Among those who look warily on the ever-increasing size of university endowments, two positions have emerged. One view, represented by Congressman Reed’s bill, holds that Congress should act to keep the wealthiest universities from hoarding cash by creating financial aid requirements. The other posits that an excise tax on the largest endowments could redirect the funds to community colleges, which educate nearly half of all American undergraduates.
This latter effort is laudable, as community colleges need more funding. But it is not Congress’s job to redistribute funds between private and public universities. Making Harvard poorer will do little to change the systemic problems facing the American higher education system.
The proposed legislation also fails to take into account the differences in size between major universities’ endowments, as well as more relevant statistics such as endowment-per-student. A one-size-fits-all mandate would disadvantage universities with lower endowments. After all, siphoning off 25 percent of the income from Amherst College’s $2.1 billion endowment would have a larger impact than would the same policy for Harvard’s $37.6 billion endowment.
Ultimately, these attempts to meddle in the finances of private institutions is worrying. Universities know better than Congress how to handle their endowments. We hope that recent legislative developments do not portend challenges in the future.