Although I wonder what the weird second order effects will be.
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.
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
Permanently restricted funds in endowments are legal.
https://en.wikipedia.org/wiki/The_Fellowship_(Christian_orga...
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.
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.
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.
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.
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.
Maybe they should stop allowing donors to put restrictions on how to use the money?
I doubt that is a tenable option for the owner/curator(s) of the endowment fund.
ref. https://philanthropydaily.com/what-malcolm-gladwell-gets-wro...
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.
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".
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.
There's no reason to donate thousands of dollars to a private, wealthy university that isn't to curry favor.
That's a problem for Harvard to untangle, not the Department of Revenue.