- Donor dependent Bard College faces the future
- Expanding Portfolio
- Endowment Spending Rate Drops Slightly
- Endowment Envy
- How Much Is Enough?
- Endowment funds grew as donors and investments came through
- Perpetual endowments can thwart colleges' educational and charitable goals (essay)
- 'Open the Blinds'
For Leon Botstein, Happy Days Are Here Again
Gatherings of college presidents these days aren't exactly joyful. Stories are traded about budget cuts, hiring freezes, fund raising woes and more. For presidents who spent years building up their endowments, only to watch them shrink so suddenly, 2008 has been trying and frustrating.
Reviewing the latest round of statements from college leaders explaining their strategies for retrenchment, and for dealing with smaller endowments, Leon Botstein came to mind. The Bard College president has for years been telling anyone who would listen that endowment growth in higher education was irresponsible and encouraged all the wrong strategies. He has called for colleges to spend the money they raise, rather than stocking it away. With the economy crashing, and tuition-dependent colleges like Bard worried about enrollment and wishing they had larger endowments, is Botstein sticking to his views? How does higher education look to the person who warned that endowment dependence was a terrible thing?
Botstein wants you to know that it's not Schadenfreude he's feeling. "I don't wish any of these institutions ill."
But to Botstein, what is happening now is proof that the endowment strategy doesn't work. "Institutions should not be banks. They are not good at it, and they are no better than anybody else. It should come as no surprise that as investing vehicles, there was a certain amount of arrogance and hubris," he said. "There was much too much time and money spent on getting richer and richer without being clear about why."
As a result, he said, the wealthiest universities have "endless tiers of overlapping management" and lack a tradition of making tough choices. "Instead of figuring how to cooperate [within universities], wealth let everyone do their own thing. Creativity was that you never subtracted, you added."
The idea that university presidents at such institutions are publicizing their losses and announcing major cuts clearly offends Botstein. "These places are enormously rich. It's like a rich person saying 'I was worth a billion dollars and now I'm only worth 750 million.' They are still rich."
The reason this issue matters so much, Botstein said, is that leading universities are "trying to be even less risk averse" and are "learning the wrong lesson" from what's going on. Many wealthy institutions are announcing hiring or salary freezes and doing so largely across the board, assuming equal value for most or all programs and justifying the approach by pointing to losses of 25 or 30 percent or more in their endowments.
"They are crying over money which was excessive to begin with, made faculty risk-averse, because they were like trust fund children. Their patrimony is being threatened. Rich is not better."
Hiring freezes make no sense, he said. "This is the time to hire the best talent."
Institutions should be going through programs, eliminating some, but building others -- and spending their endowments to make institutions more creative. Operating on the assumption that endowment growth or losses matter "is a tragedy that makes everyone risk averse," he said.
What about Bard? After all, it's easy to critique Harvard's billions in losses, but Bard has an endowment too. Prior to the economic collapse this fall, Bard had a $150 million endowment for its undergraduate programs, and a $100 million fund for graduate programs. The former lost about 20 percent and the latter (on which investment strategy is restricted) lost about 4 percent. While those percentage losses are considerably smaller than those at Harvard and elsewhere in the Ivies, Botstein said "the reason is not that we're smarter." Where Bard is smarter, he said, is viewing the endowment "as a cash reserve against bad times, not an offset for operating expenses."
While the endowment losses don't cause him any lost sleep, Botstein said Bard will feel the economic downturn. He's not sure by how much, but expects private donations to drop. Many more students may need financial aid, or more aid. So Botstein is ordering cuts. One is even across the board (in the administration building) -- a 10 percent cut in the salaries of senior administrators, himself included.
And he's talking to faculty members about a range of ideas to save money, but these ideas are intentionally not across the board.
For instance, Botstein plans to ask professors to teach some sections for which they used to rely on adjuncts. "We have a first year seminar -- a Great Books seminar -- and everybody agrees it's a good thing, but not everyone wants to teach it, so you hire outside," Botstein said. "I'm telling faculty they need to teach it themselves. It will be a better course." Another example: the college currently has 15 courses that can be used for the science requirement and Botstein would like the scientists on the faculty to instead come up with "a good course or two with problem based sequences" that could be taught in multiple sections. He thinks the course could be better than current offerings. In addition, he will ask professors to identify programs that could be changed or even eliminated.
Botstein is also putting his money where his mouth is on fund raising. He is converting a $500 million capital campaign -- originally planned for endowment growth and building projects -- entirely to current operations. And he's starting new programs -- programs that are unendowed -- and planning others.
Among the ideas he wants Bard working on now are: creating better general education programs in the sciences, expanding its relationship in the sciences with Rockefeller University, and setting up new relationships with colleges abroad with the aim of using technology or exchanges to improve the teaching of foreign languages. In addition, he says that colleges like Bard need "to put a line in the sand" on certain issues, and refuse to cut spending whatever happens to endowments. One of those issues is student aid.
The other is the arts -- not surprisingly given Botstein's musical career and Bard's strength in the performing and creative arts. "No one in this democracy is concerned about the arts. Who are those first on the firing line for cuts? Musicians and artists. We need to keep them alive."
Most college presidents would say that if you care about your arts programs, you should endow them. Botstein disagrees. In a few years, when the economy is stronger, he said, Bard should build up its endowment so it has larger reserves to spend as needed. But for now, he sees the economic crisis as a good thing, and something to handle without worrying about the endowment.
"What's great about the economic crisis is that it's such a huge opportunity to rethink what you are doing," he said. "This is such a very exciting time in which to be working in this field -- there's a certain relief that good times are over."
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