Congress sends letter to U., Seminary to request endowment spending| Feb 17, 2016
Several members of Congress recently sent a letter to 56 private colleges and universities with endowments over $1 billion including the University and the Princeton Theological Seminary to solicit information regarding how the institutions spend their endowments.
The letter requests information regarding categories of assets in the endowment, investments outside the endowment, spending to manage the endowment and the institution’s Form 990, a tax document. It also requests information regarding how universities spend their endowments and endowment principals, especially concerning financial aid, as well as means and sources of routine contributions.
The letter is signed by Utah Senator Orrin Hatch, chair of the Senate Finance Committee and Texas Congressman Kevin Brady, chair of the House Ways and Means Committees and Illinois Congressman Peter Roskam, chair of the House Ways and Means Oversight subcommittee, among others.
The letter aims to investigate the rising cost of tuition as “many colleges and universities have raised tuition far in excess of inflation,” according to Emily Schillinger, communications director for the House Ways and Means Committee.
“Constituents are very concerned about the rising costs of college education which has been exceeding inflation for years,” Schillinger said. “We sent this letter to gain a better understanding of what drives the costs of a higher education and what colleges are doing to assist families and students.”
Schillinger also noted that many Republicans in the Ways and Means Committee recognize the nonprofit sector as a large part that needs to be evaluated in the process of a comprehensive tax reform.
Min Pullan, Media Relations Specialist for the University, said that the University has received the letter, is preparing its response and will meet the deadline of April 1, 2016 as requested per letter.
According to University Vice President and Secretary Robert Durkee ’69, the University received a similar request from the chair and ranking members of the Senate Finance Committee in 2008. This inquiry was sent to both public and private institutions.
“We were pleased then to have an opportunity to describe how we use and manage our endowment and we welcome an opportunity to do that again in response to this letter,” Durkee said.
According to Durkee, the endowment plays a critical role in supporting the University’s programs of teaching and research and a financial aid program that makes a ‘Princeton education’ affordable to students from all income levels without requiring loans.
“We bring in students who generally to do not have any means, and they go into a low-paying vocation so our endowment funds really cover their expenses,” said Shane Berg, vice president for Communications and External Relations for the Princeton Theological Seminary.
Berg said that the Seminary is “an outlier” as it is typically unusual for a seminary to have an endowment over $1 billion. He added that the average scholarship awarded by the seminary covers 94 percent of a student's tuition. “What we have – it goes out to students,” he said.
“As I followed the debate, I do think asking schools to spend at a higher rate is really mortgaging the future,” Berg added.
Jessica Sebeok, associate vice president for policy for the Association ofAmericanUniversities, wrote in an email that AAU was pleased that institutions have another opportunity to describe how they use and manage their endowments.
“This kind of inquiry helps legislators and staff, particularly those new to Congress, achieve a more nuanced understanding of how universities manage and spend their endowments to support their educational, scientific and charitable missions,” Sebeok said.
She added that the member universities with which they’ve communicated have indicated that they look forward to explaining the ways in which they manage their endowments and use them to fulfill their primary missions.
In an effort to control the rising costs of tuition, New York Congressman Tom Reed separately proposed a legislation that would require colleges and universities with endowments greater than $1 billion to use a certain percentage of their yearly endowment earnings on financial aid. Failure to comply for three years will result in loss of the institution’s tax-exempt status.
Brandy Brown, the communications director for Reed, stated that the legislation’s motivation is similar to that of the letters.
Brown said that Reed is “really concerned about higher education costs because he’s a dad and he put himself through law school.” She also said that as the youngest of 12 kids, “he worked the entire time, and recognizes how hard this is.” Brown called the endowment “just a piece of the puzzle to get [the cost of tuition] under control.”
“We care about ensuring fairness in higher education and allowing every child to succeed without holding them back because of cost. It’s only right that we begin looking for solutions to get the cost of higher education under control and this is a step in the right direction in that process,” Reed wrote in a statement.
Schillinger further noted that the more Congress learns about college endowments, the better situated it will be to make sound policy decisions.
“We will continue to gain understanding of the nuanced decisions that impact endowments and realize that a one size-fits-all policy may not work for all schools,” she said.