UVA Slushfund just the tip of the Iceberg
In July, the former Rector at the University of Virginia, Helen Dragas, accused the school of having created a $2.3 Billion “slush fund” during a period when the university had raised tuition on students by 74%, and cut grant aid to poor students. While this is an astounding story in itself, the fact of the matter is that there is much, much more to this story than meets the eye.
In 2013, it was discovered the University of Wisconsin had similarly amassed between $400 million and $1 Billion in reserves, built largely from excess tuition income. Members of the state legislature, furious that the college had been stockpiling cash while using stories about their dire financial straits to convince the state to allow them to raise their tuition, actually demanded that the president of the university resign. However, the president ultimately was able to hang on to his job by using, essentially, a“but everyone’s doing it” defense.
The university compiled a list of similar cash stockpiles their peer institutions had accumulated, roughly during the same time. As the table below shows, the numbers are staggering.
While the University of Wisconsin had built up assets exceeding $1 Billion, they were correct about their peer institutions engaging in similar hoarding activities and some to a far greater degree. The University of Texas, for example, had amassed $9.5 Billion in restricted assets, and another $3.5 Billion in unrestricted assets. The University of Michigan had stockpiled $3.3 Billion in restricted assets and $2.5 Billion in unrestricted assets. Even relatively small, private schools like Temple University had managed to squirrel away billions in expendable assets! A couple of years ago, I was at a meeting where the president of a smallish community college in central Illinois bragged that the school had managed to amass some $80 million in reserves. I held my tongue at the time; but, the time for silence on this issue is over.
These revelations scream out for further scrutiny. If ever there were a worthy subject for investigative journalist teams to examine, the growth of college/university slush funds is ready for sunlight. Remember, these mountains of cash are over and above the endowments of these schools and only came into being over the past ten years. The universities are claiming that this is prudent fiscal management, but the facts of the matter speak for themselves. These pots of money barely existed ten years ago. Now they are everywhere and they are everywhere HUGE.
If these numbers are at all representative of Academia broadly, it is quite safe to say that the cumulative total of these stockpiles could easily exceed the combined value of all college endowments (about $630 billion), and could even match the size of all student loan debt in this country (roughly $1.4 Trillion).
Colleges and universities in this country have raised their tuition at record rates over the past ten years. All have also given administrative staff massive increases in pay, and most have undertaken massive capital improvement projects. They justified their tuition hikes by citing state cuts in funding. This is a complete fiction. In fact (but for a slight dip in the wake of the financial crisis of 2008), the states have consistently increased their funding to colleges, in real dollars, roughly with the rate of inflation. These cuts the colleges claim to have happened, never happened and are really only college officials pointing to the fact that the states “slice of the budget pie” is now smaller due to the colleges skyrocketing operating budgets. This blatant dis-ingenuity of the higher education complex must end.
While Helen Dragas is undoubtedly being vilified by her colleagues, she should be given a medal for demonstrating that at least one college official as the moral compass to point to what is obviously wrong, and demand that the universities be held accountable for their greed, and their gross neglect of the community purpose that they claim to serve.
run75441: The slush fund build is going on at the same time cuts in funding for minority and low income students is occurring. Much of the funding for tuition for lower income and minority students is going to higher income students.
Alan Collinge is Founder of StudentLoanJustice.Org, and author of The Student Loan Scam (Beacon Press). Alan Collinge has been featured at Angry Bear over the years.
The problem is that these institutions just like in the health care industry have to be well funded to be pay for future retirements and health care benefit costs to their retirees. So these institutions have all become much more for profit conscious, motivated and organized to do so. Many today do not believe that education and health care should be profit motivated but totally run by the government. The problem there in lies that if you eliminate profit you eliminate competition for lower cost opportunities the government will not be able to get…One last point of contention is the fact that many school superintendents especially in the larger more wealthy school districts make more per year in salary than the president of the U.S. does. There is something fundamentally wrong with this picture. The future of education lies in the ability to create a nation of bold thinkers, dreamers and doers to where we once again becoming a nation of makers and not takers.
Ryan:
BS, schools have out performed healthcare in profitability. The issue for both is a lack of control.
The future of education is remarkably similar to healthcare and finance, purely extractive and parasitical . It was fun while it lasted .
Run,
I can assure you the cuts to the UNC system by the North Carolina General Assembly have been real. I don’t know what, if any, slush fund they may have, but I sure know who here to ask. (I retired from UNC-Chapel Hill in 2012 from a non-academic position.)
Many people also think the schools with name brand athletic departments share in the income from that, but they don’t. Al least at UNC, all monies raised via trademarked paraphernalia, etc. goes right into the athletic department, not the general budget of the university.
It would be great if this story could reach a wider audience. I wonder how many people struggling with student debt would be interested in hearing why their tuition was so high, and their borrowing likewise?
Thanks for bringing this to my attention. I will share your alert with some of my former UNC co-workers and a few chosen state representatives.
Sandi:
Which is why the UNC system is doing contortions to instill the Koch Bros in a WNC Center for Free Enterprise? What they did cut was anything involving minorities and low income.
“One last point of contention is the fact that many school superintendents especially in the larger more wealthy school districts make more per year in salary than the president of the U.S. does.”
Yes but so do newly minted MBAs after a couple of years as a ‘trader’ on Wall Street. It rather astonishes me that people who have two or three years of post graduate training including a couple of calculus classes are seen to have so much more a skill premium than 99% of tenured faculty (outside Med school anyway).
The compensation given to school administrators at the higher levels is kind of a scandal. But often enough these people are handling jobs with much larger budgets and higher levels of responsibility than mid-level staff at Wall Street banks. Somehow the simple fact that your job touches money elevates your skills such that you ‘deserve’ mid six figure salaries. And your boss low sevens, and his boss high sevens and above. Which is to say many multiples of any college employee. Including all but a handful of University Presidents. (And maybe 50 or so football coaches and ADs plus a dozen plus basketball couches-cough).
(Run, BTW I closed an em tag that was italicizing the comments)
Thanks Bruce. I was pretty tired last night.
This is a particularly disturbing example of wealth “distribution.” This massive accumulation of wealth by public colleges and universities comes at the expense of students who are now racked with massive unsustainable debt.
Lately their has been, rightfully so, a great deal of attention paid to the “for profit colleges,” one of which, ITT Institute, this week just closed their doors leaving students and taxpayers on the hook for millions.
The removal of virtually ALL risk to the lenders ( student loans are uniquely exempt from most all standard consumer protections ) has created a situation not unlike the sub prime mortgage debacle. And boy are some folks cashing in on it big time.
It is quite possible that the accumulated wealth of these institutions could account for well over $1 trillion in student debt. This wealth does not include massive capital improvements that so many colleges underwent even during a severe economic downturn.
More than half of all student loan borrowers are currently in some form of delinquency. Many are in desperate need of real relief and I’m not talking about token reductions in interest for those still in good standing such as the bill pushed by Senator Warren offers.
This needs to be taken much more seriously and with a great deal of urgency. At a bare minimum a full restoration of standard free market consumer protections must be restored to ALL student loans. This would go a long way toward eliminating the predators from the equation and allow those on hard times to protect themselves. Statute of limitations, truth in lending and bankruptcy are essential for preventing this kind of fiscal feeding frenzy.
These principles occupy a prominent place in our constitution for a reason.
Ed, all first time commenters get auto-sent to moderation. Welcome, won’t happen again with this e-mail.
Run,
Needless to say, I am not privvy to the innards of the entire UNC system. I can say that when the GOP took over the legislature in 2010, then Pat McCrory was elected, securing the GOP lock on the state, the members of the Board of Governors was completely turned out and replaced by Republicans, some say chosen by Art Pope. As you probably know, Mr. Pope is sometimes referred to as ‘the third Koch brother’. My guess is, he had a lot to do with the WCU deal.
I’ve read elsewhere that that was not their only target. They have apparently been doing the same at University of Florida, among others. Just as Liberty University began their own law school ‘to bring them up in the ways they should follow’ (my closest recollection from Sunday School), the Kochs seem bent on building their own academic team to counter those rabid left-wingers, don’tcha know?
Besides, where else can the kids who were either home schooled, or sent to academies that teach creationism and damn climate change to find a college to attend?
Respectfully, I find the claim that ANY state has actually cut funding to colleges not credible. While I have not looked specifically at North Carolina, every state I have looked at shows the same thing. An INCREASE, in real dollars, in annual state funding of higher education institutions year over year, roughly with the rate of inflation.
Also, I might add that UNC’s endowment has increased by a BILLION dollars since 2010 (this is over and above whatever slush fund monies they have managed to accumulate.
One could perhaps argue that as the student population increases, this would tend to make the funding PER STUDENT decline, but the increase in student population is pretty small year over year, and the actual cost to service these students in college should not increase in direct proportion to the number of students (In other words, it does not cost twice as much to put twice as many students through a school- economies. Therefore, calling even this a “cut” is, in my view, disingenuous.
Also, defending this practice of stockpiling cash by pointing to the cost of funding retirees retirements and healthcare is not credible. The Universities have been funding retirements, etc. for decades. There is no new costs in these areas that have come up that would compel the buildup of additional cash reserves like these. Also, these monies are NOT being used to fund retirements or other similar items.
Have you looked at Lousiana? Have you looked at CUNY’s financial crisis?
While you’re right that universities have been funding retirements for many years, many state retirement systems are in a state of financial crisis due to underfunding, so state retirement systems are demanding larger amounts of money from universities to make up the difference. That makes a big change in university budgets, especially when we’re talking about the majority of public universities, not a few rich ones.
Every university mentioned above is a well known highly ranked university, so it’s not reasonable to generalize from a handful of rich universities (fewer than 100 universities and colleges out of 5000+ in the US have endowments of $1billion or more) to the remainder. Funding is very different at the large majority of state universities than it is at state flagships, much less highly ranked state flagships like University of Michigan or UW. In my state, the flagship gets 2-3 times the state funding per student than the regionals get and charges higher tuition, though they still have far less than a billion on hand in endowments or rainy day funds.
Bob first time commenters are ALWAYS sent to moderation. So consider the delay an apology. But COME ON MAN! Your e-mail addy is bullshit, impossible, because ‘Null’, even if it is your name screws up computer systems and NEVER would be acceptable in the form you supplied. You might as well have called yourself zero.null@myownisp.ru. But your comment itself is welcome enough.
The Raleigh News & Observer has a story today, updating the Koch’s ‘philanthropy’ to two NC universities…………
I can’t help but wonder how rigorous this ‘research’ will be? Will they truly follow the evidence, or only that that confirms their free market bias?
………University officials said the new entity will focus on economic development in North Carolina and particularly the western part of the state. The controversial center has been in the works for about a year and was endorsed by Chancellor David Belcher and approved by trustees, despite the Faculty Senate’s 21-3 vote last year opposing it. Professors said they were concerned about cost, inadequate review and potential threats to academic freedom.
The announcement came two weeks after Wake Forest University unveiled plans for its new $4.2 million Eudaimonia Institute, dedicated to the study of “human flourishing.” The center is funded largely with money from the Charles Koch Foundation, which pledged $3.69 million during the next five years. Another $500,000 will come from Liz and Chris Wright, CEO of Liberty Resources and Liberty Oilfield Services.
The center is named for Aristotle’s term for “flourishing.” A university news release said scholars from various disciplines will “explore the concept beyond the typical scope of how happiness is understood or used in everyday conversation.” The funding will cover faculty development and workshops, student research, programs, conferences and speakers on campus. The institute will be led by James Otteson a professor of economics and business ethics who is an expert on Adam Smith, the 18th century Scottish philosopher and pioneer of political economy.
At Western Carolina, the free enterprise center was proposed by Edward J. Lopez, a professor of economics and BB&T Distinguished Professor of Capitalism.
Read more here: http://www.newsobserver.com/news/local/education/article103497397.html#emlnl=morning_newsletter#storylink=cpy