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.