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Congressional Tax Writers Scrutinize Endowments and Executive Compensation

October 19, 2015

MaryFrances McCourt, senior vice president and chief financial officer at Indiana University, served as NACUBO's witness at an October 7 hearing on "The Rising Costs of Higher Education and Tax Policy."

"Today we're here to look at what's behind the rising cost of college, and to consider whether this nation's tax policies are partly to blame," said U.S. House of Representatives Committee on Ways and Means Subcommittee on Oversight Chairman Peter J. Roskam (R-IL) in his opening statement.

Roskam also voiced concerns with the growth in administrative staff at colleges and universities as well as executive compensation rates. Other lawmakers at the hearing pointed out that endowments enjoy tax-exempt status and the donations they receive are deductible, and questioned whether institutions are doing enough to keep costs down and provide tuition relief. 

NACUBO was asked by the subcommittee to discuss college and university endowments at the hearing, to help lawmakers and the general public gain a better understanding of how endowments are designed to work, how much spending comes from endowments, and the purposes to which those withdrawals are applied. In recent months, along with continued focus on student debt levels and college costs, public attention has also turned to college and university endowments, and critical opinion pieces have appeared in national media outlets.

In her opening statement, McCourt said, "I take very seriously the responsibility to deliver on the public purpose of higher education to enhance intergenerational mobility and drive the knowledge creation and innovation that supports economic growth... As demographic, geographic, financial, and cultural forces reshape our economy, we are using the sophisticated business analytics to implement our mission and optimize our operations to meet the expectations of all of our stakeholders-from parents and students to our donors to the U.S. economy writ large."

McCourt conveyed that institutions are responding today to an array of pressures that will determine their financial condition not only now but also in the future. During an exchange questioning whether institutions are doing enough for students, she pointed out that "colleges and universities have put hundreds of millions of dollars of skin in the game."

The other witnesses at the hearing were David Lucca, research officer at the Federal Reserve Bank of New York; Richard Vedder, distinguished professor of economics at Ohio University; Brian Galle, Georgetown University professor of law; and Terry Hartle, senior vice president of the American Council on Education. 

"College presidents understand the importance of this issue and the extraordinarily high levels of public concern," Hartle said in his opening statement. He stressed the impact of steep cuts in states' operating support for public higher education, as well three other important cost-drivers for institutions of higher education:  labor, technology, and government regulation.

Outlook

NACUBO expects lawmakers to continue to fix a spotlight on colleges and universities in the coming months. McCourt readily and confidently responded to concerns raised at the hearing with clear information about institutions' investment in students. As public scrutiny persists, chief business officers should be prepared to tell the story of their efforts to find cost efficiencies and stretch resources, and the "skin in the game" their colleges and universities invest in their students.

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Contact

Liz Clark
Director, Federal Affairs
202.861.2553
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