May 13, 2008

Proposal Would Restrict Certain Gifts to Colleges That Hoard Endowments

Washington — In recent weeks, all sorts of rumors have been flying around about Congressional proposals that would penalize college endowments that hoard their assets.

The latest comes from Rep. Peter F. Welch, a Democrat of Vermont, who today proposed restricting IRA rollover contributions to colleges that don’t use their endowments to help low- and middle-income students pay for college.

In a letter to the House Ways and Means Committee, Mr. Welch said wealthy colleges were among the biggest beneficiaries of those IRA distributions and should not be eligible to receive them unless they started using their endowments “specifically for containing college costs” for needy students. He urged the Ways and Means Committee to modify the Internal Revenue code as part of its drafting of a tax bill under consideration.

Mr. Welch has previously proposed requiring colleges to spend at least 5 percent of their endowments every year, and to report annually on how much of their endowments had been spent. The latter proposal is part of the House’s legislation to reauthorize the Higher Education Act. —Brad Wolverton

Comments

1. Here’s an even better idea.

   Require all colleges and universities with an endowment over 1B to contribute to a fund that provides open access to the major online databases for ALL community colleges, colleges, and universities.

   This could be called the Carnegie Library Initiative—a way to level the playing field and to make it possible for all students to access the best that is being thought and said, regardless of where the students are enrolled.

   As it is now, the well endowed institutions have, in addition to everything else, the advantage of being able to afford to have first rate libraries. We can try to compel the well endowed to admit a few token working class students or we can think bigger and imagine making the very best, most current insights available to all students across the country.

   If we’re going to be idealistic, let’s be Idealistic….

   — rurspin    May 14, 08:02 AM    #

2. This bill is moronic. Hey! I’ve got an idea, let’s convert all those land trust gifts to industrial parks!

   — Bill Heller    May 14, 08:40 AM    #

3. You are propsing the government require non-profits to take money that was donated for a specific cause and would violate the donor bill of rights.

   That said; I propose that you give your money to needy and homeless people to provide access to life’s essentials.

   A few thoughts:

   Tell me what an endowment size has to do with library access?

   So what’s next? Remove tax-exempt status from colleges and universities? Will schools start shunning local & state governments and suggest uprooting and moving to another location the same way professional sports teams hold hostage – and mind you the millions of dollars of tax breaks for-profit sports and entertainment arenas receive.

   Let’s focus on getting kids into school first and then worry about access.

   — Conservative 1    May 14, 08:52 AM    #

4. Everyone stumping for the Democrats this election should carefully consider this sort of misinformed legislation. Of course we should all do what we can to help poor students. But requiring restricted endowments to be diverted (most likely against the donors’ wishes) is misinformed. College funding is a much more sophisticated issue than these government bureaucrats realize.

   Before stumping for the Dems, carefully consider the serious ramifications of raising taxes, restricting endowments and creating more government bureaucracies.

   — Profet    May 14, 08:58 AM    #

5. Mr. Welch continues the generic attack on higher education endowments without drilling into the underlying details. Unfortunately, this is something that our beloved politicians excel at. (In addition to their other flaws, like looking for bandaids to symptoms as opposed to cures for illnesses). As some posters have aptly pointed out, many endowment funds are restricted by donor directive. Others are endowments that are unrelated to operating expenses and as a result would not have a significant effect on day-to-day costs. Poster rurspin might also be interested to know there are numerous library endowments at schools large and small, including one at a small school that is geared toward helping fund library needs “that may arise from time to time.” In other words, they accumulate funds over time and then spend them when they need them. Forced annual spending would leave little for the bigger needs when they arose.

   Congressman Welch (and your associated cronies whether R or D):

   1. Please stop playing this issue at a superficial level and for “playing to the crowd” that has limited knowledge of important details as simple as the fact that some endowed funds have spending limitations.
   2. Please start considering this issue (and others) at the level of detail that it deserves. Stop painting the endowment issue with one broad brush.

   Congressman, you will also have my undying admiration when you propose a bill to freeze congressional pensions until Congress develops a sense of fiscal discipline and eliminate earmarks. After all, congressional representatives are the biggest beneficiary of the pension contributions. You and your peers should not be eligible for your pension until you start governing with fiscal discipline specifically for containing government costs.

   — Kevin O    May 14, 10:19 AM    #

6. An endowment has many purposes, but one of the primary ones is sustaining the university. If you require universities to spend x amount of their endowment simply because they have it, it defeats the primary purpose. Suppose there is a requirement to spend 5% of the endowment and interest earned on the endowment is less than 5% or worse, negative. Eventually, you will go broke. This policy of “smoke ‘em if you got ‘em” will leave cause universities to either go broke or spend needlessly just to meet the requirement. Spending from the endowment should be done with the long-term in mind, after great thought about what is needed to advance its goals, and independently determined.

   — Paul    May 14, 06:05 PM    #

7. Here’s what’s next! It was recently proposed that city of Pittsburgh and its county tax Pitt, the Pitt hospitals (UPMC), and CMU by their square-footage. This would allow the locals to drop the recently enacted booze tax!

   — Paul    May 14, 09:41 PM    #

8. Sorry, #6 Paul. #7 Paul is a different person.

   — Paul    May 14, 09:44 PM    #

9. Interviewer to Jesse James: Why do you rob banks?

   James: It’s where the money is.

   — R.    May 15, 06:31 AM    #

Previous: Tension Over Title IX Shows Itself in Lawsuits
Next: Mr. Mayor Is a Freshman