USC must use its endowments to promote students’ interests


Deena Baum | Daily Trojan

In August, a New York Times profile on the modern-day college student revealed that a quarter of the more than $41 billion given in charity to higher education ended up in the pockets of just 20 institutions, squeezing other institutions — especially community colleges from accessing a growing pool of higher education funds.

Much of this philanthropy comes in the form of donations to endowments, or funds that facilitate a school’s executive functions and ability to grow.

Endowments function primarily as investments, with universities employing a diverse portfolio to seek quick returns. In fact, USC ranks among the top five U.S. college endowments for one-year returns. But most donors restrict the scope of their gifts by earmarking them for research or financial aid, with contributions for student assistance growing from 15.9 percent to 16.8 percent over the last decade.

Undaunted by the massive endowments of Ivy League universities, in 2011 USC announced a fundraising goal largely thought to be the biggest in American academia. Fast forward six years and USC has now attained its $6-billion fundraising goal over a year ahead of schedule, with $4.71 billion already lining the coffers and more on the way.

With $4.71 billion in tow, USC’s endowment ranks the 21st in the nation — and this sum represents a monetary value larger than 42 countries’ Gross Domestic Product.

At a time when tuition hikes are the norm and loans and debt are multiplying, students and parents often cast a skeptical eye toward multi-billion sitting pots of gold.

Despite these gaudy figures, USC is no University of Stagnant Capital. While half of donations expand the University’s endowment and thus are invested for further returns, the rest is devoted toward new buildings, labs and research, with 100 new faculty positions already created, 19 new research centers and institutions endowed and $330 million more devoted annually to financial aid.

To students, where this money goes is just as important as where it comes from. With over 322,000 individual donations — 64 percent of which come from non-alumni — USC’s ambitious fundraising efforts resemble a grassroots political campaign, with hundreds of thousands of people buying into the goal of expanding the impact and reach of the University. With that being said, roughly 500 people donated a million or more to the cause as well, all of which involved a relatively low cost of about nine cents for each gift dollar raised.

But endowments swell through investments as well, and where universities park their dollars raises moral and ethical questions. Generally, universities focus on lucrative firms with strong returns on investment, many of which represent “sin stocks,” or companies related to alcohol or weaponry for example. But many students and donors would expand this definition to encompass other stocks, such as those related to fossil fuel extraction, a debate that rages on campus, across the country and at home, with a petition for a divestment effortrecently filed by the Environmental Affairs Organization at USC.

But as much as universities have to diversify and possibly divest their investments, so too must donors diversify their donations. To lower tuition rates across the board, to expand research capacities across the country and to preserve and extend the reach of countless intuitions — whether they be private universities or community colleges — private capital must be more encompassing.

As USC embarks upon a new era of greater prosperity and opportunity, it must remain aware that with great endowment comes great responsibility — to the Trojan community and beyond. As the University expands its funds, it must double down on contributing to the international body of research, expanding the accessibility of higher education and serving as a model for a socially conscious private university.  Now that would be a good return on investment.

 

  • RDLA

    If donated funds are held in trust, there is a fiduciary duty to invest those funds with certain risk and return parameters that probably differ from some people’s social justice goals. Donors may not consider it a good investment in the university if they knew that their funds would be placed in investments subject to whatever way the winds of the liberal agenda happen to be blowing. Encourage this at your own risk — if, for example, certain students actually succeeded in having the university abandon the name of “Traveler” due to some facile connection to the Confederacy, do you think some donors might be a bit upset that a social justice warrior has succeeded in highjacking the school’s tradition and their fond memories? Perhaps enough to vote with their feet and donate elsewhere?

    Additionally, are donors supposed to feel bad that community colleges are “squeezed out of access” to donated funds? Or, more appropriately, can we say that donors are free to place their funds at whatever institution is better equipped to carry out their vision of the advancement of society (be it through medicine, finance, law, or the arts), rather than catering to some vague notion of social consciousness?

    Telling people, who are willing to donate their money to a worthy cause like improving the education at USC and the university’s stature, how their money should actually be spent is not only counter-productive, it’s arrogant.