The push for Harvard to tap into its $53 billion endowment is mounting as the Trump administration escalates its financial assault on the university.
But on multiple fronts, that move would be more difficult than many people realize. Some 80 percent of the money is legally obligated towards certain uses.
Experts say tapping into the fortune is a measure of last resort, though some argue Harvard is at that point.
A university endowment is made up of sometimes thousands of accounts from different donors, many of them specifying they want their money to go towards specific aspects of the institution, such as a sports team or funding a particular professorship in the economics department.
“It’s not like a bank account, […] The idea is that you’ll have it sort of forever so that you can take income from it and fund some activity, but you could do that forever. So not just for students today, but for students in the future,” said Sandy Baum, a nonresident senior fellow at the Urban Institute.
The first move Harvard could make is to call up donors and ask them to reallocate where their money goes, but that takes time and personnel and also risks the possibility of losing the donation altogether.
“They can always be approached, but that’s a dance, right? I mean, you got to be careful with that. Because they gave you the money because they cared about something and you don’t want to alienate them,” said George McClellan, professor of higher education at the University of Mississippi.
And with a school as old as Harvard, which was founded in 1636, many of those donors are dead.
“The institution can go to the state attorney general and [seek] relief for a provision … Maybe it’s impossible, for instance, for the donor’s intent to be effectuated in the way that the money is to be spent from an endowed fund and they can get relief from a state attorney general. It’s a cumbersome and difficult process, and I don’t think it would be very easy,” said Steven Bloom, assistant vice president of government relations at the American Council on Education.
President Trump is hitting Harvard every way he can, with his administration launching multiple investigations and going after the university’s ability to enroll international students. Under Trump, the federal government has frozen approximately $3 billion in funding to Harvard and is moving toward $3 billion more.
The school has sued over the blocked funds, but a hearing in that case isn’t until July, putting the funding for efforts such as cancer research in a precarious situation.
Even if Harvard was able to free up all the money in its endowment, legally, they would not be able to spend it all.
Endowments are meant to last in perpetuity, with universities having to reach a delicate balance of what they can spend while letting it grow each year. For most universities, that number is around 5 percent and, in some states, they can’t legally go above that.
Massachusetts previously had a law stating that universities cannot spend above 7 percent of their endowment but has since retracted it.
But even with that law off the books, Harvard still has legal obligations to ensure its endowment continues to grow.
The school did not respond to The Hill’s request for comment.
“It is the balancing act between how much you take out of the endowment and how much you can actually return investments, returns to make up for what you’ve taken out, plus inflation. So, it’s very challenging to use an endowment, as a savings account, because they’re not structured in that way,” said Anne Duggan, managing director of TIFF Investment Management.
The Trump administration, however, is actively calling for Harvard to make use of the money.
“Harvard will cease to be a publicly funded institution, and can instead operate as a privately-funded institution, drawing on its colossal endowment, and raising money from its large base of wealthy alumni,” Secretary of Education Linda McMahon wrote in a letter to Harvard. “You have an approximately $53 Billion head start.”
Harvard has attempted to offset costs, including by instituting a hiring freeze and taking out tax-exempt bonds. But, much like making use of endowment funds, those may not serve as a long-term solution.
“An institution being subjected to targeting by such an administration might need to draw down on the endowment, but […] even the institutions with the largest endowments can’t draw down enough to cover that very long,” said McClellan.
“You make some critical decisions, but you won’t be able to cover the full run of that when you see what we’re seeing now with actions being taken against enrollment and actions being taken against grants and contracts,” he added.
