Comment by s1artibartfast
9 days ago
Why not spend the money? That is a 20 year runway.
It isn't a law of nature that the endowment must always grow. It serves the institution, not the other way around. What is the point if not to spend it when it matters?
20 years is a short time for an institution that can reasonably expect to last centuries. Serving the institution means sustaining the endowment indefinitely, which isn't compatible with spending more than you can afford.
Depleting the endowment doesn't mean the institution disappears, and as I said, that would be decades into the future.
Is there no institutional value or quality that is worth even reducing the size of the endowment? If so, then the institution is serving the endowment, not the other way around.
The key question is what you expect from the future.
If you assume that the drop in federal funding is temporary and things will be back to normal in a year or two, it's reasonable to use endowment to soften the impact. But if you expect that the lower level of funding remains for the foreseeable future, depleting the endowment is the worst thing you could do. It the financial equivalent of wetting your pants in the cold. You leave the institution permanently weaker and less capable for some negligible short-term gains.
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Keep in mind that they've also suggested attacking endowments with wealth taxes. I'm not sure they've thought that one through, because that would also open the door to going after the wealth of their billionaire buddies in the next administration, assuming there is one.
> It isn't a law of nature that the endowment must always grow.
But it is the nature of endowments that you must follow the explicit spending guidelines that almost always accompany them. A university cannot just "spend they money", because the money is earmarked for certain things and often includes certain guidance on timelines.