As its endowment has ballooned in recent years, Bowdoin has joined a small group of private colleges whose endowments exceed $1 billion. Now, Bowdoin and its peers are facing questions from congressional Republicans about the operations and tax statuses of those endowments.
In a letter dated February 8, the chairs of two House and Senate committees—Senator Orrin Hatch and Congressmen Kevin Brady and Peter Roskam—asked President Clayton Rose to answer 13 questions concerning Bowdoin’s endowment. Presidents from 55 other colleges and universities received the same letter.
The letter requests that responses be completed by April 1.
As of last September, when Bowdoin’s endowment figures were last made public, the College’s endowment sits at $1.393 billion and returned 14.4% in Fiscal Year (FY) 2014-15. It has performed well above average in recent years, earning the “Endowment of the Year” award from the finance magazine Institutional Investor in 2014.
The letter states that the goal of the survey is “an inquiry into the activities of colleges and universities related to the numerous tax preferences they enjoy.” It notes that despite “large and growing endowments, many colleges and universities have raised tuition far in excess of inflation.”
The questions comprise of four categories: “Endowment Management,” “Endowment Spending and Use,” “Donations” and “Conflicts of Interest.”
Many of the questions asked in the letter concern procedures for determining how much of the endowment a college can spend. According to Senior Vice President for Finance and Administration and Treasurer Katy Longley, Bowdoin’s policies allow it to spend between 4 and 5.5 percent of the endowment’s estimated value annually.
In FY 2015-16, 32 percent of the College’s operating budget ($48.7 million) is planned to be funded by the endowment. According to Longley, the largest program funded by the endowment is financial aid, 66 percent of which will be paid for with funds from the endowment.
As a nonprofit institution, Bowdoin does not currently pay taxes on its endowment.
For now, college administrators are working on answering the letter’s questions and are reluctant to speculate about what the implications may be.
“We’ve been asked to provide information to the Senate and House, and we’re going to comply with that,” said Rose. “There’s no [action] that’s on the table at the moment.”
This is not the first time a legislative committee has requested information from Bowdoin. Senator Chuck Grassley made a similar request of private colleges and universities in January 2008, largely concerning tuition and financial aid. Bowdoin was included in that request, according to Longley.
Bowdoin made no direct changes as a result of that investigation; it was one of many schools to replace its tuition loans with permanent grants around the time of the request for information.
For now, it is unclear what course of action the legislative committees plan to pursue with the information they receive. College administrators are withholding judgment until such a plan becomes clearer.
“I’d rather wait and see what kind of bill they come up with, and then we could say ‘Yeah, we think it’s good,’ or ‘It’s a bad idea,’” said Longley. “Congress is looking at all sorts of revenue sources, and endowments over the threshold of a billion are something they’re looking at as well.”