Where Most Needed worries about elite university endowment, and InsideHigherEd decides to be helpful
The problem is Harvard's endowment - estimated at $25-30 BILLION (presumably depending on just what the position of some closed hedge funds are this afternoon).
That's a lot - but there are ~half-dozen other universities with endowments in the $5-15 billion range - the rest, not so much.
The catch is: as a charity, Harvard has to spend ~ 4-5% of its endowment each year - they can boxcar average this, and rich universities do so to be conservative and buffer bad investment years, but the numbers eventually catch up with them - over the next few years Harvard has to spend about a billion dollars of endowment income per year
That is hard.
I mean the first year you build a new campus, and then the next year you staff it and you equip it with labs and stuff.
But then what do you?
The money has to be spent on things commensurate with Harvard's registered purpose,they can't just give it away (sorry InsideHigherEd). And the funds are on top of tuition income and research funds.
We're talking over $100,000 per student per year. Close to $ million per faculty (depending on who you count), per year. Every year.
Ok, they have a medical school and stuff, but they still are going to have a very serious problem spending that sort of money effectively and rationally and in keeping with their purpose.
There is also a complication that some of the endowment is restricted, for scholarships or chairs or particular fields - that can actually get embarrassing if there is "too much money" in some area and underfunding in other areas, again it becomes an issue of dilution, the expenditure becomes less effective if there is too much coming through too quickly, takes time to build a solid program in most areas and expanding is even harder.
They are unlikely to want to expand much, this would dilute their brand.
One net effect, whether intended or not, is that they are likely to have far more non-tenure track research staff around, if only to soak up some salary funding.
A serious point, that came up recently - is that the top universities are starting to, and will increasingly have to, initiate their own internally funded research programs - we see this in astronomy, where there is a clear divide between universities which own (a share of) their own major research telescopes and those which do not. The next generation of 20-30m class facilities will accentuate this - we're talking programs expensive enough the NSF is blanching at ante'ing up!
Also, worryingly, the top 5-10 universities are hitting a "rich getting richer" phase, going over $10 billion in assets, with serious endowment incomes, and their endowment is growing rapidly; while a larger pack of universities is stuck down in the $1 billion range, with some income but small compared to their total budget, and anemic growth. And of course there is a large group of universities with negligible endowment.
The rich places are mostly the "usual suspects", but with some surprises.
An interesting issue is that a number of the top 25 universities are only just realising what they are sitting on, the listing is also a little bit deceptive, since size matters - a billion goes a lot further at a small liberal arts private college than at a large public university.
At a billion dollars the income is $40 million - that is nice, gives a university some flexibility, maybe put up a building or start a new unit; at 10 billion, the income is $400 million, per year, that is at the point where it is a significant fraction of most institution's total budget, which is why it is an interesting amount.
If this trend continues, then in the next decade or two there will be a small group of elite universities in a league of their own, with internal resources permitting their own lines of research and very rapid response to developments, with a large pool of flexible research staff lead by small numbers of faculty. Qualitatively more so than the current situation, really more like the academic structure in the USA pre-WWII, but scaled up.
One interesting buzz within astronomy is that one or two places are near the point where they might fund their own small (initially) space telescopes, as well as ground based telescopes.
Be interesting to see how they do compared with NASA. I know Caltech contemplated doing this a few years ago (not sure how seriously) and decided the cost was too high, at that point.
It will be an interesting time, and a very good one for the few on the right side of the line.
Another interesting issue will be how the funding agencies respond - whether they protect regional diversity, or accept the enhanced leverage of the current institutions, this has been an issue for some time and tips in either direction at different funding agencies.
PS: Oh, I have some ideas... happy to share them if some crimson clad critter wants to give me a call ;-)
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So in light of Rob's situation, does this make the future faculty situation worse (fewer institutions support few permanent positions with tenure) or better (more money into the field as a whole, so at least neat things get done and more institutions get interested in hiring people who do it)?
And how does it influence hiring politics and graduate student admissions? On the one hand, I'd guess for new faculty, the old boy network and pedigree will become more important; but since these places will be phd factories there will be plenty of those to go around and get hired, like now but more so. However, once you're hired watch out-- since doing a graduate degree anywhere other than these locations won't be worthwhile, the graduate school population will overwhelmingly shift to places that can support an army, making jobs outside these few plum overseer positions painful. Again, like now but infinitely more so.
My only response to this whole issue is to cry.
My University made it clear I was going to be booted because I couldn't get money.
Other Universities don't know what to do with their money.
They hire us and don't give us the resources needed to do what we were hired to do; they demand that as part of our job, we are supposed to get our own resources.
And then they have all this money sitting around that they're not sure what to do with.
All I can do is cry.
And flee. Got that part in the bag.
Yeah, read 'em and weep.
The doubly ironic aspect is that Vb is one of the universities I think will fall above the line and reach the "super rich" league...
On an institutional level, the really hard thing is to make rational decisions - a lot of universities with these resources seem to be effectively paralyzed at the thought of so much internal free resources. Partly that is infighting over resources, partly it is lack of effective leadership and partly it is structural - universities are mostly conservative with layers of checks and balances on making rash decisions.
When some of these universities wake up and take action, in any one field, then look out world, 'cause they'll own us. Given the faculty demographics at a lot of universities this will lead to a lot of instability and playing of musical chairs.
There are going to be some grotesque errors made, universities funding large high profile internal institutions that fail or, more likely, become mediocre mudpits; there will be numerous high profile spectacular successes also.
At the faculty level I think we will see a lot more "Mirrlees instability" - the same phenomenon that drives baseball player salaries - the top universities will go to extraordinary lengths to recruit young hot shots and experienced academic superstars offering increasing salaries and resources - there'll be a lot of "chiefs" with probably a lot of staff (non-tenure track) minions.
I wouldn't be surprised if the success rate of individual faculty at these institutions will remain about the same, extraneous factors (aka real life) are probably the main constrains on faculty success at the top universities and I don't see the existing faculty getting any better in making hiring choices.
Too prone to trendiness and single quantitative objective indicators.
They'll still be disproportionately successful - lots of resources, insanely good students and lots of postdocs is almost guaranteed to lead to success - question is whether the success will be proportionately high enough compared to the resources available.
For perspective - an institution like Harvard could comfortably spend as much on science research each year as an entire NSF division.
If I recall, one of the problems pointed out in the NSF senior review is that you can get outside funding from individual donors to build facilities, but non-sexy things like operating costs are much harder to sell since they don't come with naming rights. This suggests that institutions with continuous cash flow (independent of somebody's ego) could make a good business out of buying telescope shares by ponying up for operating costs.
I mean, at the small-scale end, the entire SMARTS budget is probably a drop in the bucket compared to what these institutions can dish out. At the large-scale end, I think the UC system's share in Keck is up for renewal within a decade, and who knows if they want to keep 40% of Keck if TMT is about to come online. Even Caltech is already shopping around for future buyers on some of their Keck time. I bet someplace like Yale or Michigan (#2 and #7 on that list) could probably buy a very respectable share if they kicked in for continued operating costs, and even in 2015, 15-25% of two 10m telescopes would bring a whole lot of instant power.
Nice to see the people counting dollars as the basis of the wikipedia article don't know what a university system is, at least in Texas. Not to mention that, as nominal branches of the state government they aren't allowed to have endowments in the sense being used here. Or that each member of the system is itself a university (i.e., the flagships get the lion's share of state funding, but the others have to get their share too, by state law). But if this is the future, I suppose it's a good thing they have McDonald in hand for astronomy.