Listen: As college tuition rises, so do endowments

MPR’s Kerri Miller interviews multiple education experts on the rise of tuition and how that is also affecting endowments. While college tuition continues to rise, a record 76 colleges and universities have achieved endowments of $1 billion or more. Some members of Congress are putting more scrutiny on those endowments, and asking whether schools should use their endowment money to moderate tuition increases.


Richard Pfutzenreuter - Vice president and chief financial officer at the University of Minnesota.

Steven Roy Goodman - Education consultant and admissions strategist. He is the author of "College Admissions Together: It Takes a Family."

David Ward - President of the American Council on Education and former chancellor of the University of Wisconsin-Madison.


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[MUSIC PLAYING] KERRI MILLER: Coming up on the first hour of Midmorning, nearly 100 colleges and universities in this country have built billion dollar endowments. The U of M's is worth $3 billion, even as many of them are raising tuition. Now a key Senator thinks the answer may be to require that colleges spend 5% of that endowment money. We'll talk about it when Midmorning begins in a moment. First news.

PAUL BROWN: From NPR News in Washington, I'm Paul Brown. The Labor Department says first time claims for unemployment insurance continued to rise last week. It's a sign that the weakening US economy continues to batter the jobs market. NPR's Frank Langfitt has more.

FRANK LANGFITT: Initial unemployment claims went up 22,000 last week. Some of that increase is connected to a strike on an auto supplier in Michigan and New York. But the overall trend is clear. Unemployment is rising. The monthly average for first time claims, a key indicator, is now up to 365,000. That's the highest it's been since Hurricane Katrina ravaged the Gulf Coast in 2005.

After years of growth, the American job market is now headed in the other direction. In the last two months, the country actually lost a combined 85,000 jobs, and those losses can ripple through local economies. People without paychecks naturally spend less, and that's never good in an economy like America's, which is built on consumer spending. Frank Langfitt, NPR News, Washington.

PAUL BROWN: The rain has stopped in the Midwest and much of the North Central areas, but now the danger is more massive flooding. Michael Goforth of Piedmont, Missouri was one of many people caught in rising waters. He was in his car at the time.

MICHAEL: I was going to try to get out the back window and it was too small. I have a sliding back glass. So I had to force the driver's side door open, push it open, and was able to get out. And as soon as I stepped out, it swept me probably 50 yards before I could get my feet under me again.

PAUL BROWN: The storm system has moved eastward where it will dump snow on New England. There's been flooding in Illinois, Indiana, Ohio, and Kentucky. In a newly released recording, Osama bin Laden suggests that the European Union could face fresh attacks after the publication of cartoons mocking the Islamic prophet Muhammad. The announcement came as Muslims celebrate Muhammad's birthday. NPR's Peter Kenyon reports from Cairo.


PETER KENYON: The audio recording marks the first time the Al-Qaeda leader has been heard since last fall. It was posted on the internet by Al-Qaeda's media arm, As-Sahab. Bin Laden's message was that the publication of controversial drawings was part of a new crusade against Islam. According to the tape Bin Laden said, quote, "the answer will be what you shall see, not what you hear," which was seen as a threat of new attacks on European soil.

The cartoons, which many Muslims took to be offensive, were first published by a Danish newspaper in 2005. They were reprinted the following year, sparking a widespread uproar and boycott campaign. This year several Danish newspapers republished one of the cartoons again after a death threat against the cartoonist. Previous Al-Qaeda attacks have hit Spain, Britain, Italy, and Denmark. Peter Kenyon, NPR News, Cairo.

PAUL BROWN: In early trading on Wall Street, the Dow Jones Industrial average is up 95 points at 12 195. The NASDAQ is up 17. This is NPR News.

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GRETA CUNNINGHAM: From Minnesota Public Radio News, I'm Greta Cunningham. Today is the first official day of spring, but snow is in the forecast for Minnesota. The National Weather Service has issued a winter storm watch for West Central and Southern parts of the state for tonight and tomorrow. Forecasters say it will start as a rain and snow mix in southwestern Minnesota, then turn to all snow and move across the rest of the southern part of the state. The Weather Service says snowfall could top six inches in a band from west central into southeastern Minnesota. The rest of Southern Minnesota could see two to six inches of snow.

AirTran Airways will end its service between the Twin Cities and Chicago's Midway Airport on May 5. Atlanta based AirTran says high fuel costs are forcing the airline to cut some routes and its Twin Cities Chicago service isn't performing as expected. The low fare airline has generally charged between $100 to $200 for a round trip flight between the Twin Cities and Chicago's Midway Airport. Northwest, AirTran's only competitor to Midway, would match AirTran fares to retain or win customers. Hobbit Travel owner George Wozniak says AirTran's exit from the route will mean higher fares.

GEORGE WOZNIAK: That's too bad, because I'll tell you what, they are the only guys that are keeping Chicago reasonably priced. Once you turn it over all to the legacies, then fares go way up.

GRETA CUNNINGHAM: The legacies are Northwest, American, and United Airlines. All three fly to Chicago's O'Hare Airport. Northwest flies to both O'Hare and Midway. So far there's no sign carriers have hiked fares between here and Chicago. While it's dropping service to Chicago, AirTran is not pulling out of the Twin Cities. AirTran will continue flying from the Twin Cities to Atlanta and Orlando. Sunshine in the northeast today with high temperatures ranging from 35 to 45 degrees. From Minnesota Public Radio News, I'm Greta Cunningham.

KERRI MILLER: This is Midmorning on Minnesota Public Radio. I'm Kerri Miller. This hour, why college tuition and college endowments are climbing.

It may get even more expensive next year to pursue a degree at the University of Minnesota. There's talk that tuition could go up by as much as 7.5%, even as the U lobbies hard at the State Capitol to minimize the governor's proposed cuts to its budget. But there's one place in that budget, that things look rather rosy. The University of Minnesota has nearly $3 billion in its endowment funds, the largest endowment in the state by a good measure. And 2007 was a very good year. The market value of the U's endowment increased by 26%. That was better than the national average.

But there are now a record number of colleges and universities that are holding billion dollar plus endowments and even more. Harvard boasts a $35 billion endowment, Yale $22.5 billion. And by the way, that money is tax free. Those are the kind of big numbers that have attracted the scrutiny of a powerful Senator from Iowa. Charles Grassley is proposing that universities be required to spend at least 5% of what their endowments are worth on the market today.

Many colleges average the value of their endowments over a number of years, which can lower the stated value. But Senator Grassley says take today's endowment value, slice off 5%, and spend it to benefit the college and its students. The suggestion has landed like a lead balloon in the college and University community, but it has its supporters. And we'll talk to one of them a bit later in the hour.

For now, we begin with David Ward, president of the American Council on Education and a former Chancellor at the University of Wisconsin Madison. Mr. Ward, good to have you on the show this morning. Thanks for being with us.

DAVID WARD: Glad to be here.

KERRI MILLER: Richard Pfutzenreuter is also with us this morning. Vice President and Chief Financial Officer at the University of Minnesota. And Richard Pfutzenreuter, good to have you on the show.

RICHARD PFUTZENREUTER: Well, good morning. Nice to be here.

KERRI MILLER: And to you first, I know it isn't Harvard's $35 billion, but $3 billion is, of course, nothing to make light of. Where does most of that money come from?

RICHARD PFUTZENREUTER: Well, that money comes from, obviously, from donors in Minnesota and as well as around the world.

KERRI MILLER: And does most of the money come with strings and conditions?

RICHARD PFUTZENREUTER: Well absolutely. When you ask people to give money, they often give for a very specific purpose. They've got something in mind, something that they have a real strong interest in, whether it's diabetes research or cancer or even a scholarship for a music student as opposed to a scholarship for a psychology student. So those monies, 90 plus percent of the endowment we have is restricted either by state statute or by donor intent.

KERRI MILLER: Are people giving that way, though, because that's how the University is asking for the money? How often does the University say, we would like discretion in how to spend this money? We'll hope you'll honor that with your gift.

RICHARD PFUTZENREUTER: What we're finding out as we go out and raise money today, people are actually becoming more smarter and wiser and more interested in targeting their gifts. We certainly go out and try to get people to give those dollars without restrictions. And I think we'd freely admit we've got to work harder at that.

KERRI MILLER: David Ward, how big was the University of Wisconsin's endowment when you were chancellor? Do you know?

DAVID WARD: Yeah, well, I mean, it grew rapidly. I was there eight years, and it grew pretty rapidly. And because the endowment was actually divided into three parts, probably if you added all three together, it would have been pretty close to that of Minnesota. But it's usually not counted as the foundation itself is probably-- would probably be more like 1 and 1/2 billion. But there were two other endowments too. So we were privileged in the same way as having a significant amount of endowment support.

KERRI MILLER: And was there discussion at the U of W about how big that endowment should be? I mean, was there actual--

DAVID WARD: Never. You see, I've been gone eight years, and this dialogue is really quite different than it was 10 years ago, when in fact, the governor and the state legislature were very eager for me to find revenues, particularly in areas where private funding was possible. The medical school, the business school, areas of international trade, and so on. And so I was being encouraged, in effect, to find revenues from private sources that frequently were targeted in order to, in a sense, help the state out in the public side of the equation.

We apparently have been so successful now that rather than sort of applauding us for over 15 year period in many public universities raising endowments from perhaps half a billion to $3 billion, we're now being argued that we should do something different with that money. And the concept of an endowment at that time I think was shared also by the legislature and the governor, namely intergenerational commitments. That is the governor said, we really need to think about the University three generations on.

And obviously, how you spend the yield of your endowment in good years and bad years needs to be evened out, otherwise our grandchildren won't be beneficiaries of this endowment. And most donors I've ever talked to back then in the '90s, they were interested in legacy. They were interested in a perpetuity, if you like, of their commitment. And of course, the Congress, which is interested in all this, is the last place that should be preaching prudence, because our grandchildren are going to have tax levels.

KERRI MILLER: All right, well, point well taken.

DAVID WARD: I mean, why are they telling us how to manage endowments? It's just absolutely absurd.

KERRI MILLER: One of the things I'm curious about, though, Richard Pfutzenreuter, maybe you can give me a sense of this. Is there discussion within the University that we will build this endowment to this amount of money. And then when we are raising money, we will be bringing it into the University to spend it on other things. Or is this a sense no endowment can be too big?

RICHARD PFUTZENREUTER: Well, the President Bruininks here at the University has made a very big deal out of raising money for what we call The Promise Of Tomorrow Scholarship. And in the last four or five years, we've raised about a little over $200 million for that scholarship. And we're going to embark on another major capital campaign in the near future. And the raising of money for scholarships will be a key part of that.

KERRI MILLER: I'm not sure you answered my question, though. I'm asking is there discussion within the college, the University, that we will build this endowment to this amount? When we hit that amount, whether it's $3.5 billion or whether it's $30 billion, when we hit that amount, we will stop trying to raise money for the endowment and we will turn all of our energies on bringing money in for other priorities.

RICHARD PFUTZENREUTER: Oh, absolutely not. We will continue to raise money for our endowment for the benefit of our academic programs and our students.

KERRI MILLER: So you'll build it as big as it can go?

RICHARD PFUTZENREUTER: Well, I think as long as we're graduating students and we have alumni who want to give to the University, we will continue to take their money.

KERRI MILLER: David Ward, why do schools need this kind of money? This is a lot of money.

DAVID WARD: Yeah, but I mean, I think you've got to remember that the yield, 5% yield on an endowment for most public universities is still less than 10% of their total revenues. And yet at the same time, it may be the margin of excellence in many programs, because that money can be used on top of the state money for the margin of excellence.

Every donor I spoke to in the '90s talked about the margin of excellence. They did not want to give to substitute for state or public money in a public University. They were really interested in adding very strategically to certain key programs the kind of largesse that would allow those programs to be world class.

Now, I do want to also say that there were also other donors who did want to give for student support. There's no shortage of people committed to giving to student support. But one has to accept that not all donors want to give in that direction. But even if we were to turn the entire endowment yield over to student support, in view of the enormous growth in the number of students, it would be impossible to substitute for public financial aid the economics of taking the yield on of an endowment.

We could use certainly more of it for student aid, and we could persuade more donors to go in that direction. But even if we were to do that successfully, you would still need significant amounts of financial aid, because the magnitude of the needs of financial aid in this day and age are so great. I mean, just to give you one example, the Pell Grant, which is the key source of money for low income students to go to college, in the current president's budget, the largest increase in domestic expenditure is the Pell Grant.

But the Pell Grant, that increase does not increase the Pell Grant. Simply the number of modest income students who are now going to college. It's our success. More poorer kids are going to college takes that money. So just broadening the base of the college going population is actually taking up most of the increase in the Pell Grant, which is in the billions.

KERRI MILLER: I don't think that Senator Grassley, though, is saying with this idea, look, if these colleges and universities spend more of their endowment, 5% of their endowments, then we can back off on the financial aid. I think he's seeing rising tuition throughout the country at colleges and universities and saying, what are they holding on to this money for if not to try to help more kids come to college?

DAVID WARD: But that's exactly the point I'm making, that even though some of these endowments may be used for financial aid, certainly most donors, that's not the only priority of donors. And so I think he has got in-- what he has in mind is I think the cost of college. And if you want to solve the cost of college in ways other than through financial aid or perhaps by cost economies in how universities run themselves, I think it's a silly way to go. If what Senator Grassley wants is lower tuition, let's address that problem, but let's not assume that endowments are a quick fix for it.

KERRI MILLER: Richard Pfutzenreuter, do you agree with that? Do you think Senator Grassley's plan is a foolish one that won't work?

RICHARD PFUTZENREUTER: I don't want to really argue about whether the payout ought to be 4.75% or 5%. All these endowments have economic models that decide what that intergenerational equity that was talked about earlier. That's a bedrock foundation of endowments. And the payout rates is a product of that.

KERRI MILLER: I know. But we're not talking about 50%. We're talking about 5%. And that's a small amount, isn't it?

RICHARD PFUTZENREUTER: It isn't a significant amount of difference between, like I said, 4 and 1/2 or 5. We're certainly looking at our payout rate again. We're going to model it again and take a look. But that intergenerational equity is a key factor in this formula. And it can't be dismissed away.

And if the model suggests or points to a payout rate of 4 and 1/2 percent, we're going to care about that intergenerational equity and that's what our payout is going to be. It doesn't surprise me that the feds have a different view, as was stated earlier. Show me a program at the federal level where they're caring about intergenerational equity.

KERRI MILLER: All right, we're all stipulating that their budget management is not the greatest, but that's not what we're talking about this morning. If you're listening in on Midmorning, having a conversation today about a proposal, I think not yet legislation, but a proposal by Senator Charles Grassley who is looking at the gains that have been made in college endowments across the country here. Many of the college endowments had a pretty good year in 2007.

DAVID WARD: By the way, to get our listeners clear, the number of college endowments above $1 billion--

KERRI MILLER: 76. 76. Yeah, that's the number.

DAVID WARD: I have 1,800 members. So 76 of my members out of 1,800. Can you imagine for the most of my members are just kind of scratching their head a little bit about the idea of what's going on here? It's sort of like it's la la land to about 1,700 of my members.

KERRI MILLER: Let me bring some listeners into the conversation here. So if you're listening in, that's what we're talking about. Rising tuition costs with which Senator Grassley is talking about and perhaps trying to offset some of the rising costs of college by requiring that colleges use 5% of their endowment, spend 5% of those endowments.

And we've invited a number of guests here this morning to talk about it. David Ward is with us. He's President of the American Council on Education, former Chancellor at the University of Wisconsin Madison. Richard Pfutzenreuter is with us, Vice President and Chief Financial Officer at the University of Minnesota.

And I want to bring Steven Roy Goodman in to the discussion here. He's an education consultant and admissions strategist and he's author of the book College Admissions Together, It Takes A Family. And Steven Goodman, I know you've been listening to this conversation. What do you think about what you've heard so far?

STEVEN GOODMAN: Well, first good morning.

KERRI MILLER: Good morning.

STEVEN GOODMAN: And second, I feel like we're in la la land. The universities keep claiming that under no circumstances should the federal government get involved when, in fact, if you think back 20 years ago, there was the Justice Department tried to prevent the universities from tuition price fixing. And now there's a discussion about trying to have the universities spend 5% of their endowments. And as you pointed out, not 50% of their endowments. But yet it's never enough. And that any oversight on the part of any government seems to be something that the university community opposes.

And meanwhile, tuition just keeps going up and up and up. And the University of Minnesota's endowment, as you correctly pointed out, grew so much last year. I calculated it. It grew at $68,000 an hour last year. And I'm not quite sure why Minnesota needs all of that money, why it can't be used to--

RICHARD PFUTZENREUTER: Let's be careful here. In 2002, the University's endowment actually dropped 11.5%. In 2001, it dropped nearly 16%. The market goes up. The market goes down.

STEVEN GOODMAN: But why does the University need to keep hoarding all of that money? I don't understand. And I think the American people--

DAVID WARD: It was the intergenerational issue, isn't it? Doesn't it want to try to project forwards to the future?

STEVEN GOODMAN: Of course, you always want to save for a rainy day. And I think that universities should be commended, just like private foundations and public charities should be commended for saving for the future. But there's a point at which it just becomes silly when there's so much money that's floating around there. To put this in some context, Minnesota's endowment is larger than the GDP of 43 nations. The Minnesota endowment is approximately equal to the GDP of Barbados. So you're dealing with numbers that are just excruciatingly crazy. And I think what the money should be used for is lowering tuition, perhaps paying working--

RICHARD PFUTZENREUTER: Well, as we said earlier, money that is managed here at the University and our endowments, over 90% of it is restricted to a particular purpose. I can't undo the past.

KERRI MILLER: Steven Goodman, I asked the question of the universities. I'm curious about your thoughts on this, and then going to go to some of the listeners. But I asked, well, is that because you're soliciting money that comes in with strings attached? I mean, is it more about the case you're making to potential donors? Richard Pfutzenreuter says, well, we get more money because people are more interested in targeting their giving. Is that a fair argument?

STEVEN GOODMAN: Well, I think it is a fair argument. And I think he's right in that donors like to say that I'd like to endow the XYZ scholarship fund for the Department of Chemistry. But I think money is fungible, and so it's important to say, well, if we keep getting money from this source and this source and this source, when do we use it for appropriate uses?

And I think it's also fair as a society to try to figure out what happens with all this money? Why aren't we building high schools? Why aren't we using this money to fund graduate assistantships? And why are we paying all this money, very high salaries to top administrators at these schools at rates that are just way beyond the rates that we're seeing in other sectors? So I don't begrudge universities saving for the future. And as I put it in a Boston Globe op ed recently that it's important to save for a rainy day, but how many rainy days are you saving for?

KERRI MILLER: Let me go to the phones here. If you're listening in to this discussion and maybe you have a dog in this fight, maybe you're attending college, maybe you're bracing for an increase in tuition, curious about your perspective on this. Maybe you've endowed some money to the University of Minnesota or to another college and you have a different perspective on this.

We'd like to hear it. 1-800-242-2828. In the metro area, 651-227-6000. If you're online this morning, and click on Send A Question. 1-800-242-2828, 651-227-6000. Tom in Saint Paul. Hi, Tom. Thanks for hanging on and what do you think about what you're hearing?

AUDIENCE: Well, it's a great conversation and it's most apropos for my situation, because my wife and I moved here from Arizona. And the understanding is I was going to get my master's. She got her masters at the University of Arizona. I got my undergrad there. And when we moved here and I got my-- went to Pima for my-- which is also a community college in Tucson.

And basically, my point is that it was $43 a credit to go to university or to go to Pima, which is a community college, a very big community college. And it was 117, 140 to get my credit for my undergrad. And we moved here thinking, well, it's high tech, stuff like that, but we never researched the school as so far as it was how much it cost to get my master's. I went into the guidance counselor and they said, well, it's about 740 a credit. And I said no, no, no, I was asking a credit. I thought that was a class. But she said, no, that's a credit. And so that's $50,000 for me.

And then we come to find out that Berkeley and a number of other places that have the same degree that I was looking for is half that. It's $9,800 a year to go to the University of Berkeley for a master's in my area. And we own a home. We pay high taxes. I don't mind that, as long as I feel like I'm getting something for it. But I turn around now and we're moving.

We're going to move back out to either Oregon, Washington state, or California so that I can get my master's. I'm not going to pay $50,000 in this environment. And so basically, I just feel like, like I said, I don't mind paying taxes, but they're saying they want to hold it down to 4% increases. That's ridiculous. They ought to cut it in half. They ought to make it to where people can-- more and more people need to get a master's to compete these days.


AUDIENCE: It's getting more and more expensive.

KERRI MILLER: Tom, this was at the U of M?

AUDIENCE: This was at the U of M.

KERRI MILLER: All right. Let me put your point then to Richard Pfutzenreuter. Address some of what he's saying about the cost of the credits and contributing to the economy here with taxes but then having to swallow those high increases.

RICHARD PFUTZENREUTER: I'm not familiar with what program or what program here costs $50,000 a year. So I guess I'll have to beg off on that one.

DAVID WARD: If I can, I think the question is a good one, because I think it focuses on what the problem is here, which is the cost of college. I think we have a big problem. And I would be the first to admit that the recognizing both from the point of view of the public, the Congress, state legislators that we do have a problem here of rapidly rising tuition and we must face it.

And there's also the issue of the fact that states often set tuition separately in terms of how much subsidy they are prepared to give to the institution. And there are also, obviously, investments in quality that cause both buildings and faculty to perhaps be paid in different ways. So there is a problem here, and I recognize.

RICHARD PFUTZENREUTER: And in Minnesota, at the University of Minnesota, we have what's called the Founders Free Tuition Program. So let's take an average family income of $25,000 a year. Next year, 4,200 students, undergraduate students here between federal money and state money and U of M resources will have their tuition and fees entirely covered.

KERRI MILLER: But the rest of them or many, many of them are going to potentially absorb a 7.5% increase in tuition, right?

RICHARD PFUTZENREUTER: Well, that's not true, and it wasn't true in the year we're in now. In cooperation with the legislature and the appropriations we received for this fiscal year and next on the Twin Cities campus, tuition for Minnesota resident students with a family income up to $150,000, that only went up 1.9%. The plan for next year is 4.8%.

KERRI MILLER: Does that depend on what happens at the State Capitol? Because as you know, Governor Pawlenty is proposing some cuts to the budget.

RICHARD PFUTZENREUTER: The president's hope is that the cuts will be reduced and we'll be able to retain that scholarship program for Minnesota residents for the coming fiscal year. It's the press that keeps saying it's 7 and 1/2 percent.

KERRI MILLER: Well, I guess I'm asking you, is the number absolute? You're saying it's a 4% increase and that's where it will be or does it depend on--

RICHARD PFUTZENREUTER: Depending on the level of cut, the increase next year will be--

KERRI MILLER: So we don't know. We don't know yet what's going to happen at the state capital. We don't know if Governor Pawlenty will get his way in the budget or if--




DAVID WARD: It is a very good point, though. If, in fact, the state legislature is as much a variable in this decision making as is the University, then one of the great difficulties is where does the endowment fit? You cannot go out and say, oh, the governor and the legislature has decided to cut the budget by 3%. Part of that cut gets absorbed by tuition. You hope that not all of it will be and that certainly there's some need based adjustment at the bottom end.

But then to go to a donor or go to the people who are the fiduciary owners of the foundation and say, we'd like you to substitute for this reduced public investment, this is a very hard sell. So I'm trying to argue that it's not an impossible sell, by the way. If there is surplus money, I'm sure some endowments would make some modest contribution to this issue if there is flexible money there.

KERRI MILLER: Steven Goodman, I want to let Steven Goodman in on this.

STEVEN GOODMAN: If I may, I'd like to bring this down to Earth a little bit. I thought, Tom, your question was terrific. And I think we need to worry about and your neighbors and your family members and your future and your future and the future of your family.

The fact that someone like Tom is going to have to leave to go out of state because of costs is crazy. And I know these discussions, these public policy discussions, are important, and we can talk until we're blue in the face about endowments and all of that. But really it comes down to people. And it comes down to the fact that people like Tom can't afford to go to school.

And in fact, what's one of the crazy things, if this keeps up, the United States is going to lose, not just Tom. Since 2000, the United Kingdom has reported an 80% jump in the number of Americans who've studied there. The Canadian government has reported that the number of Americans studying for full time degrees in Canada has jumped 220% in the last 20 years.

And so this is crazy that we have to figure out a way to contain the costs. And I think that Senator Grassley is absolutely right to try to get universities to be accountable to somebody. It's not a crazy thing. In fact, it makes a lot of sense to people like Tom and millions of Americans.

KERRI MILLER: All right. Let me thank-- Mr. Ward, hang on one second here. I have to Thank Richard Pfutzenreuter. I've got to go to news and then we'll come back and we'll give you a chance to speak, all right? Richard Pfutzenreuter, thanks so much for being with us.

RICHARD PFUTZENREUTER: Well, thanks for giving me the opportunity to participate in this discussion.

KERRI MILLER: We appreciate it. Vice President, Chief Financial Officer of the University of Minnesota. David Ward continues with us, President of the American Council on Education. And Steven Goodman continues with us, education consultant and admissions strategist. He's the author of the book College Admissions Together, It Takes A Family. We're going to break for news. When we come back, you will get a chance to get in on this conversation. 1-800-242-2828 651-227-6000. We've got full lines. You can reach us online at and click on Send A Question. Back in just a moment. To the newsroom and Greta Cunningham. Hi, Greta.

GRETA CUNNINGHAM: Good morning, Kerri. Thanks. The number of newly laid off workers filing for unemployment benefits rose last week to the highest level in nearly two months. It was another sign that the weak economy is having an adverse impact on the labor market. The Labor Department announced today that applications for jobless benefits totaled 378,000 last week. That was an increase of 22,000 from the previous week. It was a far bigger increase than had been expected.

US stocks appear headed for a mixed open investors are eager to take advantage of bargain prices following yesterday's market slide. But they're anxious about the rise in new unemployment claims. Yesterday stocks plummeted, giving back Tuesday's big advance. Investors grew worried, once again, about the possibility of further troubles at banks with mortgage related debt on their books.

Vice President Cheney has met Afghan's President Hamid Karzai during an unannounced visit to the country. Cheney says the United States will call on NATO countries to step up their commitment to Afghanistan. The Vice President is praising progress made in improving security forces in the country despite continuing violence. After meeting with Karzai, Cheney boarded a helicopter and flew to Bagram Air Base to get a briefing and to spend some time with US troops.

In regional news, Senator Amy Klobuchar says she thinks the National Transportation Safety Commission should have a public hearing into the collapse of the interstate 35 W bridge in Minneapolis. Klobuchar joins Congressman Jim Oberstar, a fellow Democrat, in questioning the board's decision not to have a public meeting. The state's other Senator, Republican Norm Coleman, says he trusts the judgment of the NTSB to proceed as it wants. This week the NTSB voted three to two to follow a recommendation from its investigative team and not hold an interim public hearing.

There is a winter storm watch in effect for west central and southern Minnesota tonight through tomorrow. Mostly sunny today in the northeast, with clouds in the west and south. Some light rain and snow becoming likely in the far southwest this afternoon. A mixture of rain and snow possible this afternoon in west central and southern Minnesota. Highs today ranging from 35 to 45 degrees. Right now in Duluth, skies are clear with temperature of 18, a few clouds in Rochester and 30. It's clear in Moorhead and 25. Overcast in Sioux Falls and 35. And in the Twin Cities at this hour, a report of clear skies with a temperature of 27 degrees.

MELISSA OUSLEY: Before the light of Easter comes a time of darkness and shadow, of betrayal and death. Classical Minnesota Public Radio explores the deep mystery of the spiritual season with two special concerts. On Thursday, it's the Concordia College Choir in performance last month in Saint Paul. And Friday, an encore broadcast of a treasured choral tradition with the Dale Warland singers and cathedral classics. I'm Melissa Ousley. Join me for Light In The Shadows Thursday and Friday at 7:00 on Classical Minnesota Public Radio.

SPEAKER 2: Today's programming is supported by the U of M College of Continuing Education, interdisciplinary graduate and undergraduate degrees for adults. You can design your own degree. Online, evening, and summer courses available. Details at 612-624-4000.

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KERRI MILLER: We're back on Midmorning on Minnesota Public Radio. I'm Kerri Miller. Coming up at 10 o'clock, this new report from the CDC. Some rather alarming news that one in four, at least one in four teenaged girls in this country has contracted an STD. We're going to find out why and how young people, girls and boys, consider the idea of having an STD. Has the stigma of that diminished with the advent of so many kids dealing with this? We'll talk about that at 10 o'clock. We'll also get some advice from our guests, both doctors, about how parents talk to kids about STDs. That's at 10 o'clock.

And then tomorrow morning at 9:00, Congressman Jim Oberstar is going to be with us. He has just sent a letter to the head of the NTSB about his displeasure with the idea that the NTSB has voted not to hold a public hearing on the 35 W bridge collapse. We'll talk about that. We'll talk about Jim Oberstar's views on the merger and anything else that you'd like to raise. Of course, he is Chair of the House Transportation Committee. So much to get in this conversation. Congressman Jim Oberstar with us tomorrow morning at 9:00.

Back to our conversation. This morning with our guests, we're talking about endowments and tuition hikes. And our guests this hour, David Ward is President of the American Council on Education and Steven Goodman is with us. He's an education consultant and admissions strategist. Gentlemen, I'm going to go right back to the phones here, because we have not heard very much from our listeners in this conversation. So let me go to Al in Minneapolis. Good morning. Thanks for waiting. What do you want to tell us?

AUDIENCE: Well, thank you for taking my call.


AUDIENCE: A couple of points here. I'm always quite amazed when we get people who come on and complain about the rising costs and point at issues of inappropriately high salaries in the public sector. I'm not sure I ever hear those voices complaining that loudly about inappropriate salaries in the private sector. It's always a problem to figure out how to manage the issue of value when you don't have a bottom line or a clear profit.

Having said that, my wife and I have established a small endowed scholarship at the University of Minnesota. I view that as a private contract between myself or ourselves and the University. And I somewhat resent Senator Grassley's plan to intervene and manage that contract. It seems to me that that's up to those of us who have set those funds aside in a public institution. And it's up for us to work with the management of that organization to maximize the benefit of those funds.

I mean, I grant the earlier caller's issues of rising costs. I mean, I've got adult children that are struggling with school loans, and one's finishing medical school or residency and has issues there. So I'm clearly aware of those problems. And I think the universities generally have an issue of controlling their costs as best they can.

KERRI MILLER: But primarily, you say this is a deal between the people that want to give and the institution they're giving to.

AUDIENCE: That's correct. And I think it's incumbent upon the legislatures and those people to fund appropriately the public colleges.

KERRI MILLER: All right. Stay with me for a minute.

AUDIENCE: They're always in a little bit of a disadvantage in competition with, as you pointed out, with the Harvard things. And I've been to both schools, so I understand those issues entirely.

KERRI MILLER: Stay with me for a minute. I want Steven Goodman to react to that.

STEVEN GOODMAN: Well, I think that's-- and thank you, Al. I think that's a fair point, because it is a contract with you and the University. But remember that the government does step in on a number of things. The government passed the Americans with Disabilities Act. The government says that there needs to be a rough parity between the number of male and female sports teams. The government says that universities and individuals need to file tax returns in a timely way.

So in a perfect world, perhaps you're right that there would just be an absolutely pure contract between you and the University. But the federal government and state governments have repeatedly gotten involved in things, whether it's in the public or private sectors, when it's in the interest of the public to do so.

So I empathize with you wanting to have a pure contract. I mean, I can't make a contract with you to sell you 100 pounds of marijuana because I feel like it. I mean, that's against public policy and that would be illegal. So in the same way that the government steps in for certain things, this is just another example of the government sometimes needs to step in when-- antitrust is another example. When institutions get so large, then the government has to step in. And I think we're probably entering that era when we need more accountability for the universities, notwithstanding your contract.

DAVID WARD: I hope you'll hold the same standard to the private sector.


KERRI MILLER: David Ward, what do you mean?

DAVID WARD: Well, I mean, we are indicating how in the public interest, the government should intervene. And I absolutely agree with that. I couldn't agree more. But it's kind of interesting for eight years we've certainly had a deregulatory attitude, perhaps the subprime mortgage mess might have been benefited from greater regulation. In other words, I don't think universities and higher education are the only place that are in desperate need of public interest.

But I think all of these issues are not important. I think my colleague on the phone here was right. It's the human story that's most important. The first question, the first call in, it's the cost of college that's the issue. And to get the endowment issue, we can all differ about whether or not the government should regulate endowments, whether it be proper or not. That is a debate. But that it will then address in any appropriate way the other bigger challenge of access to college and the cost of college is not the case. It might appease in one or two cases the magnitude of this issue, but it is not a solution, and in my view, not an appropriate way to go.

So if what we're after here is access and affordability in higher education, we need to address that issue. And endowments, first of all, affect very few universities in the total picture. And I think it raises a lot of issues about people's attitudes and the underlying philosophy of endowment if, in fact, the government were to intervene. I'm very deeply concerned about college cost and finding some answers. And I worry that the endowment debate is in effect going to distract us from a serious solution of the issue of college costs.

KERRI MILLER: David Ward, I don't get the feeling that this discussion is in anybody's view the end all be all to high tuition, but is it really right to say that as we look at a lot of different dimensions of this situation we're in with rising college costs that this is not perhaps a part of it? Even if at many colleges a small part of it.

DAVID WARD: And I would say that the point you've been making, which I also agree with, that is in going out with statements to donors in trying to suggest areas of strategic need in the college for which giving should be made. I did certainly 10 years ago make need based student aid to be a target of opportunity for donors. There was no question.

KERRI MILLER: At the U of W.

DAVID WARD: Yeah. And I think this is true. I mean, the fact that Harvard, for example, have responded as of many other of our independent colleges, in fact, that part of their endowment that can be reallocated to need based aid, they have done so. So I agree with you that in the range of things that you might want to put on the table for donors to give to, which is, of course, ultimately their decision. We certainly should stress the idea of need based aid as an option. I have no problem with that at all.

KERRI MILLER: Steven Goodman, a quick thought on this and then we'll go back to the phones.

STEVEN GOODMAN: Well, the human dimension is right. I think David and I both agree the human dimension is what this is about. I happen to believe that accountability of universities will help to help individuals, and that's the human dimension. And without that oversight, we're just going to simply have universities hoarding more and more money and more and more people like Tom leaving the state and leaving the United States to go to get their education.

KERRI MILLER: All right. Let me go to Drew in Minneapolis. Hi Drew. Thanks for waiting.

AUDIENCE: Hi Kerri, how are you?


AUDIENCE: I'm calling because I did quite a bit of shopping around for-- I'm doing my thesis for my master's right now, and I did quite a bit of shopping around when I was looking to go to grad school and ended up going long distance to the University of Nottingham in England because the price was significantly less than it was here at the time. And even with the cost of or the value of the dollar going down in comparison to the pound, I'm still paying 1/3 less than what I would be paying here.

And I think that with the advent of the internet and the ability of people to be shopping around and looking for the best deal, it's gone to a global market. And people are going to look outside of the country when they can get that much less cost for tuition.

KERRI MILLER: Steven Goodman, I think that's an interesting point. As colleges continue to experience tuition hikes, that there's just many more opportunities out there for students to say, well, if it's not going to work here in state, I've got an entire world to use to get my degree. How are they going to compete with that?

STEVEN GOODMAN: Well, and some universities are going to have trouble. In fact, my job is I'm an educational consultant. I advise students and families on the college admissions process. And my fiduciary responsibility is to the student and to the student's family. So I very often advise students who will go to a university overseas rather than a school in the United States simply because of the cost or in some instances because they perceive that the quality of that particular school may be better.

And in Drew's case, I mean, Drew acted as a rational consumer of the education marketplace and he and he found a program that was going to suit him. I have a student right now at the University of Edinburgh. I recently came back from the University of Saint Andrews. And I think this is going to continue happening. I mean, as the world becomes much more global, I think we have to be really concerned about our universities pricing themselves out of the market.

And that's one of the reasons that I've argued that it's important to spend more of the endowment money on students here. Because if we don't spend that money, more students like Drew and Tom and I'm sure there are thousands of other people throughout Minnesota who are just affected by these costs. There are 756 high schools in Minnesota.

And imagine what those high schools could do with the extra money if we just-- we're not asking for 50%, Kerri, as you pointed out. We're talking about 5%. And 5% is $120 million. Imagine how that money could go to reduce what Drew or Tom would pay for their school or to help these 756 high schools throughout Minnesota.


DAVID WARD: [INAUDIBLE] is the increment. Right now they're probably paying out 4 and 1/2 percent or more. So I think it's just that you wouldn't yield the full million dollars you're indicating there. It would be much less than that.

KERRI MILLER: Well, I'm not clear about-- David Ward, I'm not clear about what you're saying. What do you mean?

DAVID WARD: Well, I mean, he was taking 5%.


DAVID WARD: But they're already spending 4 and 1/2. He said, look, what would 130 million do. That's not the amount that would be yielded by this legislation. It would be the increment from, let's say, 4.2% or 4.3% up to 5%. And again, I want to just come back to the point here of the international marketplace.


DAVID WARD: We have many American universities setting up abroad too, by the way. Many of our business schools have satellites abroad actually charging quite high tuition and still getting students. I do believe the marketplace is important and students should choose. On the other hand, for undergraduates, that may not be an option and they should be able to go to their local university and tuition should be affordable.

I think where am I disagreement here is whether the magnitude of the income gain from regulating endowment payout would give you the kind of money that would have even the most minor effect on the tuition problem. It could help and it should help. But the magnitude of it will be small. And if we focus on this issue, we may also discourage donors.

And in the end, we may find that gentleman who called earlier said, well, I don't think I'm going-- I'm just I'm not going to give that way. I'll give it to a private foundation that could then give it independently of the University to the students that I wish to give it to or to the programs I wish to give it to. I think there's a trade off between--

KERRI MILLER: But I would say--

DAVID WARD: Regulation and perhaps the recognizing the rights of donors.

KERRI MILLER: Let me follow up on what you've just said there. What if more donors actually gave directly to programs that would benefit students and they weren't giving to build these huge endowments? You see what I'm saying?

DAVID WARD: Well, that's beginning to happen. Did you know that John Morgridge has just, former head of Cisco, has just given a major grant to a foundation that's the fund for Wisconsin scholars. Any graduate of Wisconsin high school going to any school, public or private in Wisconsin, will get some sort of financial aid from this foundation.

So I believe that some philanthropists are recognizing that if you really want to address the access affordability problem, there probably are some other ways to go about doing this. But it's got to be the philanthropist's desire and purpose. And in some cases, I think we are seeing some foundations developed independently of the universities, which will serve not only one University but all the universities in a particular state.

KERRI MILLER: Steven Goodman, is that part of the answer here? If you really want to do something about allowing more kids access to college, you get outside of these big endowments.

DAVID WARD: If a philanthropist felt the same way as some of us, as my colleague here on the phone, the advice would be to try to create foundations explicitly designed to serve access and affordability. Because many donors to universities are really interested in programs and facilities and other issues than access alone. And to some degree, those preferences historically defined the purposes of foundations.

So my concern here is not-- and by the way, I also feel that some degree of accountability and regulation is a very good thing for higher education, although it needs to be done in such a way that it does no harm as well. The point I think I'm trying to make here is that if the issue is access and affordability, the endowment issue, while it may need to be addressed by those who are concerned about it, not by myself, obviously, I understand their point of view. But it will not and is not a strategic--

KERRI MILLER: I think we've got that.

DAVID WARD: way of getting at the college cost issue, which--


DAVID WARD: --I believe is a very serious issue.

KERRI MILLER: I do think we understand where you're coming from here. Steven Goodman, weigh in on this, and then we'll take another call.

STEVEN GOODMAN: Sure. I mean, I respect David, but I think this is just double speak. David claims that he believes in accountability but he refused to sign on to the Spellings Commission Report where there was even a simple, a minor amount of accountability.

DAVID WARD: No, no, no.

STEVEN GOODMAN: I think on one hand-- I think on one hand, you're saying that we need to have a little bit of accountability but as long as I'm the person who decides who's accountable and when. Society needs to be accountable. These are massive amounts of tax dollars. The University of Minnesota last year had $548 million from the National Science Foundation.

Somebody has to be in charge of that money. And I think that the university world, while I love being part of the university world, the university world needs appropriate accountability and they need to be accountable to someone. And what we see is just this increased growth and growth and growth and growth and growth and hoarding and hoarding and hoarding of more money and no one's looking out for students.

KERRI MILLER: Let me squeeze one last call in here, because Pilar has been waiting for a long time. She's in Morris. Thanks so much for hanging on. Tell us what you wanted to say.

AUDIENCE: Hi. I just wanted to address the size of the endowment.

KERRI MILLER: Yeah, sure.

AUDIENCE: I was a fundraiser at a public and a private institution. And part of the reason it's so large, I mean, I know in the last place I worked, the goal was to fund scholarships. And it takes about $100,000 of fundraising. We would get a donor to give $100,000 and that money would then fund just tuition for one year for one kid. And this was a public institution.

So at a private, it would probably be twice as much, because the tuition cost is higher. And that was just principle. I mean, we never touched the principle. We would just spend the interest. And so that money could fund one student for year after year.

And a lot of universities, and I can't speak to every university, the goal really is to give free tuition to every kid. And if their endowment is large enough, they can do that and just use the interest. And that's kind of the point of growing the endowment. I mean, at least at the institutions that I worked at. Now, there are donors who want bricks and mortar and they want their name on a building. And why would anybody turn that down?

KERRI MILLER: But Pilar, if you're saying it costs so much money to fund one child to go to school and then you see that the endowments, most of the endowments are never-- most of it is never touched. It's just generating more money. How does that fit with making sure more kids are getting scholarships to go to college?

AUDIENCE: Well, if you spend the money then it's gone. I mean, if you spent that $100,000, that'd probably fund-- I mean, Al said it was $50,000 for him to get his master's. So there's two kids. Their whole education is funded, gone. But if you keep it in an endowment and just in the interest, you can fund kids for year after year after year.

KERRI MILLER: Steven Goodman, weigh in.

STEVEN GOODMAN: Well, let's look at this in terms of a family. And let's assume that if you don't spend the money today on fixing your garage or you don't spend the money on fixing your car, you'll have the money tomorrow. That's true. But at some point, you need to fix the car today, because you need to get in the car and drive to work. Or you need to fix the garage or you need to pay for heating oil. It just doesn't make any sense. At some point, when is enough enough?

When does it end. I mean, at what point-- and Kerri, I think you asked this at the beginning of the program. At what point do you stop raising money and you say, we have enough and we're going to go on and work with the students we have. And you didn't get a straight answer from our colleague from the University of Minnesota.

KERRI MILLER: David Ward, what about the idea of capping the endowment?

DAVID WARD: Again, it just it seems to me that if there is an appropriate expenditure of the endowment, growing the endowment simply grows the expenditure. By growing the endowment, there's more money to spend from the interest that's made there. I think what the listener just now was observing that in many endowments, one of the great problems those endowments that have got in trouble is that they've raided the principle and ultimately the principle has disappeared. And it is this problem that the amount of money that's made by an endowment varies from year to year in good times and bad times.

So again, certainly if you had 10 very good years in the stock market and the rate of growth of the endowment had grown very, very rapidly that it had no proportionate relationship to the payout, I certainly think that the endowment, the people who supervise the endowment, who are frequently not directly linked to the University to protect the University from perhaps making untoward decisions, that they could then make a different decision. But raiding the principal, which could in fact result from spending more than is necessary, is in fact denying that what you have is an endowment, but rather an income stream to which future generational needs are not going to be thought about.

But again, you see, I think we've got to come back to two other issues that keep being raised here, the cost of college and the level of government regulation that is appropriate. And I think that while my colleague here on the line and I may differ a little on this, we both agree that that's where the answers are.

KERRI MILLER: David Ward, I appreciate you being with us this hour. Thanks so much. David Ward, President of the American Council on Education, former Chancellor of the University of Wisconsin Madison. Steven Goodman, one last thought here before we wrap our conversation.

STEVEN GOODMAN: Well, thank you for having me. Just in terms of the tuition costs, I just want to put this in some context. If the cost of milk had gone up as much as the cost of college since 1980, a gallon of milk would now be $15. It's time for the American public to do something about college costs. And we've got to contain them and it's got to be part of a national discussion.

And Kerri, I applaud you for starting this discussion and continuing this discussion, but we need there to be some government intervention here. Otherwise the endowments are going to keep growing, tuitions are going to keep growing, and the American people and students and families are going to be hurt even more than they've been hurt.

KERRI MILLER: Thanks for spending part of the hour, most of the hour with us. We appreciate it.

STEVEN GOODMAN: Well, thank you.

KERRI MILLER: Steven Goodman is an education consultant and admissions strategist. He's author of the book College Admissions Together, It Takes A Family. Coming up at 10 o'clock, we're talking about this rather alarming CDC report that came out late last week about how many teenaged girls in the United States have STDs.

We'll talk about whether the stigma of having an STD is what it was a couple of decades ago and why so many teens are contracting them. Is there really not enough information available? Are kids not finding the information perhaps where they need it? We'll talk about that. We'll also ask our guests who are both physicians for some ideas about how parents talk to their kids about sexually contracted diseases. So we'll talk about that at 10 o'clock.

Tomorrow at 10:00, well, I hope you've gotten your copy of To Kill a Mockingbird out of the library. The last time I tried to take a copy out, they were all taken. So I know somebody's out there reading the book. This is our Midmorning Book Club suggestion. And we are open for business again tomorrow at 10 o'clock.

This is really going to be fun. We have a guest with us who wrote a portrait of Harper Lee. We also have a guest who played Scout in the movie. We'll hear excerpts from the movie and we have a writing class from a local high school coming in to observe the show.

Most of them have read To Kill a Mockingbird, of course, and I think we may have one of the students slip into the studio and give us their thoughts from the high school perspective about what this is like to read this extraordinary novel for the first time in high school. I found that the book really changes as you age and as you go back to it over and over again. That's tomorrow at 10 o'clock and this is Midmorning.

SPEAKER 4: Support for this program comes from MinuteClinic, committed to making health care a little easier for people with a lot going on. No appointment necessary, open seven days a week, including nights and weekends. for locations and details.

SPEAKER 5: Programming is supported by the Shakopee Mdewakanton Sioux community, who have given 254 defibrillators to charitable organizations, schools, and others. To request an AED for your organization, you can go to

KERRI MILLER: I'm Kerri Miller. You're listening to Minnesota Public Radio.

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