Friday, March 18, 2016
Most public colleges and universities not required to reveal financial investments of endowments
"Endowments face little federal regulation compared with other fundraising institutions," Binkley writes. "Private foundations, for example, are required to spend at least 5 percent of their assets each year and pay a 2 percent excise tax on investment earnings. Colleges face no spending rules and, because of their educational purpose, are not taxed on their earnings."
"Colleges drew on a variety of reasons to withhold records," Binkley writes. "The University of Virginia and four other public universities said they house their endowments in outside foundations that are not subject to open-records laws. Michigan State University, also public, cited a state law that explicitly keeps college investments confidential. Private Vanderbilt University said it made agreements with financial managers not to share investment details."
Neal Stoughton, a professor and director of the Endowment Research Center at Vienna University of Economics and Business in Austria, told Binkley, “I think that they go to great lengths to try to isolate themselves. They don’t want the endowments to be subjected to a lot of political influence because that’s not the way to invest for the long term. That’s not the way to get a higher rate of return.”
Lawmakers have tried to fight for more transparency, Binkley writes. "Two congressional committees sent letters to the richest private colleges last month asking for a wide range of information about their endowments, including how the schools use endowment assets 'to fulfill their charitable and educational purposes.' The inquiry was partly meant to determine whether schools deserve the federal tax breaks they receive. Separately, Rep. Tom Reed (R-N.Y.) is drafting a proposal that would require all endowments of more than $1 billion to spend at least 25 percent of their profits every year on financial aid. Reed’s goal is to help lower tuition costs for students from working-class families. But as part of his plan, he also hopes to propose stronger reporting requirements to shed light on college investments." (Read more)