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How Does Your Endowment Grow?

A four-part series: Part 1, Part 2, Part 3 and Part 4.

As we saw yesterday and the day before, the College saps the growth of the endowment with unconscionable overspending. It is one thing for the endowment’s managers to earn a good return; it is quite another for the administration to then spend a greater percentage of that return than any other Ivy League school.

Want proof? Look at how Dartmouth’s endowment grew over the past decade compared to our peers. We are falling behind our sister schools in the quality of the education we can afford to offer our students because we are wasting so much money. More mis-administration will soon make us the poor man of the Ivy League.

Ivy Endowment Growth 2001-2010 graph.jpg

Ivy Endowment Growth 2001-2010 table.jpg

During this period, the Consumer Price Index rose by 23.8%; the College’s endowment was the only Ivy endowment not to keep pace with the rate of inflation.

But perhaps we should not use the CPI as our index of choice. The Commonfund Institute calculates a specialized index for universities called the Higher Education Price Index (HEPI), which it describes as follows: “A more accurate indicator of cost changes for colleges and universities than the Consumer Price Index (CPI), HEPI is used primarily to project future budget increases required to preserve purchasing power.” During the 2001-2010 period the HEPI rose by 35.0% — a figure far beyond the increase in the College’s endowment, but below the growth in the endowments of all of the other Ivy League schools.

Could the College do better than this? There’s an easy answer to that question. Dartmouth has done better in the past, much better. Look at how the College’s endowment grew between 1991-2000 with budgets put together by President Freedman. Under Freedman our endowment had the fastest growth in the Ivy League, not the slowest.

Ivy Endowment Growth 1991-2000 graph.jpg

Ivy Endowment Growth 1991-2000 table.jpg

In the 1991-2000 period, the CPI rose by 26.5% and the HEPI increased by 32.9%.

We should note that prudent financial management is not inconsistent with academic quality. In fact, quality in one area often goes hand in hand with quality in the other. For most of the high-growth 90’s, the College was ranked 7th or 8th in the nation by U.S. News and World Report, and students almost never had to face class oversubscriptions when they chose courses (and signing up for a DDS meal plan was optional for anyone but freshmen). Today Dartmouth has dropped to 11th place, and students are turned away from their desired courses on a regular basis (I’ll avoid piling onto DDS, like everyone else is doing).

Sources for endowment information: National Association of College and University Business Officers endowment performance studies (1991, 2000, 2001 and 2010).

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