The Drum Beats Louder

Last week I wrote about what I perceived as the constant barrage of press against universities and colleges with large endowments: “These are rumors of war—of people building for an attack on private institutions with lots of money. I expect the drumbeat will grow louder.”

Yesterday in the New York Times , the drumbeat did. This time it was in the form of an article with the basic gist that “some schools have a lot more money than others, and it’s not fair.” And no, that is not too glib a summary:

The result is that America’s already stratified system of higher education is becoming ever more so, and the chasm is creating all sorts of tensions as the less wealthy colleges try to compete. Even state universities are going into fund-raising overdrive and trying to increase endowments to catch up.

The wealthiest colleges can tap their endowments to give substantial financial aid to families earning $180,000 or more. They can lure star professors with high salaries and hard-to-get apartments. They are starting sophisticated new research laboratories, expanding their campuses and putting up architecturally notable buildings.

Other campuses are fighting to retain faculty, and some, with less cachet, are charging tuition that rival Harvard’s and scrambling to explain why their financial aid cannot match the most prosperous of the Ivy League.

“It’s a huge difference,” said Sandy Baum, an economist at Skidmore College. “You don’t have to go very far down the food chain before you get to institutions that feel real constraints about how they spend money. Princeton can do what they want to do, but not many schools can.”

The article goes on to discuss public universities—Virginia Tech and Berkeley—that are trying to build an endowment so they rely less on their annual funding from their states. Lawrence Summers, former president of Harvard, and Shirley Tilghman, president of Princeton, have weighed in on spending endowment funds during times of prosperity.

But the most striking words came from Rep. John Tierney, a Democrat from Massachusetts:

Even as colleges race to raise their endowments, high tuitions have caused a backlash among parents, graduates and members of Congress, criticizing them for sitting on wealth. Typically, colleges spend less than 5 percent a year from their endowments.

“These institutions continue to build up their kitties,” said Representative John F. Tierney, Democrat of Massachusetts. “They say it is the schools’ money. But it is not all the schools’ money. Some of it is. But when a donor gives them money, he is able to give more because he is not paying taxes. So some of what they have is federal money, every student’s money, every family’s money.”

“It may be time to change tax policy,” Mr. Tierney added.

As I suspected when I first began following this story, the fight over endowments is, at its heart, a fight over private property. It brings up questions whose answers should be obvious. Of course the money that the taxpayer has earned is his own. Of course private institutions have the right to reap the benefits of sound investing, even if they do so better than others. And of course Americans have the right to give their money to private institutions that they think will educate the country’s best and brightest.

This should all be common sense, but, of course, it is not. And so the drum beats on.