Tuesday, August 7, 2012

Pity Poor Harvard – Has to Get By on an Endowment That is Only $32 Billion

Cutting Back and Crying Poverty

Dominick Reuter for The Wall Street Journal
Due to budgetary constraints, Harvard 
has delayed the construction of a
 science complex, seen in the
 foreground above, inside the fenced-in area.

Universities have endowment funds to provide them with additional funding to support their mission of higher education.  These funds allow the schools to charge lower tuition without sacrificing the quality of education and the resources devoted to education.  That is the purpose of an endowment fund, to fiscally aid the university.

Apparently the geniuses at Harvard have never understood the purpose of an endowment fund.  For them the reason to have an endowment fund is to have an endowment fund.  They want a large endowment fund for the sole purpose of having a large endowment fund.  The idea that the fund should be spent to promote affordable higher education is simply a concept that is not known to them.

The current level of the endowment fund at Harvard is around $32 billion.  But what is Harvard doing with this massive amount of funding? 

Harvard also has canceled a program that waived third-year tuition for any law student who met community-service requirements and pledged to go into public service. Instead, starting this fall, it will award post-graduate public-service grants to some students, a move a spokesman says will provide more predictability for the budget.

And of 320 non-faculty positions lost during the downturn, fewer than half have been restored and filled, according to The Harvard Union of Clerical and Technical Workers, which represents library staff, research-lab technicians, and administrative assistants.

That’s right, they are raising the cost of going to Harvard and cutting position of men and women who do the real work, maintenance, clerical etc. 

So how much of this great endowment is Harvard spending every year.  Not much.

In 2011, Harvard's total operating revenue was $3.8 billion, with $1.2 billion coming from the endowment.

Yeah that sounds like a lot, but it is less than 4%.  If the fund is earning 4% or more than the endowment is growing even if Harvard never ever gets another penny of gifts or contributions. 

Gifts to Harvard are tax deductible, and the income to Harvard is tax exempt.  Government ought to say to Harvard, use it or lose it, we didn’t give you this great tax deal for you just to accumulate an endowment for the sake of accumulating an endowment.

But no, don’t expect that to happen.  Too many Harvard grads in the government old chap.

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