5 ms·

It seems like a good idea that if the endowments are getting so big that covering tuition for all of their students would still allow them to grow, then it's ti

It seems like a good idea that if the endowments are getting so big that covering tuition for all of their students would still allow them to grow, then it's time to push for more of the money to be used for paying for public colleges. Although I wonder what the weird second order effects will be.

NovemberWhiskey 3y ago
>the endowments are getting so big that covering tuition for all of their students This sound bite always comes up. The simple fact of the matter is that for these institutions, the endowment is essentially composed of gifts, and returns on investment of gifts. Many/most gifts are restricted, meaning that the donors gave them to be used in specific ways - like to fund a specific professorial chair, or for a particular library or whatever - and it's just not an option to use them to fund tuition or for other purposes. Data point: Harvard's endowment has over 14,000 individual funds and the majority of them are restricted.
- dmoy 3y ago
  Is there a rule against perpetuities for gifts like there is for a lot of trusts? i.e. after N period of time, the restrictions no longer apply? Could be a major pain in the ass to keep track of though
  - silverquiet 3y ago
    I'm not exactly thrilled about the plutocrats continuing to rule us from beyond the grave.
    - NovemberWhiskey 3y ago
      I'm not sure that Thomas Hollis funding a chair in divinity at Harvard (for example) meets that definition in a meaningful way.
      - zer00eyz 3y ago
        "The God that holds you over the pit of hell, much as one holds a spider or some loathsome insect over the fire, abhors you, and is dreadfully provoked. " https://en.wikipedia.org/wiki/The_Fellowship_(Christian_organization) https://en.wikipedia.org/wiki/The_Fellowship_(Christian_orga... https://en.wikipedia.org/wiki/Bon_Secours_Mother_and_Baby_Home https://en.wikipedia.org/wiki/Bon_Secours_Mother_and_Baby_Ho... Are you implying that divinity is free of corruption and fuckery? Because history tells us that is not true. Rather we should look fist at those who claim any sort of divinity for all the ills of the world.
  - NovemberWhiskey 3y ago
    >Is there a rule against perpetuities for gifts like there is for a lot of trusts? Permanently restricted funds in endowments are legal.
    - dmoy 3y ago
      Haha dang, well nevermind then
- kjkjadksj 3y ago
  All the more reason to pass a tax
- justin66 3y ago
  > This sound bite always comes up. It's condescending and erroneous to dismiss what the OP wrote as a "sound bite." I imagine most people who are comfortable with arithmetic have the same thought when they learn of the size of most Ivy League endowments. Perhaps you work in circles where factoids about Ivy League endowments are passed around as "sound bites" (where?) but it's not as if the essentials of this aren't really obvious.
  - NovemberWhiskey 3y ago
    I'm not criticizing the OP - the fact is that this does often come up as a sound bite from people who are familiar with the facts and are simply trying to foment anger with others whom they believe are not.
- dopamean 3y ago
  If I donate 100 million to Penn for the express purposed of building a new architecture building and Penn invests that money and earns 20% on it is that 20% under the same restrictions as the principal? Also, it seems odd that if the funds are restricted to be used for a specific purpose that they university is allowed to gamble those funds in the market. Something about this doesn't add up.
  - NovemberWhiskey 3y ago
    >If I donate 100 million to Penn for the express purposed of building a new architecture building and Penn invests that money and earns 20% on it is that 20% under the same restrictions as the principal? It would depend on the facts of the gift; but my understand is that if you give money to be used for a specific purpose, it is restricted to be used for that purpose. There are also gifts that do not allow the principal to be spent; only returns on it. The gift is given in the expectation that it will be invested. Your use of "gambled in the market" is quite loaded; I don't think that most people would regard the activities of these investment officers that way.
    - bhickey 3y ago
      > I don't think that most people would regard the activities of these investment officers that way. I recall my university's chief investment officer announcing that the university could tolerate riskier investments after the endowment topped $4bn. She promptly lost nearly $800m.
      - NovemberWhiskey 3y ago
        Does this lead to a conclusion, or a disagreement with my point, or is your goal merely to present an anecdote?
- rqtwteye 3y ago
  "Data point: Harvard's endowment has over 14,000 individual funds and the majority of them are restricted" Maybe they should stop allowing donors to put restrictions on how to use the money?
  - dgfitz 3y ago
    If you pull on that thread, the reaction would probably be: fine, not giving you any more of my money. I doubt that is a tenable option for the owner/curator(s) of the endowment fund.
    - NovemberWhiskey 3y ago
      a.k.a "we'll take your money, but only on our terms" ... that's just not even polite!
      - rqtwteye 3y ago
        That’s how it works with most donations people give. I don’t get a say how the local animal shelter uses my donations.
  - thechao 3y ago
    Malcolm Gladwell has a podcast in Revisionist History where he likens museums to dragons (hoarding art); I think that's wonderfully apt. Whenever I see institutions, like Harvard, endlessly accumulating wealth above-and-beyond what they "need", I always think of them as "another kind of dragon". I think this interacts with Pournelle's Iron Law of Bureaucracy[1]. [1] https://www.jerrypournelle.com/reports/jerryp/iron.html https://www.jerrypournelle.com/reports/jerryp/iron.html
    - NovemberWhiskey 3y ago
      BTW Gladwell is one of the people who does know better about university endowments and still leads with the anger-inducing high school arithmetic view of the situation (in his podcast, in this case). ref. https://philanthropydaily.com/what-malcolm-gladwell-gets-wrong-and-right-about-university-endowments/ https://philanthropydaily.com/what-malcolm-gladwell-gets-wro...
- burkaman 3y ago
  Harvard's latest financial report (https://finance.harvard.edu/files/fad/files/fy23_harvard_financial_report.pdf https://finance.harvard.edu/files/fad/files/fy23_harvard_fin...) says that 30% of the endowment is flexible and 20% is explicitly allocated to "scholarships & student support". That's more than $25 billion, easily enough to eliminate tuition forever.
  - NovemberWhiskey 3y ago
    BTW Scholarships etc. are not necessarily fungible; like, if it's restricted to botany PhDs only or whatever. If you look in that report, you'll see "education revenue" - i.e. people paying to attend in the form of tuition, boarding etc - was 22% of revenues (about $1.3bn) in fiscal 2023. The endowment distributed $2.2bn (about 37% of revenues), based on a ~5% target payout rate. You can't look at that and say "that $2.2bn per year could easily pay for the $1.3bn in tuition etc" because they're already separate items on the revenue side of the book. If you reduced tuition revenue to $0, i.e. made attendance completely free, you'd have to find an additional $1.3bn a year to fund operations - that's a gigantic hole.
    - burkaman 3y ago
      I know how to fill that hole - increase the ~5% target payout rate to ~8%. Also, I'm not really suggesting they use any of their existing endowment to cover tuition. Just put a lot of it in the bank and interest alone fills the "hole".
      - NovemberWhiskey 3y ago
        >I know how to fill that hole - increase the ~5% target payout rate to ~8% That's a fantastically glib answer; do you have any reason to believe that's a sustainable rate? The endowment is supposed to last forever, remember. The usual citation for a safe withdrawal rate in retirement is 4%, for example. >Just put a lot of it in the bank and interest alone fills the "hole". The Harvard endowment is actively invested and generally substantially outperforms the interest that you'd get "in the bank" - that's the only reason that withdrawal rate of 5% is feasible.
- psunavy03 3y ago
  It seems to be a common online misconception to read "endowment" as "slush fund."
- tmaly 3y ago
  You would have to change the tax code to provide the incentive not to put constraints on the donation.
- laidoffamazon 3y ago
  Sounds like a great reason to disincentivize University donations through policy. There's no reason to donate thousands of dollars to a private, wealthy university that isn't to curry favor.
- bhickey 3y ago
  > Many/most gifts are restricted, meaning that the donors gave them to be used in specific ways That's a problem for Harvard to untangle, not the Department of Revenue.
strikelaserclaw 3y ago
where does all the money generated by endowments even go?
- NovemberWhiskey 3y ago
  Not sure if I understand the question, but assuming it's literally what you asked: it either gets spent for the purpose for which it was given, or it grows the size of the fund.
tmaly 3y ago
Imagine all jobs requiring, not a high school degree, not a bachelors degree, but a PhD

NovemberWhiskey 3y ago

>the endowments are getting so big that covering tuition for all of their students This sound bite always comes up. The simple fact of the matter is that for these institutions, the endowment is essentially composed of gifts, and returns on investment of gifts. Many/most gifts are restricted, meaning that the donors gave them to be used in specific ways - like to fund a specific professorial chair, or for a particular library or whatever - and it's just not an option to use them to fund tuition or for other purposes. Data point: Harvard's endowment has over 14,000 individual funds and the majority of them are restricted.

dmoy 3y ago
Is there a rule against perpetuities for gifts like there is for a lot of trusts? i.e. after N period of time, the restrictions no longer apply? Could be a major pain in the ass to keep track of though
- silverquiet 3y ago
  I'm not exactly thrilled about the plutocrats continuing to rule us from beyond the grave.
  - NovemberWhiskey 3y ago
    I'm not sure that Thomas Hollis funding a chair in divinity at Harvard (for example) meets that definition in a meaningful way.
    - zer00eyz 3y ago
      "The God that holds you over the pit of hell, much as one holds a spider or some loathsome insect over the fire, abhors you, and is dreadfully provoked. " https://en.wikipedia.org/wiki/The_Fellowship_(Christian_organization) https://en.wikipedia.org/wiki/The_Fellowship_(Christian_orga... https://en.wikipedia.org/wiki/Bon_Secours_Mother_and_Baby_Home https://en.wikipedia.org/wiki/Bon_Secours_Mother_and_Baby_Ho... Are you implying that divinity is free of corruption and fuckery? Because history tells us that is not true. Rather we should look fist at those who claim any sort of divinity for all the ills of the world.
- NovemberWhiskey 3y ago
  >Is there a rule against perpetuities for gifts like there is for a lot of trusts? Permanently restricted funds in endowments are legal.
  - dmoy 3y ago
    Haha dang, well nevermind then
kjkjadksj 3y ago
All the more reason to pass a tax
justin66 3y ago
> This sound bite always comes up. It's condescending and erroneous to dismiss what the OP wrote as a "sound bite." I imagine most people who are comfortable with arithmetic have the same thought when they learn of the size of most Ivy League endowments. Perhaps you work in circles where factoids about Ivy League endowments are passed around as "sound bites" (where?) but it's not as if the essentials of this aren't really obvious.
- NovemberWhiskey 3y ago
  I'm not criticizing the OP - the fact is that this does often come up as a sound bite from people who are familiar with the facts and are simply trying to foment anger with others whom they believe are not.
dopamean 3y ago
If I donate 100 million to Penn for the express purposed of building a new architecture building and Penn invests that money and earns 20% on it is that 20% under the same restrictions as the principal? Also, it seems odd that if the funds are restricted to be used for a specific purpose that they university is allowed to gamble those funds in the market. Something about this doesn't add up.
- NovemberWhiskey 3y ago
  >If I donate 100 million to Penn for the express purposed of building a new architecture building and Penn invests that money and earns 20% on it is that 20% under the same restrictions as the principal? It would depend on the facts of the gift; but my understand is that if you give money to be used for a specific purpose, it is restricted to be used for that purpose. There are also gifts that do not allow the principal to be spent; only returns on it. The gift is given in the expectation that it will be invested. Your use of "gambled in the market" is quite loaded; I don't think that most people would regard the activities of these investment officers that way.
  - bhickey 3y ago
    > I don't think that most people would regard the activities of these investment officers that way. I recall my university's chief investment officer announcing that the university could tolerate riskier investments after the endowment topped $4bn. She promptly lost nearly $800m.
    - NovemberWhiskey 3y ago
      Does this lead to a conclusion, or a disagreement with my point, or is your goal merely to present an anecdote?
rqtwteye 3y ago
"Data point: Harvard's endowment has over 14,000 individual funds and the majority of them are restricted" Maybe they should stop allowing donors to put restrictions on how to use the money?
- dgfitz 3y ago
  If you pull on that thread, the reaction would probably be: fine, not giving you any more of my money. I doubt that is a tenable option for the owner/curator(s) of the endowment fund.
  - NovemberWhiskey 3y ago
    a.k.a "we'll take your money, but only on our terms" ... that's just not even polite!
    - rqtwteye 3y ago
      That’s how it works with most donations people give. I don’t get a say how the local animal shelter uses my donations.
- thechao 3y ago
  Malcolm Gladwell has a podcast in Revisionist History where he likens museums to dragons (hoarding art); I think that's wonderfully apt. Whenever I see institutions, like Harvard, endlessly accumulating wealth above-and-beyond what they "need", I always think of them as "another kind of dragon". I think this interacts with Pournelle's Iron Law of Bureaucracy[1]. [1] https://www.jerrypournelle.com/reports/jerryp/iron.html https://www.jerrypournelle.com/reports/jerryp/iron.html
  - NovemberWhiskey 3y ago
    BTW Gladwell is one of the people who does know better about university endowments and still leads with the anger-inducing high school arithmetic view of the situation (in his podcast, in this case). ref. https://philanthropydaily.com/what-malcolm-gladwell-gets-wrong-and-right-about-university-endowments/ https://philanthropydaily.com/what-malcolm-gladwell-gets-wro...
burkaman 3y ago
Harvard's latest financial report (https://finance.harvard.edu/files/fad/files/fy23_harvard_financial_report.pdf https://finance.harvard.edu/files/fad/files/fy23_harvard_fin...) says that 30% of the endowment is flexible and 20% is explicitly allocated to "scholarships & student support". That's more than $25 billion, easily enough to eliminate tuition forever.
- NovemberWhiskey 3y ago
  BTW Scholarships etc. are not necessarily fungible; like, if it's restricted to botany PhDs only or whatever. If you look in that report, you'll see "education revenue" - i.e. people paying to attend in the form of tuition, boarding etc - was 22% of revenues (about $1.3bn) in fiscal 2023. The endowment distributed $2.2bn (about 37% of revenues), based on a ~5% target payout rate. You can't look at that and say "that $2.2bn per year could easily pay for the $1.3bn in tuition etc" because they're already separate items on the revenue side of the book. If you reduced tuition revenue to $0, i.e. made attendance completely free, you'd have to find an additional $1.3bn a year to fund operations - that's a gigantic hole.
  - burkaman 3y ago
    I know how to fill that hole - increase the ~5% target payout rate to ~8%. Also, I'm not really suggesting they use any of their existing endowment to cover tuition. Just put a lot of it in the bank and interest alone fills the "hole".
    - NovemberWhiskey 3y ago
      >I know how to fill that hole - increase the ~5% target payout rate to ~8% That's a fantastically glib answer; do you have any reason to believe that's a sustainable rate? The endowment is supposed to last forever, remember. The usual citation for a safe withdrawal rate in retirement is 4%, for example. >Just put a lot of it in the bank and interest alone fills the "hole". The Harvard endowment is actively invested and generally substantially outperforms the interest that you'd get "in the bank" - that's the only reason that withdrawal rate of 5% is feasible.
psunavy03 3y ago
It seems to be a common online misconception to read "endowment" as "slush fund."
tmaly 3y ago
You would have to change the tax code to provide the incentive not to put constraints on the donation.
laidoffamazon 3y ago
Sounds like a great reason to disincentivize University donations through policy. There's no reason to donate thousands of dollars to a private, wealthy university that isn't to curry favor.
bhickey 3y ago
> Many/most gifts are restricted, meaning that the donors gave them to be used in specific ways That's a problem for Harvard to untangle, not the Department of Revenue.

strikelaserclaw 3y ago

where does all the money generated by endowments even go?

NovemberWhiskey 3y ago
Not sure if I understand the question, but assuming it's literally what you asked: it either gets spent for the purpose for which it was given, or it grows the size of the fund.

tmaly 3y ago

Imagine all jobs requiring, not a high school degree, not a bachelors degree, but a PhD