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May 25, 2005

Thoughts about Texas university endowments

Rice.jpgThis handy document ranks the size of the 741 largest university and college endowments in the United States. Although most of the largest endowments are held by well-known institutions, there are surprises even among the biggest endowments. Not many people realize that little Grinnell College in Grinnell, Iowa has the 34th largest endowment in the U.S. at almost $1.3 billion.

Here are some entries of interest to Houstonians:

1. Harvard University $22.1 billion
2. Yale University $12.7 billion
3. University of Texas System $10.3 billion
10. Texas A&M University System $4.375 billion
17. Rice University $3.3 billion
52. Baylor College of Medicine $972 million
56. Southern Methodist University $914.5 million
57. Texas Christian University $869 million
78. Trinity University $673 million
79. Baylor University $672 million
125. University of Houston System $402.5 million
129. Texas Tech University $392.5 million

Given the institutions' relative contributions to the welfare and economy of the State of Texas, does it really make sense for the University of Houston to have an endowment that is only roughly 4% the size of the University of Texas endowment and only 10% of that of Texas A&M? Ah, the legacy of the Permanent University Fund. At least UH is providing some serious "bang for the buck" in furnishing a quality educational resource for the State of Texas and Houston at a fraction of the endowed capital of UT and A&M.

On the other hand, one way to ameliorate the effects of the disproportionate size of the endowments would be through merger. How about turning UH into the University of Texas at Houston (UTH) and Tech into Texas A&M University at Lubbock? Or vice versa, in that it actually might make more sense to merge UH with A&M, which is more in need of an urban presence than UT. Inasmuch as it is in the interests of Texas for UH and Tech to achieve Tier I university status, a merger into either the UT or A&M systems would give both institutions access to endowed capital that would facilitate such an effort.

By the way, don't worry. Both UH and Tech could retain their football teams after the mergers. ;^)

Posted by Tom at May 25, 2005 5:19 AM |

Comments

Tom -

If Social Security has been the "third rail" of national politics (touch it and you die), then surely the PUF is the third rail within Texas.

Certainly, opening up the PUF to schools outside the UT and A&M systems would help the "have nots". It was beneficial to A&M when Aggie lawmakers finally raised enough stink to get College Station a piece of the pie. Recall, of course, the joke about UT-educated legislators offering to split the PUF into 2/3 and 1/3 portions, and then they let the Aggies choose first.

And it certainly has led to the move for smaller state colleges to align with either UT or A&M to get a chance at the trough. I do miss hearing about Texas A&I in the NAIA football playoffs - Texas A&M-Kingsville just doesn't have the same ring.

The PUF is perhaps the most interesting and confusing endowment of which I am aware. In a lot of ways, the regulations overseeing its use remind me of the old "Blue Laws" that persisted in Texas up into the 1980's.

By rules, the capital of the PUF cannot be touched. However, only the interest generated by the established capital is still enough to run the UT and the A&M education systems within the state.

The money that the PUF offers is impressive. If the petroleum reserves attributable to lands donated into the PUF were the property of a sovereign nation, it would be the 7th largest oil producer in the OPEC.

But PUF monies have interesting restrictions. Basically, they have to go to pay for something that can have a 1x4 cm metal label attached to it. The label has an ID number that has to be confirmed in yearly audits - I guess to make sure that the object has not been taken out of use by the University. So, PUF money can be used for office furniture, but not for salaries. Taken to extreme, it can be used for computer equipment, but not for software to run the computers.

Not until there is enough furor created by enough powerful people within the state that are NOT aligned with (or alumni of) UT or A&M will there ever be any serious discussions about opening the PUF beyond its current limits. And, as much as my Sooner-inspired roots dislike the idea that UT has access to all that money, I am enough of a non-obstructionist to believe that if those folks wanted their "worthless" land to go to UT in their wills back in the early 20th century, then who am I to say that it must be shared with non-UT entities?

Conversely, if Texas Tech and UH get their teeth into the PUF, I will lead the petition to get OU a share, too. :)

Posted by: jim bob baker at May 25, 2005 9:20 AM

Can someone tell me why a university system needs $22 billion? The only reason I can come up with is to maintain a slush fund related to sexual harassment lawsuits against the university's president.

In another vein, maybe the feds can put liens on the endowment funds of the universities that prohibit ROTC on their campuses, and release each lien when the endowment holder begins to adhere to the law.

Posted by: Steve Tessem at May 25, 2005 2:47 PM

On further review:

I also find it interesting that the endowment for the Baylor College of Med is approximately 50% more than for Baylor U.

Even if nothing else does, this speaks volumes about the power and influence that Michael DeBakey has had in higher education.

jrb

Posted by: jim bob baker at May 26, 2005 8:24 AM

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