Endowment Spending Idea Is Attacked by Academics

Academics, including the presidents of Princeton University and Amherst College, are seeking to discourage Congress from forcing universities to spend more from their endowments.

The prospect of legislation that would require institutions of higher learning to spend at least 5% of their endowment annually drew warnings from several academics yesterday at a roundtable discussion on Capitol Hill.

The president of Princeton, Shirley Tilghman, said the idea would require universities to spend in a "boom and bust cycle."

A spending requirement, the president of Amherst, Anthony Marx, said, would make it difficult in the long run for universities to fund programs regardless of how their investments perform.

"We can't and will not close the English Department or the Biology Department during a downturn," Mr. Marx said.

Yesterday's event was convened at the invitation of Senator Grassley, a Republican of Iowa, and Rep. Peter Welch, a Democrat of Vermont. Both have argued that universities should do more to reduce the cost of a college education.

They have both pointed to university endowments as a potential source of funding for more student aid. More than 135 universities have endowments of more than $500 million. Harvard University, the country's wealthiest institution of higher learning, had an endowment last said to be worth just shy of $35 billion.

Mr. Welch introduced a piece of legislation earlier this year that would have mandated institutions of higher education to spend at least 5% of their endowment annually toward cutting down student costs.

Mr. Grassley has floated the idea of a 5% requirement in op-ed pieces. He attended parts of yesterday's event, but was absent for much of the discussion about legislating a 5% spending minimum.

One voice in favor of increased spending by universities came from a professor at Yale Law School who participated in the discussion, Henry Hansmann.

Mr. Hansmann said it only made sense of universities to keep so much money in endowments if there is a "better use for it in the future than the present."

That is unlikely, Mr. Hansmann said. He predicted that "future generations will undoubtedly be more prosperous" and that "there is no reason for us to subsidize future generations of education."