They do not give their students any breaks, so why should they get tax breaks when they are making millions off of people, everyday? Why are they even tax exempt anyway? It is a business, isn't it ?
I think it would be financially beneficial to spend 5% of their yearly endowment on worthwhile programs, such as increasing the number of scholarships for incoming freshmen, building renovations and hiring more faculty. Losing their tax-exempt status could hurt the institution more. Tax-exempt status are tied into receiving grants for many academic and research programs.
Too many institutions of higher learning hoard their endowments in order to gain interest and cushion their own accounts. And that interest, not being earmarked, is used indiscriminately. Those funds are meant to further the advancement of the school through scholarships, grants, expansion, or purchasing new supplies. A minimum amount should be required to be spent, or it does not truly qualify as a tax exemption.
Colleges and universities should be required to spend 5% of their endowments every year, because they should be circulating that money back into their communities, and the economy in general. They should see their tax-exempt status as a special privilege, and be happy to use their money to fund economic activity for the benefit of everyone.
Increasing the number and financial value of scholarships available to students through use of endowment funds will encourage a more diverse group of students to apply and enroll. Facilities will also be improved at a much faster rate, so that safety and technology can be integrated more rapidly into campuses. Proper spending of endowment funds may also encourage alumni to donate more frequently.
There is no justification for colleges to have raised tuition and fees 10-20% a year, higher than the rise in medical costs that justified instituting socialized medicine. The greater travesty is that these schools often sit on massive endowments, like Harvard's billion dollar endowment. These funds should be used to pay either college costs like salaries, so that college costs can come down or be given to far more students so that many of them can attend for free. Colleges cannot justify sitting on endowments AND raising tuition.
Colleges and universities are institutions that receive substantial amounts of money from various sources. It is their responsibility to entice students to attend their institution and provide them with a quality education. As such, they should be required to spend a portion of the money they receive to better the school in some way, be it by creating better buildings or increasing the availability of scholarships. The portion they would have to spend would in most likelihood be much less than what they would pay should they lose their tax-exempt status, so it would be an incentive for them to put money back into the school and help create a better learning environment.
Colleges are given the endowments from benefactors, alumni, or the community to help the students, and are given the tax exempt status because of the help that they provide. If they don't offer the help to the students using the endowments then they are fraudulent in their tax exempt claiming.
Most colleges and universities are constantly asking for money, but socking away millions while tuition goes up. When they do spend, it's on a big new building even though the previous building was probably fine. Instead of all this cycle, they could use some of that money to keep costs down and/or hire better professors - focusing on education instead of cosmetics and business. Isn't that the purpose of a university anyway?
I see no sense in wanting colleges to spend parts of their endowments annually. There is no guarantee that gifts to the endowment funds will be enough to make up for the amounts that are spent. That is like spending the university's long-term financial security.
There is too much government control over universities and colleges already. I think that forcing universities to spend a given percent is an arbitrary solution that only seems like an empty gesture, rather than a helpful way to improve their role in society. This seems like a bad idea to me.
Any private organization should have the right to spend their money as they so choose. Even for public universities, the government should not have such control. The government should simply be promoting education, not threatening it. The government does not have the capacity to micromanage everything. They do a poor enough job with what they already have. They should let the universities and colleges make their own financial decisions with all of their money.
Currently, college and university endowments are tax-exempt. This is to provide an incentive to the practice of higher education. This incentive is long-term. An endowment is money squirreled away for the future. Currently, the institution of higher learning has the freedom to make decisions and choices to prepare for the future, while retaining tax-exempt status. The move under consideration would take this status away, in order to encourage the institutions to not prepare for the lean years. Reconsider this proposal.
Tax-exemption generally arises from a company or organization having a stated goal of being not-for-profit. Endowments are generally meant to be a means to fund good projects and scholarships. While a requirement to spend 5% of this money will generally not effect most places because they do so naturally, they should not be required to. If they are required to they may end up having to use the money on things that they otherwise would not and thus end up wasting the money for future more valuable use.
I think colleges should be free to choose how and when to spend their endowments as long as their board approves it. There may be years that they choose not to spend any so that the principal can grow. This could be part of their planning process for something bigger, such as starting a new scholarship program.