U.S. Senate Looks Into College Endowments

This story was written by Angelica Dongallo, Daily Californian
The U.S. Senate Finance Committee is seeking answers from more than a hundred colleges, including the University of California, about their finances in an effort to boost transparency on spending.

The UC Berkeley and UCLA foundations, as well as the university system, were each issued letters from the committee asking about their endowments and spending on financial aid.

"Tuition has gone up, college presidents' salaries have gone up, and endowments continue to go up and up," said Senator Chuck Grassley (R-Iowa), ranking member of the committee, in a committee statement. "It's fair to ask whether a college kid should have to wash dishes in the dining hall to pay his tuition when his college has a billion dollars in the bank."

The letters were addressed to the nation's colleges and universities whose endowments exceed $500 million based on the results of a study conducted by the National Association of College and University Business Officers released last week.

The UC system's endowment funds for 2007 rank 12th in the nation at more than $6.4 billion, according to the study. Harvard University is ranked number one with $34.6 billion, while the UCLA Foundation ranks 80th with $975 million.

The UC Berkeley Foundation, which accepts direct gifts to the campus, ranks 89th, with an endowment of $837 million, according to the report.

UC spokesperson Chris Harrington said the university has received the letter and will respond accordingly.

Campus officials at the UC Berkeley Foundation said they have not received the letter from the Senate committee.

Considering the responses to the letters, which are expected by next month, the Senate committee may potentially subject universities to follow specific spending requirements.

Unlike private foundations, colleges and universities are currently not required by federal law to spend five percent of their endowment every year. Additionally, gifts and endowment funds are currently tax-exempt.

Some said universities should also meet the same spending standards.

"Some people are asking, 'Why doesn't the same apply to universities?'" said Richard Vedder, director of the Center for College Affordability and Productivity, based in Washington, D.C. "I think it's a legitimate question."

About one-third of the university's endowment is restricted to departmental, faculty and student support among campuses, while another 20 percent goes toward student scholarships, said Scott Sudduth, UC assistant vice president of federal governmental relations.

"(The university) only (has) discretion over about two percent of the endowment," he said.

Vedder said he expects the Senate committee to hold hearings and even consider legislation that would subject university endowments to the same requirements as private foundations.

"It's a good political method for politicians in an election year," he said.
© 2008 Daily Californian via U-WIRE