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Disclaimer: I work for a large and pretty prestigious University that has been undergoing major work in the last decade to update facilities and add buildings.

by a2tech 10y ago

Disclaimer: I work for a large and pretty prestigious University that has been undergoing major work in the last decade to update facilities and add buildings. Almost all of the building budget has been paid for through our endowment and donations from wealthy families so all the building activity hasn't really touched our bottom line at all. However, year after year the state has cut our funding which has directly led to the rise in tuition. The University already runs as lean as possible with staff-our total compensation is a joke (even factoring in generous retirement bonuses) because of this many years long death by a thousand cuts that the federal and state government has pushed on us. EVERYONE has to justify their jobs every year-and this includes faculty. If a faculty member isn't publishing, teaching, and doing community outreach on behalf of the University they won't be getting tenured.

dforrestwilson1 10y ago
If the state is cutting your funding year after year it sounds like they aren't getting a good ROI from the university via well trained employees or prospering companies? What state are we talking about if you don't mind?
- a2tech 10y ago
  The state is cutting all education funding bit by bit. Its a problem nationwide-and the worst part is that here in Michigan its not even 'that bad' compared to other states. Public universities across the country are struggling. Its become so bad that there has been talk about our University giving up its public status and going private. It'd free us from a lot of state rules and the funding from the state has gotten so minimal that the loss of it isn't the deciding factor any longer about going private.
- GFK_of_xmaspast 10y ago
  States don't cut funding to colleges because of careful consideration of the empirical evidence, they cut funding to colleges because of ideology.
ensignavenger 10y ago
These endowments and donations might be covering the capitol costs of all this building, but are they also funding operational and maintenance costs? Also, that money would, in theory, be available for scholarships or other programs if it wasn't being wasted on unnecessary things.
- a2tech 10y ago
  These buildings are replacing elderly buildings/adding capacity so we can serve more students. So the operation/maintenance costs should fall dramatically for the buildings that are being replaced, and new revenue from more students pay for the new buildings maintenance/operations.
  - ensignavenger 10y ago
    But if the building is much 'fancier' than needed, it becomes a lot more to maintain than a simpler design/finish.
- froindt 10y ago
  At the University I attend, donors have to give enough for the building and an endowment for ongoing maintenance and operation expenses. A long time ago they were getting these amazing buildings donated, then getting stuck with much higher maintenance costs than the previous billing, or had a lot of extra square footage to heat, cool, and maintain.
roymurdock 10y ago
Harvard publishes an annual balance sheet [1] and its a good read to get a sense of elite tier university revenue and cost structures. Its net worth is $42B in 2016, down from $44B last year due to very poor returns in the public equity and natural resources portion of its endowment investment portfolio, run by Harvard Management Company. --- Total operating revenues in 2016 were $4.8B (up 6%): - $1.7B endowment disbursement (36% of revenues, up 7%) - $1.0B tuition/room/board revenue (21% of revenues, up 7%) - $0.6B federal funding (11% of revenues, up 3%) - $0.3B non-federal funding (5% of revenues, up 9%) - $0.4B donations for 2016 use (9% of revenues) - $0.8B other revenue (17% of revenues) --- Total operating costs in 2016 were $4.7B (up 5%): - $2.3B in salaries and wages (50% of costs, up 6%) - $2.0B in services, space & occupancy, depreciation, equipment (42% of costs) - $0.2B in interest payments (5% of costs) - $0.1B in scholarships (3 % of costs) Harvard used 4% of its endowment to fund operations, up 7% from 2015. In normal years, the endowment fund would see returns that would cover the 4% withdrawal, but in 2016 the fund lost $626m for a -2.0% investment return (3% below benchmark of +1.0%). Real estate returned +13.8%, but public equity returned -10.2% (4.1% below benchmark) and natural resources returned -10.2% (11.6% below benchmark). Over 50% of the real estate investment portfolio is "direct investment" - the actual purchase and management of property, as opposed to indirect investment in real estate funds. This direct investment returned 20.2% in 2016, probably one of the most lucrative asset classes for HMC. You can be sure that the university will be making a lot more land purchases in the Cambridge area in the near future... --- This is all to say that purchasing real estate is a huge source of returns for colleges like Harvard, and that building facilities and updating old ones will continue as colleges look to increase the value of their purchased land. Salaries and wages at 50% of cost seem slightly high for a largely human asset-based company (compare with 48% for Facebook, 46% for HCA Holdings the largest hospital conglomerate) and will probably continue to be trimmed if returns on the rest of the endowment portfolio don't increase. [1] http://finance.harvard.edu/files/fad/files/harvard_ar_11_12016_final.pdf http://finance.harvard.edu/files/fad/files/harvard_ar_11_120...
deleted 10y ago
[deleted]

by a2tech 10y ago

dforrestwilson1 10y ago

If the state is cutting your funding year after year it sounds like they aren't getting a good ROI from the university via well trained employees or prospering companies? What state are we talking about if you don't mind?

a2tech 10y ago
The state is cutting all education funding bit by bit. Its a problem nationwide-and the worst part is that here in Michigan its not even 'that bad' compared to other states. Public universities across the country are struggling. Its become so bad that there has been talk about our University giving up its public status and going private. It'd free us from a lot of state rules and the funding from the state has gotten so minimal that the loss of it isn't the deciding factor any longer about going private.
GFK_of_xmaspast 10y ago
States don't cut funding to colleges because of careful consideration of the empirical evidence, they cut funding to colleges because of ideology.

ensignavenger 10y ago

These endowments and donations might be covering the capitol costs of all this building, but are they also funding operational and maintenance costs? Also, that money would, in theory, be available for scholarships or other programs if it wasn't being wasted on unnecessary things.

a2tech 10y ago
These buildings are replacing elderly buildings/adding capacity so we can serve more students. So the operation/maintenance costs should fall dramatically for the buildings that are being replaced, and new revenue from more students pay for the new buildings maintenance/operations.
- ensignavenger 10y ago
  But if the building is much 'fancier' than needed, it becomes a lot more to maintain than a simpler design/finish.
froindt 10y ago
At the University I attend, donors have to give enough for the building and an endowment for ongoing maintenance and operation expenses. A long time ago they were getting these amazing buildings donated, then getting stuck with much higher maintenance costs than the previous billing, or had a lot of extra square footage to heat, cool, and maintain.

roymurdock 10y ago

Harvard publishes an annual balance sheet [1] and its a good read to get a sense of elite tier university revenue and cost structures. Its net worth is $42B in 2016, down from $44B last year due to very poor returns in the public equity and natural resources portion of its endowment investment portfolio, run by Harvard Management Company. --- Total operating revenues in 2016 were $4.8B (up 6%): - $1.7B endowment disbursement (36% of revenues, up 7%) - $1.0B tuition/room/board revenue (21% of revenues, up 7%) - $0.6B federal funding (11% of revenues, up 3%) - $0.3B non-federal funding (5% of revenues, up 9%) - $0.4B donations for 2016 use (9% of revenues) - $0.8B other revenue (17% of revenues) --- Total operating costs in 2016 were $4.7B (up 5%): - $2.3B in salaries and wages (50% of costs, up 6%) - $2.0B in services, space & occupancy, depreciation, equipment (42% of costs) - $0.2B in interest payments (5% of costs) - $0.1B in scholarships (3 % of costs) Harvard used 4% of its endowment to fund operations, up 7% from 2015. In normal years, the endowment fund would see returns that would cover the 4% withdrawal, but in 2016 the fund lost $626m for a -2.0% investment return (3% below benchmark of +1.0%). Real estate returned +13.8%, but public equity returned -10.2% (4.1% below benchmark) and natural resources returned -10.2% (11.6% below benchmark). Over 50% of the real estate investment portfolio is "direct investment" - the actual purchase and management of property, as opposed to indirect investment in real estate funds. This direct investment returned 20.2% in 2016, probably one of the most lucrative asset classes for HMC. You can be sure that the university will be making a lot more land purchases in the Cambridge area in the near future... --- This is all to say that purchasing real estate is a huge source of returns for colleges like Harvard, and that building facilities and updating old ones will continue as colleges look to increase the value of their purchased land. Salaries and wages at 50% of cost seem slightly high for a largely human asset-based company (compare with 48% for Facebook, 46% for HCA Holdings the largest hospital conglomerate) and will probably continue to be trimmed if returns on the rest of the endowment portfolio don't increase. [1] http://finance.harvard.edu/files/fad/files/harvard_ar_11_12016_final.pdf http://finance.harvard.edu/files/fad/files/harvard_ar_11_120...

deleted 10y ago

[deleted]