Endowments do not have minimum spending requirements, but every college endowment I have had exposure to spends at least 5% per year, sadly many spend more. 5% spend rate on a foundation is considered a spend down rate, because the assumption is that a 5% spending rate will not allow the foundation to exist forever because returns will not be high enough to exceed inflation. Given that educational costs have inflated as much as they have that is an especially likely situation with educational endowments. That means in most cases the endowments are constantly trying to raise funds in order to not see their spending power decrease.

 

Another issue is that if you spend 5% of your endowment at the top of the market, that spend rate might become unsustainable after a crash, so some endowments try to smooth out volatility when trying to estimate a viable spend rate. David Swensen of the Yale endowment has written and spoke about this issue if you would like to learn more. I would recommend his books Unconditional Success and Pioneering Portfolio Management.

 

Higher education is incredibly competitive at many institutions. I'm sure that at some departments and some institutions someone gets away with something that would make people jealous and people would feel that is unfair. The truth is that higher education as a whole in the US is struggling and it is very competitive. There are some schools that basically have a government granted monopoly. At those schools you will probably still find people working hard and patting themselves on the back without realizing that an idiot could probably do their job. Those monopoly schools are quickly disappearing and facing more competition, so there are fewer and fewer of those all the time.

 

Someone made a case that there are lazy administrators. That is true in some ways and not in others. Many college presidents put in very long hours as do many upper level administrators. There is also a trend to hire former CEO's and politicians to run colleges. This is potentially a bad idea for many reasons, but I do not get the impression that many of them feel they have retired to some cushy government job.

 

At the lower echelons there are likely less qualified individuals and maybe some of them fit the narrative that Trump likes to spin, but I have not seen a lot of evidence for it. Plus at the lower echelons, it's hard to make the argument that at some school like a community college isn't doing a heck of a lot of good in the world and teaching real world life skills and careers skills.

 

A final question is why just college endowments? Why not all endowments? Why not all foundations?

 

I suspect that the reason is that Trump and his messaging is very much anti-elite. A lot of dictators and strongmen have been very much against a free press and academic freedom, so that is one explanation. I suspect that is part of the issue with Trump. If it is we have real issues in this country.

 

I suspect that another issue is that some fields and some colleges are breeding grounds for liberal wackos. Rather than attacking ALL colleges because SOME colleges, departments or fields are totally detached from reality, I would prefer that people attack their ideas directly or set up competing institutions with more rigor. It's true that some departments seem to exist just to indoctrinate young people with a liberal ideology that is more religion that a fact-based rigorous field of inquiry. But financially punishing all endowments for the sins of some is really inappropriate.

 

What is really interesting is that a lot of the people who are most outspoken about this issue within the academia is that they are people who formerly identified with the left. They were liberal, and intellectually honest. They now find themselves confronted with a new wave of ideologues who are not liberal, not intellectually curious and are tyrants to their religion.

 

One group of prankster academics did an amazing job of pranking academic journals that have no standards and are just interested in hearing the orthodoxy repeated. The perpetrators of the "Grievance Studies" hoaxes are likely appreciated by a large portion of their colleagues and society, but they faced a major backlash among the true believers in the cult. See link below.

 

https://peterboghossian.com/grievance-studies

 

If you really want to find something corrupt to attack, then I would recommend you take a look at they way dollars are gifted to endowments and foundations. Did you know that for the super wealthy, there are tax avoidance schemes through which you can actually end up MAKING money, meaning actually ending up better off by giving your money away to a foundation or endowment? These are strategies that aren't available, or don't make sense, for all but the most wealthy in society. Through lobbying, the super wealthy have bought the ability to generate an increase in intergenerational wealth though tax avoidance schemes involving donations to non-taxable charitable organizations.

[Gregmal]

I'll blow your mind even further; I am not opposed to wealth taxes on religious institutions either. I think there should be parameters. If you are building homes or doing mission work, sure, exempt it. But some of the most disgustingly gaudy places Ive ever been have been churches. Some look like Trump designed them himself. Gold everywhere, jumbo murals and crosses decked out in gems. Fuck that stuff. I am not really a fan of a wealth tax on individuals, but entities and institutions are a different story.

[Read the Footnotes]

I'll blow your mind even further; I am not opposed to wealth taxes on religious institutions either. I think there should be parameters. If you are building homes or doing mission work, sure, exempt it. But some of the most disgustingly gaudy places Ive ever been have been churches. Some look like Trump designed them himself. Gold everywhere, jumbo murals and crosses decked out in gems. Fuck that stuff. I am not really a fan of a wealth tax on individuals, but entities and institutions are a different story.

 

I agree with that sentiment more than your use of profanity.

 

If you want to be consistent about putting wealth taxes on endowments and foundations, at least it's a bit less of an attack on political enemies.

[stahleyp]

Why be surprised that I'd like a wealth tax? I think inequality is very, very dangerous for societies (so is super equality though).

 

But Greg, if you start taxing religious institutions, how can those folks maintain their modest homes?

 

https://www.velvetropes.com/backstage/joel-osteen-house/

 

 

Or dangerous, low quality cars?

 

https://www.washingtonpost.com/business/2018/12/20/should-megachurch-pastor-be-lambasted-buying-his-wife-lamborghini/

 

 

As we all know, Jesus lived in huge mansion with an attached castle and wore the best clothes, so surely, these folks are following His example. ;)

 

 

[Read the Footnotes]

Ok, so now I am completely confused. You not only support the leftist wealth taxes, now you are quoting from that leftist fake news organization the Washington Post? I thought you had given up all fake news? You know the Washington Post is probably full of leftists who just hate all christians (not just prosperity ministers) and Trump and now you're spreading their hate!

 

;)

 

 

Why be surprised that I'd like a wealth tax? I think inequality is very, very dangerous for societies (so is super equality though).

 

But Greg, if you start taxing religious institutions, how can those folks maintain their modest homes?

 

https://www.velvetropes.com/backstage/joel-osteen-house/

 

 

Or dangerous, low quality cars?

 

https://www.washingtonpost.com/business/2018/12/20/should-megachurch-pastor-be-lambasted-buying-his-wife-lamborghini/

 

 

As we all know, Jesus lived in huge mansion with an attached castle and wore the best clothes, so surely, these folks are following His example. ;)

[Cardboard]

"You know the Washington Post is probably full of leftists who just hate all christians (not just prosperity ministers) and Trump and now you're spreading their hate!"

 

Finally one sentence of truth.

[cubsfan]

"You know the Washington Post is probably full of leftists who just hate all christians (not just prosperity ministers) and Trump and now you're spreading their hate!"

 

Finally one sentence of truth.

 

You can see we are wearing him down  :)

[Castanza]

I'll blow your mind even further; I am not opposed to wealth taxes on religious institutions either. I think there should be parameters. If you are building homes or doing mission work, sure, exempt it. But some of the most disgustingly gaudy places Ive ever been have been churches. Some look like Trump designed them himself. Gold everywhere, jumbo murals and crosses decked out in gems. Fuck that stuff. I am not really a fan of a wealth tax on individuals, but entities and institutions are a different story.

 

All this will do is cause a mass board up of small community churches across the US thus destroying all the benefits (charity) they provide for local communities. I don't like the mega churches as much as the next person. Quite honestly I think they are a disgrace to "the gospel." (cough cough catholic church). But I'm not going to get into that.

 

Also I think if you start taxing churches and other religious institutions the unintended consequences will be a fusion of church and state. Making churches and religions more politically influential is not a good route to go.

[SharperDingaan]

Endowments are not entirely bad things.

Taxing earnings, and returning the tax to the ‘eco-system’, through other vehicles (student loans, grants, etc.) - is just not efficient.

What you are really doing is trying to ‘redistribute’ the endowment; and doing it badly.

 

Endowments are just the institutional version of trust funds; money that was supposed to be run-down, by the beneficiary over time - as he/she did something (went to Harvard, reached age of maturity, needed a dowry, etc.). Endowment(s) are supposed to  breathe over time, as current beneficiaries create replacement endowments for their progeny, subject to conditions appropriate to their day. Producing, over time; endowment(s) that remain relevant to their times, and as mildly toxic as possible. If the stream of beneficiaries allowed a net run-down over time, the endowment would disappear, and the ‘health benefits’ of rags-to riches-to rags would reassert itself. Far sighted.

 

The simple solution is to 1) simply impose a maximum time limit; by which the fund must be exhausted, and 2) a default distribution when fund management no longer becomes economic. The 100-year endowment, starting today; that has a default distribution into IP development (patents, etc.), Next year, another 100-year endowment fund, and IP development that now becomes a separate business - the success of which funds future institutional growth. Train the scientists (purpose of the institution), but commercialize the product (patents), and put ‘skin in the game’ back into the ‘ivory tower’.

 

SD

 

 

[SharperDingaan]

I'll blow your mind even further; I am not opposed to wealth taxes on religious institutions either. I think there should be parameters. If you are building homes or doing mission work, sure, exempt it. But some of the most disgustingly gaudy places Ive ever been have been churches. Some look like Trump designed them himself. Gold everywhere, jumbo murals and crosses decked out in gems. Fuck that stuff. I am not really a fan of a wealth tax on individuals, but entities and institutions are a different story.

 

All this will do is cause a mass board up of small community churches across the US thus destroying all the benefits (charity) they provide for local communities. I don't like the mega churches as much as the next person. Quite honestly I think they are a disgrace to "the gospel." (cough cough catholic church). But I'm not going to get into that.

 

Also I think if you start taxing churches and other religious institutions the unintended consequences will be a fusion of church and state. Making churches and religions more politically influential is not a good route to go.

 

Just a different POV ....

 

Churches have always had a wealth tax, we just called it robbery.

The brick and mortar displays of wealth, are just displays of power, designed to impress the masses - contributing their cash flow (tithe) every Sunday. The underlying text to the display being 'Steal from us, or cross us, and you sleep with the fishes ... because among our patrons, are the thieves. The Vatican display of wealth, isn't just protected by the Swiss Guard, it's also protected by many others - for a modest fee ;)

 

Of course theft still happens, but there are more effective ways of dealing with it.

https://www.theguardian.com/uk/2012/may/12/roberto-calvi-blackfriars-bridge-mafia

https://www.amazon.ca/Gods-Bankers-History-Money-Vatican/dp/1416576592

 

SD

 

[rogermunibond]

SD - that's good idea in theory for sunsetting foundations/trusts.  Chuck Feeney did this.

 

But for higher-ed, nonprofit hospitals, religious endowments, the mission is perpetual.  I mean you want the school or hospital to be operating and in existence.  The issue for all three nonprofit types is that the governance is bad or problematic.  The trustees are often insulated and don't have to answer to anyone in the public.  Often the trustees are picked by the university president or hospital CEO, for example.  The Vatican is probably the worst kind of bureaucracy and has no governance oversight and next zero transparency to the Catholic laity.

[Castanza]

I'll blow your mind even further; I am not opposed to wealth taxes on religious institutions either. I think there should be parameters. If you are building homes or doing mission work, sure, exempt it. But some of the most disgustingly gaudy places Ive ever been have been churches. Some look like Trump designed them himself. Gold everywhere, jumbo murals and crosses decked out in gems. Fuck that stuff. I am not really a fan of a wealth tax on individuals, but entities and institutions are a different story.

 

All this will do is cause a mass board up of small community churches across the US thus destroying all the benefits (charity) they provide for local communities. I don't like the mega churches as much as the next person. Quite honestly I think they are a disgrace to "the gospel." (cough cough catholic church). But I'm not going to get into that.

 

Also I think if you start taxing churches and other religious institutions the unintended consequences will be a fusion of church and state. Making churches and religions more politically influential is not a good route to go.

 

Just a different POV ....

 

Churches have always had a wealth tax, we just called it robbery.

The brick and mortar displays of wealth, are just displays of power, designed to impress the masses - contributing their cash flow (tithe) every Sunday. The underlying text to the display being 'Steal from us, or cross us, and you sleep with the fishes ... because among our patrons, are the thieves. The Vatican display of wealth, isn't just protected by the Swiss Guard, it's also protected by many others - for a modest fee ;)

 

Of course theft still happens, but there are more effective ways of dealing with it.

https://www.theguardian.com/uk/2012/may/12/roberto-calvi-blackfriars-bridge-mafia

https://www.amazon.ca/Gods-Bankers-History-Money-Vatican/dp/1416576592

 

SD

 

You're talking about the "1%" that I already mentioned. I'm talking about your local churches. The ones where the pastor is making 25k a year and the church does a lot of good in their local community. I think the Catholic church is a racket and one of the most corrupt organizations in history.

 

https://www.amazon.com/50-Years-Church-Rome-Conversion/dp/1500910090

-Original 1886 version is best (Also happens to be Chiniquy who was Lincolns first case as a lawyer)

[stahleyp]

Ok, so now I am completely confused. You not only support the leftist wealth taxes, now you are quoting from that leftist fake news organization the Washington Post? I thought you had given up all fake news? You know the Washington Post is probably full of leftists who just hate all christians (not just prosperity ministers) and Trump and now you're spreading their hate!

 

;)

 

 

Why be surprised that I'd like a wealth tax? I think inequality is very, very dangerous for societies (so is super equality though).

 

But Greg, if you start taxing religious institutions, how can those folks maintain their modest homes?

 

https://www.velvetropes.com/backstage/joel-osteen-house/

 

 

Or dangerous, low quality cars?

 

https://www.washingtonpost.com/business/2018/12/20/should-megachurch-pastor-be-lambasted-buying-his-wife-lamborghini/

 

 

As we all know, Jesus lived in huge mansion with an attached castle and wore the best clothes, so surely, these folks are following His example. ;)

 

The Washington Post isn't as bad as CNN (but still biased). ;)

 

For the record, I don't really watch fox news. I don't even have cable!

 

I like the idea of wealth taxes (or at least some sort of higher taxes). I voted for Obama (mistake) and really liked Sanders in 2016. But, he's even crazier now so I'm out. I also didn't vote for Trump. I look at the system as heavily broken - which is why we have super low interest rates and crazy high deficits.

 

But I do think the left treats religion with disdain. Which is surprising especially with all of the social justice issues the left seems to support.

 

If there isn't a deity, there is no real standard of morality. We simply all evolved differently and have different values - all are equal. Ultimately, it's just one evolutionary instinct vs another. So things like "social justice" makes little sense. Really, if no deity exists, survival of the fittest/best over helping the weak and downtrodden seems to be the most rational "moral" system.

[rukawa]

My view is pretty different than what has been expressed so far. I guess my feeling about whether these institutions should be taxed is based on their effectiveness. I regard universities as horribly corrupt and ineffective...so I would tax them. That said if universities were actually far better run my view would be the opposite...in the 19th century I think it was very difficult for people like Faraday who were doing incredible work and had real difficulties raising money to fund their activities. I think endowments were tremendously effective.

 

Poorly funded research in the 19th century was some of the best bang for buck we have ever gotten. The societal ROI was gargantuan. Today its the opposite....the societal ROI of universities is very poor. A large amount of research is garbage.

 

With the Church...I actually regard the Catholic church as one of the best run institutions in human history. I think it was and is highly effective. It has on the whole done a tremendous amount of good. I think its far more effective than most governments.

 

THe problem with the Catholic church is that people have far higher expectations for it than they apply to any other institutions. For instance, the church's abuse of young boys is a scandal. The governments abuses of young boys which occurs in state run institutions....is well not covered at ALL. There is no control here. The Catholic church is bad....COMPARED TO WHAT EXACTLY? Nobody ever tells you that. Its always an absolute comparison, not a relative one.

 

 

 

 

[SharperDingaan]

SD - that's good idea in theory for sunsetting foundations/trusts.  Chuck Feeney did this.

 

But for higher-ed, nonprofit hospitals, religious endowments, the mission is perpetual.  I mean you want the school or hospital to be operating and in existence.  The issue for all three nonprofit types is that the governance is bad or problematic.  The trustees are often insulated and don't have to answer to anyone in the public.  Often the trustees are picked by the university president or hospital CEO, for example.  The Vatican is probably the worst kind of bureaucracy and has no governance oversight and next zero transparency to the Catholic laity.

 

It actually works better with perpetual ...

 

Assume that 50 yrs ago, Carnegie put 100M into XYZ hospital for 50 years.

At 5%/yr, over 50 years, roughly a gross draw-down of 5.5M/yr to do something useful with - consistent with Carnegie's wishes. To raise a replacement 100M; the hospital must both compete (refreshing the mission), and demonstrate results (skin in the game); Carnegie's gift didn't just gave XYZ hospital assured funding - it also gave them a powerful, compounding, and extended tail-wind, that should make replacement endowments easier to obtain. Compound 2% growth over 50 yrs and Carnegie's 100M seed turns into a replacement 270M seed - while continuing to do something useful every yr, throughout the next 50 yrs. Very, very swift.

 

Records are also made to be broken.

Carnegie was a bastard (albeit a very swift one). If I contribute 100M (net of 50 yrs of inflation), is that evidence that I'm a better bastard than he was? If so, great company!

 

Accountability.

Administrative 'smarts' ebb and flow; but forcing daily competition for new funds, ensures efficient capital allocation over time. If the hospital doesn't produce (in spite of its tail wind), it will die as soon as Carnegie's endowment is done. Not a bad thing.

 

Vatican, endowments, & corruption.

The take-away is that if you can constantly, and consistently sweep cash (Sunday donations, endowment contributions), the end result is corruption. The organization does not even have to be efficient (robbery, incompetence, etc.), as compounding alone (long runways) will get it there. But if it is to keep its stash ... it needs friends in low places.

 

SD

 

 

[cameronfen]

So the reason I think (based on personal observation) that the cost of higher ed has increased so much is because you have a few schools like Harvard that have so much money they don't know what to do with it, so the build new buildings they don't need and renovate almost new buildings that don't need it.  As a result you have this arms race between schools because everyone wants to have facilities as good as or close to as good as Harvard otherwise no students would go to your school.  Which is imho why you get things like the library at UCSD which probably cost a fortune and is cool architectually but probably a tremendous waste of money for a public school.  A similar thing probably goes for mega churches. 

[Read the Footnotes]

https://www.insidehighered.com/news/2019/01/31/college-endowments-returned-82-percent-2018-annual-survey-adds-some-insight-how

 

According to this inside higher ed article, higher ed college endowments returned 5.8% on average over the previous ten year period. If they are spending 5%, per annum, and higher ed costs tend to exceed the CPI, then again, most endowments are losing purchasing power, and need to raise funds on a near constant basis, which is what higher ed institutions tend to do.

 

Endowments do a lot of good things, they diversify the revenue streams for an institution, making it more resilient to changes in demographics or the economy, both of which can wreck havoc with demand for education. Endowments can also support unpopular but important disciplines, or help support pure science research that doesn't have a natural benefactor. So endowments can actually be very beneficial to the future of humanity, or a specific nation. On the other hand, you see a lot of funds restricted for purposes such as landscaping, which might be a little questionable. So far, the US is still a free country so while I believe if someone really cares about landscaping then they should be able to give money for that, but it is unlikely the best way to spend funds although it undoubtedly helps with sales and admissions tours.

 

For most colleges the endowment is just one of many roughly equal sources of revenue and is a diversifier. Those colleges that are heavily endowment dependent face their own challenges as they must consistently be successful at fundraising, and they will still be subject to the whims of the market. Those institutions that were most endowment dependent suffered the most in 2008-2010.

 

If you want to learn a bit more about how higher ed works, then then I would recommend  Inside Higher Ed and The Chronicle of Higher Education. You can get info on any not-for-profit through Form-990. You can also get a ton of information on public institutions. Disclosure varies a bit by state, but for many state institutions the online databases are very easily learned and accessed and you can get TONS of information.

 

One thing that people tend to miss about higher ed is that when you subsidize and encourage debt for education, you actually increase demand and drive up the cost of education as the demand increases.

 

There are a lot of other issues with the demand side. For instance in the 2000's people were so brand conscious and so convinced that the market only goes up, that real estate only goes up and the value of a degree from an elite institution only increases over time, meant that people were pretty crazy and did a lot of stupid things just because they wanted to engage in value signaling. Harvard, etc for many is a luxury brand and a way of signaling status and value for parents as we have seen with the recent Varsity Blues scandal.

 

To some extent, people are very bad at assessing the value of education and the relative worth of each individual school. As a result, it contains some of the properties of a Giffen good. The higher the price, the higher the demand for the product.

 

There are a lot of stupid and wasteful things about higher ed, as cameronfen implies, but I don't think they are driven so much by the endowment. To a large extent they are driven by the need to sell the institution to 18 year olds and their parents. People end up making decisions based on stupid things like landscaping or whether the residence halls have hot tubs. That is where the real race to the bottom begins. It's a war to see who can have the best brochure and the best admissions tour. Trust me there are a lot of reasonable administrators who see the problems and feel that the inmates are running the institution and feel that they indifvidually are powerless to affect the situation.

 

The highest growth rates in terms of costs are in costs for psychological counseling, diversity related initiatives, and an entire layer of administrators that don't really do anything but are they to comply with regulations, or to provide cover in the event of a lawsuit. There are tons of reasonable academics who are very frustrated about these rising costs and the fact that these people generally don't contribute much to the educational mission. Again, the majority of faculty and administrators would like to reduce the costs, but it is difficult for them to buck the trend and a lot of the situation is driven by the way legal liability is created and dealt with in the US.

 

The psychological counseling costs are skyrocketing, and unfortunately seem to be needed. Faculty and administrators are generally thankful for the  help. There is a broader issue in society that creates the need for such a rapid and serious increase in these services. The issues are societal and the student arrived with those issues. Some schools do a much better job at dealing with these problems than others, but for the most part the schools are inheriting the issues, not creating them, although there are a few wacky schools that are probably doing everything in their power to make the situation worse.

 

By the way, it's fun to pick on Harvard, but if you look at it on a per student basis, or adjust for the number of labs and the amount of non-teaching related research activities, or even the amount of employees, Harvard's endowment is not as large as it would appear on the surface. Harvard is huge, so by the time you divide many billions by huge, the endowment doesn't look excessive any more.

[stahleyp]

There's a little blurb in Barron's about endowment performance looking at the Ivy League schools and a few others.

 

Over the past 10 years, the best one was Bowdoin College at 12.0% (smallest endowment, by far of the ones listed).  Followed by MIT at 11.6%. All of these others lost to the benchmarks.

 

S&P 500 14.7%

70/30 stock/bond allocation: 11.4%. You would think all of these smart folks should be doing something more productive for society.