Tuesday, November 17, 2015

Dean's Tax

There was a time when a donor could give money to BYU and expect most of it would support some pet project. That doesn't happen much anymore. The university administration is anxious to build up their endowment. Annual college rankings place a lot of emphasis on the size of an institution's endowment. In the US, Harvard leads the pack with a $36 billion fund, followed by the University of Texas at $25, Yale at $24, and Stanford and Princeton at $21 billion each. Even lesser-known schools such as Bowdoin, Grinnell and Swarthmore have billion dollar endowment funds. BYU's fund is much smaller, but growing, and current university policy reserves a high percentage of many donations to grow the endowment.

So, for instance, I belong to a family who recently donated $3 million to BYU. We were feted with a lovely luncheon and heard a rousing speech from the dean. Then we found out how much good this generous gift would accomplish in 2015 - it would provide four students with half-tuition scholarships. BYU tuition for LDS students in 2014 - 2015 was $2,500, so the 2015 beneficiaries received a total of $5,000 in value from a $3 million fund. That is a yield rate less than 2/10 of 1%. Donors have a colloquial name for this huge amount that gets siphoned off from a bequest to fund the endowment. They call it the "dean's tax." Growing the BYU endowment is a laudable goal, but industry-standard overhead metrics typical of charity ranking services (e.g. Charity Navigator, GuideStar) make BYU look terrible because of it. This harsh reality makes it unlikely that donations to BYU will fund expensive Book of Mormon projects in the future. Work like FARMS did in the 1980's and 90's will probably have to be done off-campus.