How Big Must Endowments Grow Before Universities Say They’re Big Enough?

Every year the National Association of College and University Business Officers (NACUBO) compiles and ranks the endowments for higher educational institutions in the United States. Last year was a good year for investors, and higher ed endowments performed quite smartly.

By my calculations, between fund raising campaigns and investment returns, endowments of all Virginia colleges and universities grew by nearly $1.7 billion last year, or 15.8 percent. That’s after accounting for what the endowments paid out to support university building and operations.

(To view larger version of this table, click here.)

Here’s my question: What are universities doing with that money — besides letting it pile up, I mean? As we all know, affordability is a major issue in higher education. One thing they’re NOT doing is making tuitions more affordable. Despite amassing ever bigger endowments, universities have been jacking up tuitions at a rate consistently higher than the Consumer Price Index.

Colleges and universities raise money from alumni and other supporters because they can. They hike tuitions because they can. They coax more money from the General Assembly because they can. They’re not accountable to anyone.

Take my alma mater, the University of Virginia for example. I love dear ol’ UVa dearly, and I take pride in its success. But look at the numbers. UVa increased the size of its endowment by more than $750 million last year! That compares to $190 million in state support budgeted for fiscal 2009. Look at it another way: That’s $36,700 for each of its 20,400 students! Can someone explain again why UVa had to boost its tuition this year by 8.3 percent this year? (See “What Would T.J. Say?“)

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  1. Larry Gross Avatar
    Larry Gross

    A better title:

    “How big can Endowments go before the University says: ‘we’ve self sufficient and no longer need taxes from citizens” ?


    I’d say .. we’d see that headline at about the same time that Virginia sees a Republican Governor and Republican GA that rebates revenue surpluses to taxpayers.


  2. Anonymous Avatar

    So, the real point is that U.Va. is so rich it should be private? That’s nuts. If it privatized, then the university should pay massive rebates to taxpayers and their estates. These are the people who built it up over scores of years.
    What’s wrong with being a public university anyway? More to the point, what is so inherently wrong about being a successful public university?
    Maybe I need a short course in Baconomics: “Public-bad, Private-good.”

    Peter Galuszka

  3. Jim Bacon Avatar

    Tut, tut, Peter, you’ve gotten carried away without yourself. I never implied that UVa is so rich it should be private. My point is that UVa is so rich that maybe it can cut its students (or their parents) a little slack with tuition.

    As for private institutions, I can’t see that they’re any better. Indeed, they’re worse. Look at University of Richmond. Even with $1.6 billion endowment, UR’s tuitions exceed $40,000 a year now! That’s obscene! There’s no good reason for it.

    The problem is that universities, as non-profits, don’t seek to maximize profitability, they seek to maximize prestige. Making tuitions more affordable doesn’t really figure into the equation — despite all the lip service given to it.

  4. James Young Avatar
    James Young

    What I find interesting is the figure for R-MWC, now Randolph College. Weren’t they pleading poverty last year when the decision was made to go co-ed? Yet their endowment is larger than my alma mater — Hampden-Sydney — where single-sex education is thriving. In fact, R-MWC’s endowment appears healthier than ANY OTHER women’s college in Virginia.

    If I were an alum, I’d be pretty perturbed over this. It would seem that R-MWC’s administration has some ‘splainin’ to do.

  5. Anonymous Avatar


    Isn’t it that place where all those well-off, white boys go?

  6. Anonymous Avatar

    Jim Bacon,
    You mean I could get a rebate? After all, I am a tuition-paying U.Va. parent.
    This idea just might have legs, Jimbo!
    Can I sign up for the next Baconomics course? Is it tax deductible under “Continuing Education?”

    Peter Galuszka

  7. Must be karma, heh, heh, heh.

    I just love it when two issues meld into one. If you question the use/purpose of the endowment of “The University” now (and yes I am proud alumnus until I remember they cancelled Easters), you would be beside yourself if you had heard several members of the Board of Visitors and the CEO of the UVA foundation speak before the PWC BOCS Tuesday night. They flexed their muscles, used their considerable influence and forced a rather unpalatable and potentially precedent setting rezoning application down the county’s throat. It bears mentioning that the rezoning regarding property owned by the University, property gift deeded to it 40 years ago by an individual whose express intent in the deed was for the land to be used to establish an educational presence in NOVA. Interestingly, despite those express wishes, it is the University’s position that they have crafted such deeds in a fashion that allows them to make whatever use of the property they desire, regardless the intent of the donor. Yes the county jumped at the proposition in large part because of the proffers but also because (at least in their view and the University’s representatives) its all about the kids, the University asserted it must have the proceeds from the property so they can keep the tuition rate for students from VA and particularly PWC low, because they get such little support from Richmond and they need ever increasing amounts to keep tuition in the range of 6 grand. Although I have been historically supportive of the University, it has become increasingly difficult to accept their actions. As if cancelling Easters, wasn’t enough, you have to also consider the extorsion techniques used with regard to season ticket sales and now strongarm tactics with regard to land use. Can’t help but thinking about all those old Cav Daily cartoons about “Nebraska” and “creeping state-uism”. Maybe they weren’t so far off after all.

  8. Groveton Avatar

    Tut, tut Jim:

    “As for private institutions, I can’t see that they’re any better. Indeed, they’re worse.”.

    You don’t get out of Virginia much I guess. The 20 top rated universities in the United States are all private.

    I am also surprised that you don’t think UVA should “buy out” the Commonwealth of Virginia with a few billion of that endowment. I mean the state is selling crucial transportation infrastructure to Flour Transurban. Why not sell The Grounds to the UVA endowment fund? Oh wait … I forgot … only assets in NoVA are for sale. Everything outside of NoVA is either a breath-taking natural wonder worthy of an irrevocable easement or a precious historical landmark that has to be preserved with tax money. Maybe you could support selling Mt. Vernon?

    Wink, wink Jim. I know you wouldn’t sell Mt. Vernon even though its original owner was just another souless, inconsequential NoVA resident living in his McMansion and not paying congestion tolls.

    Mom – I agree with everything you wrote with one exception – you can be a mom or an alumnus but not both.

    The present management of UVA and its foundation are dubious on the best of days. I graduated from UVA and I’ll never give them another penny. Nobody living in Northern Virginia should give them a cent in my opinion. I am happy to donate to Christopher Newport and George Mason but nothing for UVA.

    Mom – UVA is a state U. It always has been and probably always will be. The only real difference is that Berkeley and Michigan are pretty clearly better state Us.

    Too bad the person donating land to UVA didn’t know what kind of management team would be deciding how to use his donation. If he did, maybe he’d have given the land to George Mason – a responsible public instution that is actually trying to educate Virginia’s youth at scale. Or Christopher Newport – a university making a real difference down in Tidewater.

    BTW – The term “The University” is arrogant, offensive and typical of of jackass mentality of too many students and alumni. UVA falls in the national rankings (per US News & World Report) year after year. If the people associated with UVA want a nickname, I’d suggest “The Anchor” because that school is sinking like an anchor.

  9. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Yep, colleges and churches are all the same in my book. They plead poverty to the public, while the rectory is lined with gold.

  10. Anonymous Avatar

    Don’t worry, all hope is not lost;

    Senators seeking more student aid from college endowments

    Also, are the endowments required to disclose what they do with the money?

  11. Anonymous Avatar

    No, foundations are not required to disclose what they do with endowments. This topic has been covered over and over again by Richard Vedder at

    UVa Foundation fundraisers are tasked with raising a million dollars a day for their current campaign. (There was an article in the Chronicle of Higher Education some time ago about this.)

    Worse, VA law prohibits SCHEV and the GA from considering private money (endowments and donations) in budget considerations, including faculty salaries, so we get hosed all the way around until the Assembly can stand up to Casteen and Lockridge and the members they have bought paid for.

  12. Groveton Avatar

    I did NOT post the comment under Anon 8:27. However, I wish I did.

    “Worse, VA law prohibits SCHEV and the GA from considering private money (endowments and donations) in budget considerations, including faculty salaries, so we get hosed all the way around until the Assembly can stand up to Casteen and Lockridge and the members they have bought paid for.”.

    Well said!!

    Jim – you’re a professional journalist. Why doesn’t this whole UVA controvery get any play in the MSM?

  13. Jim Bacon Avatar

    I am as baffled as you as to why the MSM doesn’t cover the UVa controversy. It seems like a huge issue to me — that’s why I keep coming back to it on this blog. The explanation could be budget cutbacks. The Times-Dispatch used to have a reporter based in Charlottesville who covered UVa as a major part of his/her beat. I haven’t seen diddly out of that beat for a couple of years. I would guess that the position was cut.

    Clarification of my statement that private universities are “worse.” I’m well aware that private universities rank higher in US New & World-Report and other rankings. I did not mean “worse” in that way. I meant “worse” in the sense that they are piling up bigger and bigger endowments while cutting their students no slack in tuition. I specifically cited the University of Richmond which, under its previous president, concluded that it *could* raise tuitions, so it did. From roughly $35,000 a year to $40,000 a year. Why?

    Harvard may be the worst of all. Its tuition is so high that it could literally offer tuition for free… forever. Indeed, according to the Wall Street Journal, some people are considering doing exactly that.

  14. Groveton: “The Anchor” because that school is sinking like an anchor.”

    Amen to that, and it has been since Hereford stepped down as President. I can rember quite a debate regarding his replacement, O’Neill, and the potential impact of putting those who are not alumni with a sense of tradition in charge of the University. To that point, although the CEO of the UVA Foundation obtained his Phd from dear ole UVA, his undergraduate and masters degrees are from Miami. Wonder if his next initiative will be changing the uniform from blue blazers to fatigues or changing the tagline from “The University” to “The U(of VA)”

  15. Anonymous Avatar

    Point of information, Jim.

    Yale, which has an endowment of about $20 billion, is giving its kids a tuition break.

    Peter Galuszka

  16. Groveton Avatar

    I learned years ago to listen to Mom. Once again, Mom is right – the problems started accelerating when Hereford left.

    I have the strong feeling that Casteen sees his role as more of a political force than the head of a university.

    How sad for the students of UVA and the citizens of Virginia.

  17. Jim Bacon Avatar

    Peter — hooray for Yale! Maybe Harvard will follow. And then, who knows, maybe even UVa.

  18. Anonymous Avatar

    Actually, Harvard was first to move, Yale followed and soon several others will make announcements that they are establishing massive financial aid packages to offset high tuition rates. At some private schools, families with incomes as large as $150k per year will enjoy significant discounts. The Wall Street Journal has published several articles on the topic recently.

    Richmond will be among those announcing something in the next twelve months. Their new prez seems very committed to expanding access to education.

  19. Anonymous Avatar

    I say go for it. If the endowment (or the rainy day fund) gets big enough then tuition (and taxes) will go away.

    Then we can stop crying about spending our grandchildren’ inheritance.

    As long as we keep crying for the minimum level of taxes, we gurantee ourselves a position of living paycheck to paycheck.


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