The U.S. Senate Finance Committee demanded information from the university, along with 135 of the nation's other wealthiest colleges and universities, on rising tuition costs and endowment-spending practices. The committee's members are concerned about high tuition prices and are pressuring universities to give more financial aid to students. Members of the committee are discussing whether or not universities should be required to annually spend 5 percent of their endowments as foundations are required to do. Executive Vice President Scott Douglass said university officials will answer all questions asked in the letter signed by two senators on the committee.
"Basically we do in fact typically spend 5 percent of our endowment resources every year," Douglass said. "I think we'll be in compliance with what they want."
The university has the 52nd largest endowment of all colleges and universities in the country, according to the National Assessment of College and University Business Officers. Between 2006 and 2007, the university's endowment increased 14.2 percent from $1,223,203,000 to $1,397,492,000. Harvard University leads the nation with the largest endowment, which grew 20 percent to $34.6 billion.
Jill Gerber, press secretary for ranking committee member Sen. Charles E. Grassley (R-Iowa), said the committee is trying to gauge whether or not tax policies for colleges and universities need to be changed.
"They're seeing double-digit increase in endowment growth at hundreds of colleges and universities," Gerber said.
She said the finance committee members plan to analyze the information colleges and universities send back to them to see what these institutions are doing to control costs for students and how they are spending endowments.
Douglass said the university's endowment fund is used primarily towards scholarships but also faculty salaries, chairpersons' salaries and ongoing academic programs that previously had been supported by donors.
Endowment funds must be invested in order to make returns, he said. If a smaller percentage of an endowment is spent, more money can be invested, so greater amounts of money can be spent in following years.
"You have to reinvest a significant portion of your earnings to make sure endowment grows to support programs in the future," Douglass said.
He said the cost of delivering education increases each year, and tuition prices must rise to offer good salaries to faculty members who could find higher-paying jobs with private companies.
"It's a function of competing for the best faculty with other universities and the private sector," Douglass said.
According to the Office of Institutional Research, tuition at the university has increased 5.8 percent for in-state students and 5.6 percent for out-of-state students between the 2005-06 and 2006-07 academic years,. Tuition has increased by approximately 3 percent each year for the past 11 years at the university.
Lynne Munson, adjunct research fellow at the Center for College Affordability and Productivity, said college tuition prices have increased by greater than twice the rate of inflation for the past 25 years.
"If the price of gas had gone up the same that tuition has increased, a gallon of gas would cost $9.15 today and a gallon of milk would be $15,"Munson said referring to the changes since 1980.
Tuition costs at colleges and universities have risen because colleges are trying to keep up with each other, she said.
"It's not really about cost," Munson said. "There's no convincing justification for why college tuition has gone up so greatly."
Gerber said Grassley is exploring the possibility of whether or not colleges and universities should be required to spend 5 percent of their endowments.
"He feels they should spend an adequate amount on educating students rather than stockpiling large amounts of money," she said.
Munson said she thinks universities should spend more than 5 percent of their endowment funds each year.
"Five percent is a very low number and doesn't take into account how aggressively these monies are invested now," she said.
The Finance Committee's request for information from colleges and universities is the first time the government has required such institutions to provide any information about endowment funds, Munson said.
"There's a great deal of interest on the Hill about skyrocketing tuition and about how higher education endowment monies could be used to address that problem," she said.
Correction: This story originally reported that the university's endowment increased to $1,397,492. The endowment is actually $1,397,492,000. (10:30 a.m., Feb. 12, 2008)
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