institutionalfinance

3 Engineering Programs to Share $200 Million Donation

Engineering programs at Kansas State and Oklahoma State Universities and the University of Oklahoma will benefit from a stock gift valued at more than $200 million, the institutions announced Thursday. The three universities' foundations have received privately held stock from Dolese Bros. Co., a construction materials company, and that the company will buy back $500,000 worth of the stock each year, with the goal of improving the engineering programs and increasing the number of graduates they produce. (Note: This article has been updated to correct the names of the institutions receiving the gift.)

Ad keywords: 

A fix for the big-time college football mess (essay)

The endless conversation about big-time football appears to be reaching a point of decision and change. While some would like to see big-time football disappear from the collegiate enterprise, this is not likely or desirable. We like our football, our constituents like our football, the nation tunes into our football, and for many universities, nothing is more visible or engaging about their operations than their football. 

So we will have football. Success in the big-time has created a variety of conflicts between ideal models for amateur competition and real behavior that the current system finds increasingly difficult to manage. Much of the difficulty stems from the problem of money: too much of it. The money is not going away because we like our football, but we need a better model to manage the money and the game.

Part of the difficulty comes from trying to reconcile the notion of a college-based student activity with the exceptionally high profile and revenue of a previously unimaginably popular and commercial viable enterprise. Football at the top level of American’s institutions, exemplified by the five major athletic conferences, is a big business that depends for its success on the recruitment, retention, and development of superb athletes who must also function as students.

Among the many issues and controversies (academic, ethical, financial, and operation) that complicate our current operating arrangements, refined over many years, is the mismatch in the eyes of our constituents between the revenue scale of the football enterprise and the compensation provided football players (especially the celebrity players of the most successful teams). The current model limits compensation to direct payments for tuition and other college expenses and the indirect compensation by providing players with a high-cost platform for the development of their potential professional value and their possible future value from a professional contract.

Boxed in by our definition of amateur student-athlete, we have found it difficult to construct imaginative ways of reflecting market circumstances that affect the players. We sometimes think that without the strict amateur definition, the college football enterprise would collapse into an uninteresting minor league activity divorced from its academic sponsorship. This may well underestimate the potential creativity of the university, which has, in other contexts, developed mechanisms that could provide a useful model for the football dilemma.

Any model would need to (1) address the market issue of the value of football players within the five major conferences, (2) redefine the organic connection between college education and the student-athletes in the football enterprise, and (3) retain the connection between football and the rest of the college intercollegiate athletic enterprise.

Fortunately, universities have mechanisms for dealing with similar issues that might be adapted to meet the needs of the football enterprise. Think, for a minute, about the university medical center hospital.  In many cases this is a separate not-for-profit enterprise, affiliated with the university.  Its relationship with the parent university is contractual, and transactions that involve university and hospital are done not through university internal governance mechanisms but by contract that specifies how the hospital economy and the university economy will interact.

The agreements also specify how the academic activities of the university in medical education and research will engage the hospital and how the hospital activities related to patient care and other services will engage the university.

But the two enterprises are financially, legally and operationally separate organizations.  They may well have interlocking boards of directors/trustees, but the labor and financial structure of the hospital is not the same nor is it constrained by the circumstances of the university, and the university’s labor and financial structure is not the same nor is it constrained by the circumstances of the hospital.

Adapting this notion to football, imagine that we spin off the football enterprise out of our university and athletic department into a private not-for-profit corporation affiliated with the university, let’s call it the University Football Corp, or UFC (and we could substitute the name of the University for each institution’s football not-for-profit). We license our name and trademarks to our UFC, we lease our football-related sports facilities to the UFC, we contract for various management services that the university may provide the UFC.  The coach and other athletic personnel who operate the football activity will be employees of the not-for-profit UFC, and will not be constrained or managed by the university. The financial structure of the football enterprise will require that it be self-supporting. This should not be a problem for the football programs in the five major conferences since almost all of them do indeed make a profit, even if their universities’ intercollegiate sports programs over all lose money.

Students who perform as football players will be employed by the UFC not-for-profit to perform football duties, but requirements for a football player employee will include an age limit between 18 and 24, eligibility limits, enrollment in the university, maintenance of academic good standing, and progress toward a degree. This is not unusual for other student employees of the university.

The football employee will receive a two-part compensation. The first part will be equivalent to the full cost of attendance at the university, to match the requirement that the football player be a student. This amount will be paid by the UFC not-for-profit to the university that will award the financial aid as it would for any student. The second part will be variable and will depend on the market value of the football player to the UFC not-for-profit. This second amount can vary by season and the market for college-age football players, and might well follow norms and procedures established in the National Football League.

This model bears a close resemblance to what we do for medical students, for faculty physicians, and for other university people who have duties and obligations associated with an independent hospital affiliated with the university.

Where is the NCAA in this model? Like hospitals, the UFC not-for-profit will be regulated by an external agency, in this case the NCAA, that will establish the game rules as it does now, and specify the academic eligibility requirements for football players to be considered students, but the NCAA will not regulate payments to players. These will be managed by each institution’s UFC, but probably in accord with rules established by the five major conferences. The NCAA may well require these organizations to have transparent and independently audited financial records so that the public is clear about the way in which the athlete who is also a student is being paid and managed and clear about the financial arrangements between each UFC and its parent university.

Football players must be students in good standing and making appropriate progress toward a degree and can only have four years of eligibility, but they can test their value in the commercial sports marketplace at any time and choose to leave for professional work. 

Once hired for professional play, of course, they will no longer be eligible to participate in the university-related not-for-profit UFC. 

Athletes within the UFC can also contract for commercial endorsements and other sports-related (but not sports competition) activities and earn stipends or fees, but they must do so through the UFC not-for-profit so that the organization can identify conflicts of interest or commitment.  Similarly, employees of the UFC (coaches, athletic directors, and others) can earn outside income related to sports but must report this income and receive approval for outside commitments from their institution’s UFC (again to prevent conflicts of interest and commitment). Alumni and other fans can contribute to the football enterprise, either to support players or to subsidize athletic facilities, but again, always through the institutional UFC to ensure transparency.

The UFC not-for-profit will create various funds and arrangements for player health and safety and compensation for injuries or other insurance-related functions. Whether it decides that it is better to hire the football players as employees or deal with their football participation as independent contractors will be an issue to be resolved as the market for football players indicates.  Either solution would work, although of course the players are likely to emulate the professional marketplace and create a union to represent their interests. In some universities this would mirror the union representation of other student employees. Players can have agents, lawyers or other advisers to help them negotiate the contracts that govern their college-related football participation, although not the academic requirements that define them as students. The five major conferences may well establish salary caps and other financial constraints proved useful in the professional marketplace.

Because each UFC football enterprise is affiliated and ultimately controlled by its parent university, if indirectly through its board appointments, and because it is required to manage its enterprise through contracts with the university that are publicly available, the university can reap the benefits of big-time football without the constraints of trying to fit the football juggernaut into the university’s normal academic infrastructure. However, the university can require that the football UFC provide a significant payment to the university for the use of its name and other marks, a payment that will serve to subsidize the university athletic program for other sports as happens currently. 

Finally, because this arrangement puts the academic scholarships for football players who must be students inside the university (but paid by the UFC not-for-profit), the current commitment to women’s sports driven by Title IX requirements to keep scholarships reasonably equivalent will remain.

Any university can create this model and participate, although they will need conference support, television revenue, and other characteristics of big-time programs to succeed. Such an opportunity may well help institutions decide that they want good football but not big-time football.

While endless details will need to be worked out, as were required to create the arrangements that govern independent not-for-profit hospitals affiliated with major research universities, the model offers an approach to the growing difficulty of managing big-time football within the current university context.

John Lombardi is president emeritus of the University of Florida and served most recently as president of the Louisiana State University System. He is the author of the forthcoming How Universities Work (Johns Hopkins University Press).

Editorial Tags: 

Paper argues more support for adjuncts won't cost much

Smart Title: 

A new paper from the Delphi Project argues that some key ways colleges can support adjunct faculty don't cost anything, despite administrators' assertions that they can't afford to improve working conditions.

After months of controversy, a $90,000 bonus for Rutgers's president

Smart Title: 

After months of controversy, a reward for the president of Rutgers -- which he is donating back to the university.

$65 Million Gift Supports Research at 5 Australian Universities

An Australian businessman who made his fortune mining precious metals will donate $65 million to support research fellowships and scholarships at five universities in Western Australia, The Australian reported. Andrew Forrest, who heads Fortescue Metals Group, will donate $50 million to create the Forrest Foundation, which will fund grants at the University of Western Australia and four other institutions in the region, and $15 million to build a residential college for rising research stars at Western Australia. The gift is among the largest in the history of Australian higher education, the newspaper reported.

As part of the donation, a new $50m Forrest Foundation will be set up to fund scholarships and postdoctoral fellowships at UWA and WA's four other universities.

- See more at: http://www.theaustralian.com.au/higher-education/forrest-digs-deep-with-65m-gift/story-e6frgcjx-1226739826619#sthash.qLyHaRos.dpuf

As part of the donation, a new $50m Forrest Foundation will be set up to fund scholarships and postdoctoral fellowships at UWA and WA's four other universities.

- See more at: http://www.theaustralian.com.au/higher-education/forrest-digs-deep-with-65m-gift/story-e6frgcjx-1226739826619#sthash.qLyHaRos.dpuf

 

Study: Many Endowments Change Spending Policies

A new report from the National Bureau of Economic Research (abstract available here) finds that college and university endowments change their policies on spending rates regularly -- a finding that was not expected. "Given the long-term and relatively static nature of the investment problem faced by the typical educational institution, existing theoretical models of endowment management predict that the permanent portion of the stated spending policy should be highly stable," the report says. But based on an analysis of more than 800 college and university endowments from 2003 through 2011, the study found that half of the endowments changed spending policies at least once, and a quarter did so every year.

 

Moody's: Big-Time Sports Pose Growing Financial Risks

Moody’s issued a report last week warning universities of the risks associated with big-time sports and urging caution for those seeking to escalate into elite levels of competition. Focusing on institutions in the National Collegiate Athletic Association’s Division I, the report acknowledges that while big-time sports can boost brand recognition, donor support and student applications, that’s accompanied by growing “financial and reputational risks that require careful oversight.” Those risks include budgetary strain (nine in 10 athletic programs are not self-sustaining and require growing subsidies diverted from other university operations), public scrutiny when scandals hit, depleted debt capacity caused by capital investment in athletic facilities, and uncertain future costs as concussion treatment and the amateur model continue to be challenged.

In June, Moody’s downgraded the NCAA’s credit outlook to negative, citing a major lawsuit angling for athletes to be paid. “Increased public discourse about the best interest of student-athletes combined with highly publicized litigation could destabilize the current intercollegiate athletic system and negatively impact the NCAA and its member universities,” the Moody’s report said.

Leaders urge research universities to look beyond U.S. government for support

Smart Title: 

Some research university leaders say it's time to look beyond the federal government to states and businesses, given Congress's dysfunction.

National University Becomes Latest to Sponsor a Bowl Game

First the University of Phoenix paid millions of dollars to plaster its name on the stadium where the National Football League's Arizona Cardinals play their games. Then Bridgepoint Education, a fast-growing for-profit education company, sponsored the Holiday Bowl college football game in San Diego, where its corporate headquarters are located. But with Bridgepoint's primary institution, Ashford University, facing significant scrutiny from Congress and challenges (now mostly resolved) in retaining its accreditation, the company opted to let its sponsorship expire this year.

Now another university -- a nonprofit one -- is stepping in. National University, a professionally focused institution that is part of a growing system of similar colleges, will become the title sponsor of the Holiday Bowl this year, the Union-Tribune of San Diego reported. National does not have any sports teams itself.

 

 

Ad keywords: 

Essay on why one college stopped investing in fossil fuels

Doing what is right pays dividends. That is a lesson learned in the weeks and months following Unity College’s divestment from investment in fossil fuels.

In 2012, Unity College, an environmental college founded in 1965 by Unity, Maine-area residents became the first college in the United States to divest from investments in fossil fuels. With a modest endowment of $13.5 million, we could not afford to get this wrong. If divesting from investments in fossil fuels produced negative results for us, there would be no lifejacket at the ready -- we would sink, and fast. Far from possessing some special dispensation due to an economy of both the size of our student body and comparatively modest endowment of $13.5 million at the time, Unity had more to lose than large universities.

There was no drama in Unity’s decision to divest. Once our board members were satisfied that Unity’s fiduciary responsibilities would be met post-divestment, they unanimously supported the initiative.

If the warnings of naysayers turned out to be correct, this college would have far less cushion if things went wrong after the divestment than much wealthier institutions. In the ensuing months, however, I was surprised to read comments from some in higher education downplaying the significance of Unity’s decision to divest. They argued that they have far more to lose from divesting than an institution like Unity College, and disentangling their complex matrix of investments in order to do so would be a logistical nightmare akin to raising the Titanic.

A funny thing has happened since Unity College divested. Not only has this institution not lost money, but it has benefited from a positive series of unintended consequences.

The Rewards of Acting Upon an Ethical Imperative

Just weeks after Unity announced its decision to divest, our director of development, Martha Nordstrom, received a call from the Richard David Stutzke Foundation. The foundation, impressed by Unity’s divestment, offered a generous gift. That gift has since transformed into scholarships in perpetuity for students pursuing studies at Unity as part of its sustainable energy management and environmental policy, law, and society programs.

Foundation officials felt that Unity’s divestment demonstrated leadership and a commitment to the sustainability of the planet. We framed our decision as an ethical imperative related to the recognition that the burning of fossil fuels is driving the crisis of global climate change. Since Unity announced its decision to divest, more than 300 college and university campuses across the United States have seen the development of robust student movements encouraging divestment. Bill McKibben’s organization, 350.org, is leading this effort and encourages any who are interested in divesting to contact them.

An important aspect of our divestment is that we did not intend to use it as a political football. We have always intended to keep the focus on what is scientifically undeniable and point out the course of action we feel is justified. When considering whether to divest, our Board of Trustees discussed the political implications. Trustees unanimously voted to divest not as a monolithic group of liberal-leaning activists (they are not), but as a group of deeply engaged stewards of this college. The board agreed that our investments should be aligned with our values. All institutions of higher learning have a stake in this, regardless of their focus, given the consequences we all face from global climate change. There is no controversy regarding the need to mitigate global climate change, all academies of science recognize the existence of this problem.

Keep Politics Out of It

When advocating for divestment, disengage from possible political quandaries and stick to the facts. You must not allow others to turn divestment into a political act and struggle. The truth of it is that although Unity has an environmental mission, it has always been home to a diversity of political perspectives. In point of fact, caring about the planet is not a brand to be possessed by a political party, it is a timely value to be embraced by all of humanity.

At the risk of offering stereotypical characterizations, I would point out that we have students from conservative backgrounds who are studying to pursue careers in conservation law enforcement, while some sustainable agriculture and environmental policy majors are preservationists with a penchant for social causes championed by groups within the liberal spectrum. When making our divestment announcement , we did not characterize it as a choice between political philosophies, but rather a choice to proactively preserve the precious resources that students across the political spectrum care about.

Unity's divestment announcement has been well-received by its politically diverse college community, including alumni, some of whom have expressed an overwhelming sense of pride in their alma mater. This alone ought to be a call to action for development departments across higher education. Taking a stand on behalf of a world facing the ravages of global climate change is a winning position for advancement professionals, trustees, presidents and senior leaders across the spectrum.

Advancement Professionals Can Advocate for Change

Advancement professionals are in a position to advocate for their own institutions to divest from investments in fossil fuels. Their strength lies not only in their ability to point to the ethical imperative to do what is necessary and right in service to the ongoing renewal of civilization that is at the core of higher education, but to point out that doing so at this juncture makes good business sense.

The green economy is now overtaking the aged, lumbering giants of the dying fossil fuel industry. Divesting at this juncture will position institutions of higher learning to capitalize not only on the inevitable, the wholesale greening of the economy, but encourage the fossil fuel industry to start seriously transforming itself into an active participant. Most fossil fuel players know that carbon emissions must be reduced, probably sooner rather than later. The game afoot is to wring every last drop of profits possible before nightfall. By continuing the divestment movement within higher education, the fossil fuel power players will eventually lose their social contract to pursue business as usual. This will hopefully lead to major changes in service to a simple goal: ensuring that the fossil fuel reserves still available are not extracted and used.

If they are and business continues as usual, the science says it will be “game over” for this planet. The clock to get this done is ticking and advancement professionals in higher education can be change agents.

Financial managers may complain that divestment will be complicated and insurmountably onerous. However, it takes no more effort to manage a portfolio for minimum exposure to fossil fuels than it does to manage for maximum market return – and these two goals can coexist. Admittedly, markets are more complex today than in the time of divestment from companies associated with apartheid. Depending on your particular mix of investment tools, achieving an absolute zero fossil fuel return may be difficult. Presently we have achieved less than 1 percent exposure to fossil fuels for a majority of our holdings, and we are confident that our overall portfolio will generally not perform more poorly than the market average while holding true to our promise to divest.

Your institution must not be on the wrong side of this issue. A commitment to unimpeachable ethical standards is in keeping with the best impulses of the fund-raising profession. Also, when you make your arguments in favor of divestment, be sure to point out that since divesting Unity has not lost a dime on its investments.

I cannot comment on the reasons why Harvard University chose not to divest. What I can say is that Unity's decision to divest was both financially and morally rewarding. We believe that higher education should be focused on the renewal of civilization and sustainability of the planet regardless of a student's field of study.

Stephen Mulkey is president of Unity College.

Pages

Subscribe to RSS - institutionalfinance
Back to Top