Higher education, the 1%’s dependent

American college and university endowments did very well last year, according to the Chronicle of Higher Education.  The Council on Aid to Education’s research concludes that

[c]olleges raised $37.45-billion in 2014, the highest amount recorded since the survey started, in 1957. That is a 10.8-percent increase in giving since last year—the largest gain since 2000.

This is excellent news for higher education, isn’t it?  Well, for some of higher ed.  Actually, just a tiny fraction, according to a Vox article:

In all, according to the most recent NACUBO-Commonfund study of college endowments, 82 universities have endowments worth more than $1 billion. (And most of those endowments are in seven figures, not eight — generally worth less than $2 billion.) Those 82 universities, mostly private research universities, own about 70 percent of all college and university endowment wealth. [emphases added]

Recall that there are roughly 4,600 institutions of higher education in the United States.  These 82 count for about 1.8% of them.  They are, in a very literal sense, American higher education’s 1%.

What about the rest of our campuses?

Most college endowments are worth $500 million or less. Those colleges and universities mostly depend on tuition for their revenue. And colleges with endowments in the hundreds of millions still serve a minority of American college students. Forty percent of all college students attend to community colleges, which barely have any endowments at all.

_Excellent Sheep_Needless to say, those 99% do not win the attention of the well endowed.  They don’t have the equivalent of a book like Excellent Sheep, lamenting the challenges of teaching and learning in the 1% zone.

We can take the 1% argument a little further.  These endowments are built less by income and more by wealth – i.e., by the 1%’s capital.  According to the Chronicle, who cites “a fund-raising consultant with Bentz Whaley Flessner”,

the increase in charitable giving can be attributed to wealth, not income. Colleges are “more and more dependent on wealth than on your average graduate getting a raise next year,” he said. “What’s really driving this is a huge explosion of wealth.”

In other words, the gift of a rising graduate making her way in the world, building a life of upward mobility American-dream-style, is less significant for growing these endowments than contributions from the already wealthy.  Our richest families, America’s equivalent of landed gentry, are increasingly the prime movers of their preferred campuses’ business model.  Academia’s 1% are becoming dependents on our society’s 1%.

As Libby Nelson notes, “At Harvard, endowment returns contribute more to the university’s budget than any other source of income: more than tuition revenue, research grants, or donations meant to be spent immediately.”

Meanwhile, higher education’s 99% muddle through in a mix of cuts to public funding, increasing debt, and overall privatization.  Which seems to have been a congenial course of action for America’s 1%, who are the leading spirits of our policy world according to recent political science analysis (pdf).

What does this mean for higher education?

PS: Thomas Piketty came to similar conclusions about endowments, education, and inequality last year.

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8 Responses to Higher education, the 1%’s dependent

  1. VanessaVaile says:

    I’m behind on re-blogging — probably need a aggregation post — “all the bad news most adjuncts would rather not know but not getting that choice from me.”  More than a few I want to re-read at leisure (or what passes for leisure in the no-speed limit lane of the Infobahn) and think about how to work into other projects.  From: Bryan Alexander i To: vcrary@yahoo.com Sent: Wednesday, January 28, 2015 10:01 AM Subject: [New post] Higher education, the 1%’s dependent #yiv6458105737 a:hover {color:red;}#yiv6458105737 a {text-decoration:none;color:#0088cc;}#yiv6458105737 a.yiv6458105737primaryactionlink:link, #yiv6458105737 a.yiv6458105737primaryactionlink:visited {background-color:#2585B2;color:#fff;}#yiv6458105737 a.yiv6458105737primaryactionlink:hover, #yiv6458105737 a.yiv6458105737primaryactionlink:active {background-color:#11729E;color:#fff;}#yiv6458105737 WordPress.com | Bryan Alexander posted: “American college and university endowments did very well last year, according to the Chronicle of Higher Education.  The Council on Aid to Education’s research concludes that[c]olleges raised $37.45-billion in 2014, the highest amount recorded since the” | |

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  2. skjandrews says:

    This is very interesting in relation to the starving of public ed considering that, as Robert Reich pointed out in October, about $1 out of every $3 these donors give is effectively a donation from the U.S. government in the form of a tax rebate:

    “Government subsidies to elite private universities take the form of tax deductions for people who make charitable contributions to them. In economic terms a tax deduction is the same as government spending. It has to be made up by other taxpayers.

    These tax subsidies are on the rise because in recent years a relatively few very rich people have had far more money than they can possibly spend or even give away to their children. So they’re donating it to causes they believe in, such as the elite private universities that educated them or that they want their children to attend.

    Private university endowments are now around $550 billion, centered in a handful of prestigious institutions. Harvard’s endowment is over $32 billion, followed by Yale at $20.8 billion, Stanford at $18.6 billion, and Princeton at $18.2 billion.

    Each of these endowments increased last year by more than $1 billion, and these universities are actively seeking additional support. Last year Harvard launched a capital campaign for another $6.5 billion.

    Because of the charitable tax deduction, the amount of government subsidy to these institutions in the form of tax deductions is about one out of every three dollars contributed.

    A few years back, Meg Whitman, now CEO of Hewlett-Packard, contributed $30 million to Princeton. In return she received a tax break estimated to be around $10 million.

    In effect, Princeton received $20 million from Whitman and $10 million from the U.S. Treasury – that is, from you and me and other taxpayers who made up the difference.

    Add in these endowments’ exemptions from taxes on capital gains and on income they earn, and the total government expenditures is even larger.”

    http://robertreich.org/post/99923361875

    And if Reich is too much of a lefty for anyone, here’s Richard Vedder making effectively the same observation:
    http://www.bloombergview.com/articles/2012-03-18/princeton-reaps-tax-breaks-as-state-colleges-beg

    The Plutocrats need to be expropriated, and fast!

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    • Fast might not be an option. There’s little Obama can do for the next two years, assuming he’d want to. Then in 2016 we see a battle between oligarchy-friendly political dynasties.

      So what would you recommend educators do? Perhaps backing Sanders or Warren, to shift the discussion a bit?

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      • skjandrews says:

        Conventional politics – Ha! I doubt Warren has much of a chance against Hillary’s Wall Street backers, but I guess if she emerged as a serious challenger it would be welcome. Otherwise, I would recommend educators tell students that, very soon, there may be a massive political uprising near them and they are free to miss class to go join it. Or start it. Otherwise, they are probably screwed. I don’t say it as bluntly, but that’s the gist.

        In other words, be practical: demand the impossible.

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      • (I like your Situationism)
        So push for broad political awareness and a social movement that hasn’t gelled yet. Maybe towards Occupy 2.0.

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  3. Pingback: Trends to watch in 2016: education contexts | Bryan Alexander

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