Academia’s Wealth Stratification Drives the Decline in Reporting Endowments

This year marks the 50th anniversary of the annual survey of higher education endowments conducted by the National Association of College and University Business Officers (NACUBO). First published in 1974, this survey has become “the preeminent analysis of U.S. college and university endowment performance.”

Indeed, the NACUBO survey is the fundamental source of data for the public reporting on endowments that appears annually in major media outlets, such as Forbes, Barron’s, the New York Times, Bloomberg News, the Financial Times, the Wall Street Journal, and many others. The survey also documents the wealth stratification in American higher education, the history of which we explain in our new book.

It is therefore startling that participation in the NACUBO survey has steadily declined since FY 2017. Why is the number of participants decreasing every year? Why is the decrease closely correlated with endowment size? What does that correlation reveal about wealth stratification in higher education?

The NACUBO Survey and the Decline in Reporting Since 2017

For over three decades, NACUBO ran the survey alone and participation grew, exceeding 500 institutions in 1998 and 800 in 2009. In that year, NACUBO partnered with Commonfund to sponsor the survey, and began to produce more detailed data analysis as the number of participants fluctuated above 800. This arrangement continued until 2018, when NACUBO invited TIAA to join the partnership. In 2023, NACUBO has resumed its primary partnership with Commonfund to conduct what we call here the “NACUBO survey.”

As of FY 2017, the fluctuating number of participants stood at 818, which own about 99 percent of endowment in higher education. Indeed, the wealthiest 3 percent of institutions own 80 percent of endowment in American higher education, and the richest 1 percent own more than half.

In 2017, when Congress imposed an unprecedented punitive excise tax on large endowments in the Tax Cuts and Jobs Act, the number of colleges and universities that reported their endowments to the NACUBO survey coincidentally began to decline. And the number has decreased steadily, falling to 678 in the most recent survey for FY 2022. That decline occurred because 179 institutions that reported their endowments for FY 2017 stopped doing so at some point by FY 2022, according to our review of the NACUBO surveys during that period.

Why, then, did over one-fifth of institutions that reported in 2017 cease participating in “the preeminent analysis of U.S. college and university endowment performance” over the last five years?

Correlation of Endowment Size and Nonreporting

This question becomes more pressing in view of the close correlation between endowment size and the number of institutions that ceased reporting. Of all the institutions that reported their endowments in at least one year between FY 2017 and FY 2022, the number that did not participate in the FY 2022 survey was closely correlated with the amount of endowment. In proportional terms, the non-reporters in FY 2022 constituted:

• 3 percent for endowments over $1 billion,

• 5 percent for endowments between $500 million and $1 billion,

• 18 percent for endowments between $100 and $500 million,

• 39 percent for endowments between $50 and $100 million, and

• 48 percent for endowments under $50 million.

In order to analyze and understand this remarkably close correlation, we attempted to contact the vice presidents (VPs) of advancement or finance at the 179 institutions that reported to the NACUBO survey for FY 2017 and ceased doing so by FY 2022. Forty-five VPs responded from colleges and universities ranging across geography, institutional type, and endowment size—from the University of Chicago to Miami Dade College in Florida, North Iowa Area Community College, and Whittier College in California.

Smaller, Decreasing, and Revolving Staff

Sometimes institutions simply lost track of the survey between the office of advancement, the office of finance, an institution’s separate foundation, or a system foundation, as happened at the University of Cincinnati, the University of Maryland, and the Kentucky Community and Technical College System.

More often, staffing created problems. The pandemic—entailing a loss of staff, a transition to remote work, and significant changes to work processes—was cited by several vice presidents, including those at Eastern Michigan University and Eckerd College in Florida. However, although “the easy answer for the decline could be the pandemic … I don’t believe that’s entirely the case,” stated Blake B. Rickman, advancement vice chancellor at the University of Arkansas–Fort Smith.

At highly endowed colleges and universities, advancement work (involving relations and fundraising with alumni, parents, foundations, and the community) generates huge revenue, and the unspoken policy is “don’t mess with the bank,” observed Joseph Fiochetta, VP of development at private Delaware Valley University. Wealthy colleges and universities therefore build and maintain large advancement staffs, comprising, for example, “300 of the most talented and dedicated advancement professionals in the nation,” as at the University of Maryland, College Park.

Smaller and less-endowed institutions must make do with fewer staff. Among institutions having less than $50 million of endowment that responded to our inquiries, all but one employed fewer than 15 paid staff working on advancement. As endowments rose to $100 million, the number of staff rose to 20, and then up to 50, as endowments grew to $500 million. At institutions with endowment exceeding $1 billion, the number of advancement staff exceeded 100 and rose close to 200. With some exceptions, this loose correlation was largely independent of enrollment and whether the institution was public or private.

Not only do they have fewer staff, but “many smaller colleges with less resources are losing qualified staff,” stated Robert P. Ziomek, advancement VP at the Massachusetts College of Liberal Arts, a public institution. For example, since 2016, the number of full-time equivalent (FTE) advancement staff has decreased by 20 percent at Eastern Mennonite University in Virginia. Likewise, since 2017, the number of advancement staff has decreased by 43 percent at Ashland University in Ohio. Due to a similar steep “decline in FTE staffing” since 2020, Marietta College in Ohio made a deliberate decision “to stop responding [to optional surveys] to create capacity for our team to pursue institutional priorities,” stated Joshua Jacobs, advancement VP.

[Related: “Curtailing Financial Competition in Higher Education”]

Exacerbating the problems of small and shrinking staff, advancement offices face an increasing workload that results from both the recent economic turbulence and the competition to obtain gifts amid “the great transfer of wealth” that is occurring as the Baby Boomer generation retires. Due to these factors, “donor engagement has rapidly increased” in recent years, observed Gary Grant, senior VP for advancement at the Florida Institute of Technology. Today, in the world of development and advancement, “competition for time is fierce so surveys … take a backseat,” stated Nelson Hincapie, chief executive officer of the Miami Dade College Foundation.

Compounding the small size and decrease of advancement staff is rapid turnover, which has prevented the completion of the NACUBO report by Fitchburg State University in Massachusetts, according to Jeffrey A. Wolfman, advancement VP. Turnover particularly affects institutional leadership. Of the 179 non-reporting institutions that we attempted to contact, about one-third of the advancement VPs were interim or in their first year of service.

The turnover of finance VPs and chief financial officers (CFOs) is not as marked but still prevented completion of the NACUBO survey at relatively wealthy institutions, such as the University of Chicago and Kalamazoo College in Michigan. A turnover of finance VPs that prevented survey completion happened more frequently at less-endowed institutions, such as Viterbo University in Wisconsin, North Iowa Area Community College, and Whittier College in California. Exacerbating staff turnover, the fields of finance and advancement have “great difficulty in hiring competent and dedicated people,” particularly at less wealthy institutions, observed Theresa Silanskis, advancement VP at the University of Baltimore.

The fundamental effect of small, decreasing, and revolving staff is the loss of institutional memory, noted Vice President Fiochetta of Delaware Valley University. Institutional leaders in finance and advancement lose track of what the NACUBO survey is, who received it, and why it was not completed, as happened at Brevard College in North Carolina and Knox College in Illinois.

Survey Fatigue

Apart from forgetting about or losing track of the NACUBO survey, many leaders of less-endowed institutions deliberately stopped responding because they are deluged with an “endless number” of surveys, stated Ryan Smith, president of the combined University of Rio Grande and Rio Grande Community College.

Many surveys are required by regional accrediting agencies, by state agencies and legislatures, and by federal agencies. Furthermore, “there is lots of extra accounting and financial work as a result of all the federal and state grants, Covid aid, statutory changes, etc.,” remarked Philip Shapiro, interim senior VP of finance at the University of New England, a private institution in Maine. Optional surveys are even more numerous, such as those issued by the American Association of University Professors, College Board, Common Data Set, the Council for Christian Colleges and Universities, the Council for Independent Colleges, the EDUCAUSE Core Data Service, the Military Friendly Schools, Peterson’s, the Princeton Review, U.S. News & World Report, and so forth.

NACUBO’s is yet another optional survey, one that is “fairly time-consuming,” observed Laura Wilbanks, CFO of the Eastern Michigan University Foundation. “We have a very small staff and work very hard just to keep … moving forward, so survey participation is not a top priority for us and … for many institutions that … are just trying to stay above water,” she noted.  Similarly, “we have not participated [in the NACUBO survey] recently due to a lack of resources,” stated Linnie Carter, executive director of the Harrisburg Area Community College Foundation in Pennsylvania.

Small Endowments Opt Out

“Surveys may be the number one item in my inbox that takes the most time and doesn’t have a direct positive result for my institution … We pick the ones we deem most important,” stated President Smith of the University of Rio Grande and Rio Grande Community College. And the NACUBO survey is increasingly set aside.

Many leaders at institutions with smaller endowments feel that the endowment survey is not useful or appropriate for them. At Taylor University in Indiana, “the effort outweighed the benefit considering the other demands of time and … staff,” observed Michael T. Falder, advancement VP. After 2017, “our Controller did not see any tangible benefits to taking the time to complete the [NACUBO] survey so the College has not participated,” said Suzy Garner Booker, advancement VP of Maryville College in Tennessee.

The survey seems tailored to rich institutions that have complex portfolio management, noted Michael Dorner, finance VP of Concordia University, St. Paul. At “our small, regional public institution, our reporting efforts are focused on donors and auditors. We’re not competing with the larger endowments in the country, so having our names in [major] publications … isn’t necessarily a priority,” stated Vice Chancellor Rickman of the University of Arkansas–Fort Smith.

Instead, “when benchmarking our performance,” less-endowed schools turn increasingly to external investment consultants, stated CFO Wilbanks of the Eastern Michigan University Foundation, or to in-house expertise, as does the University of Arkansas–Fort Smith. Other institutions turn to alternative surveys, particularly the Voluntary Support of Education survey conducted by the Council for Aid to Education, “to benchmark our foundation financial progress … we lack bandwidth in our human resources to respond to duplicative surveys,” stated Elizabeth S. Littlefield, advancement VP of Reynolds Community College in Virginia. Taylor University and Maryville College do likewise.

The Widening Wealth Gap

The history of financial strategy, fundraising, and portfolio management in American higher education reveals how, over the past century, colleges and universities with larger endowments gradually accrued certain wealth advantages that stratified the field by wealth.

That wealth stratification has continued to grow in the early-twenty-first century. The expanding gap between the richest institutions and everyone else is shown tangibly by the recent decline of less-endowed participants in “the preeminent analysis of U.S. college and university endowment performance.”

As our poll reveals, the less-endowed schools do not have the resources—either human or capital—to keep pace with the wealthy schools in reporting endowment performance, let alone fundraising or managing portfolios. Furthermore, the less-endowed schools do not want to expend the resources to participate in the public listing of, and competition for, endowment size. They are deliberately opting out in growing numbers.

And who can blame them? In good economic years, the large endowments have long out-performed small endowments due to the greater risk that large endowments can and do assume in their portfolios. Conversely, in bad years, small endowments tend to lose less because they are conservatively managed and assume less risk. Overall, the higher returns in good years outweigh the smaller losses in bad years, and the wealth stratification expands.

Now small endowments have begun falling behind every year. For example, all endowments performed poorly in FY 2022. Yet, NACUBO reported that the market value of the cohort of largest endowments “declined by 3.8 percent, while the average decline for the three smallest cohorts was 9.6 percent.” Small wonder, then, that the NACUBO survey is increasingly set aside by cohorts with the smallest endowments.

This widening wealth gap strengthens the insular self-regard and competition for wealth and spending among the richest strata of colleges and universities. That outcome serves neither higher education in general nor the wealthiest institutions’ self-interest in the long term.

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