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BustedBlog
March 2nd, 2009
Against Endowments
The most frequent argument for having a big endowment is that it’s supposed to tide schools over tough times. It sure isn’t working out that way. True endowment funds can’t be spent even in an emergency; only the cash income and capital gains from them can be spent. (Does anyone remember what capital gains are these days?) So-called quasi-endowment funds can be drawn down if necessary, but universities seem loath to do so even in the current circumstances, as if preserving capital is a higher priority than preserving academic programs.
Hey Jeff - I work for a very large public university. Our endowments, and the income they generate, have become a steady stream of financial support over the years, paying for many important programs. It would be a huge, short-sighted mistake to spend that nest egg in “bad times” because, once gone, it never comes back, nor the interest it produces. Things will get better - have patience. And for goodness sake - no more talk about spending the endowment!
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