Accuse me of fiddling while Rome burns, but I’ve been thinking about what the current financial situation means for university endowments. Over the summer I blogged about how endowments are coming under increasing scrutiny from the Senate Finance Committee. The latest round was a panel discussion in early September that was sponsored by Senator Charles Grassley (Iowa Republican) and Representative Peter Welch (Vermont Democrat). Some of the discussion focused on the possibility of enacting mandatory spending requirements, such that institutions would be required to spend five (or more) percent of their endowment assets each year. (You can watch the discussion here.)
I suspect that recent economic events have made the possibility of mandatory spending requirements a non-starter, at least for now. Universities have long argued that they need the flexibility to save more during good times, so that they will have necessary resources on hand during bad times. The current financial crisis has given this argument a saliency that it lacked just six weeks ago. Moreover, it’s not difficult to shock the public conscience when universities sit on multi-billion endowments that grow by more than 20 % in a single year. But the politics will be a bit trickier if university endowment sheets bear any resemblance to my last TIAA-CREF statement.