[lbo-talk] Yale, well endowed

Tim Francis-Wright tim at francis-wright.com
Fri Sep 28 17:56:23 PDT 2007


Doug Henwood quoted Richard Levin in the YAM:
> But the demands for new activities far, far exceed our ability to
> support them. Universities are places of great creativity. We have
> faculties who are constantly generating ideas for new educational
> programs and new research directions. Right now at Yale we have some
> fantastic investment opportunities in the sciences. We have people
> who are doing remarkable breakthrough work in genetics. We have
> people working in quantum computing, which has the capacity to
> revolutionize the computer in the next 30 years or so. You could
> invest ten times what we're going to be able to invest, and still get
> a strong and positive social return, so that society benefits. There
> are just a lot more ideas than money. If at any time we should have
> more money than ideas, I'd say, "Fine, stop giving money to us."

There will always be new "ideas" like "Let's buy the old Bayer campus" or "let's renovate the gym (again)" or "we need to tear down the old biology labs and build anew."

The question that I would have recommended is the extent to which the President serves the endowment rather than the other way around. To put it another way, in 2005-2006, Yale spent $612.6 million from its endowment and took in $245.7 million in tuition. Cutting the tuition payment in half would have cost only 20% more from the endowment, essentially drawing 5.4% instead of 4.5%.

It's the magic of the 170(b)(1)(A) exemption for educational institutions--unlike private foundations, which actually have to spend down their endowments, Yale and others can raise as much money as they want without any pesky government telling them that they did not spend enough. And it is a strange notion of charity that allows Yale and its $22 billion to charge upwards of $40,000 per year to its students (although not as strange as the machinations that allow Skull and Bones and similar institutions their 501(c)(3) status).

--tim francis-wright



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