Today, the University officially kicks off its newest fundraising campaign, Victors for Michigan, aiming to raise the ambitious sum of $4 billion through private donations. Two of the campaign’s stated goals are to “guarantee that a diverse group of the world’s brightest students will be able to study at Michigan,” and to “serve the public good by collaborating on bold new ideas to solve the world’s most challenging problems.” But can we really trust an administration that is increasingly run by wealthy business interests to make the university more diverse and more affordable? Why would these financial interests want to “serve the public good”? What do they even mean when they say that?
Despite the recent publicity stir, Victors for Michigan has been accepting donations for about a year now. The recent contributions by real estate magnate, Steven Ross and Berkshire Hathaway Vice Chairman, Charles Munger, respectively, are part of the campaign. If we analyze how the funds from these two donations are being used, we can gain a better understanding of what the real goals of the campaign might be. Ross’s highly publicized $200 million donation went entirely to two places: the football team and the business school. Sports are great: they provide students with an opportunity to relax and relate to each other. At the same time, Michigan has one of the only football programs in the country that turns a profit and the team is already very well funded. Surely the money would have been applied more productively if it were used to lower tuition or fund scholarships.
If the goal of the campaign is truly to “serve the public good” then why accept a donation to the already well-funded business school? Isn’t it the business class that has destroyed the environment, corrupted our democracy and created massive levels of inequality? If the goal is to serve the public good, Ross’s donation could have gone to faculty, students and programs studying social justice and environmental sustainability, among many other areas in need of funding. Ross—who is the campaign’s chair—clearly isn’t committed to its “goals.”
If Ross’s donation is problematic, Munger’s is baffling. A billionaire oligarch, Charles Munger recently gave $110 million to build an unneeded—and unwanted—graduate student dorm based on laughable blueprints that would stuff seven people into every apartment. If you are a graduate student, or if you know anyone who is, then you know that most are adults who do not want to live in dorm-style apartments. Beyond that, the predicted price tag of a room would be $1000; this is 77% of what a GSI earns in a year teaching at the University. Even more outrageous is the fact that the university is taking out $85 million in bonds to finish the project and borrowing against undergraduate tuition. All of this so Munger can have his name on a building. How does spending $185 million on this ridiculous project promote the public good or make the University more affordable?
In the end, the university’s rationale for the campaign relies heavily on a narrative of state defunding. For example, as a Detroit News article relates, “President Mary Sue Coleman called the campaign ‘audacious’ and said no gift is too small since universities need philanthropy with states no longer able to support them to the degree they must for schools to be globally competitive.” This narrative seems difficult to square with the actual role of the endowment in funding university operations. The endowment contributes only 4.5% (of its total holdings) to the general operation funds of university each year. The principal stays invested. Thus, if we look at the breakdown of revenue sources at the university in 2010 the endowment contributed only $253 million. Student tuition however generated over $1 billion, while state funding totaled $315 million.
The endowment clearly has very little to do with making up for lost state funding. Its purpose lies elsewhere. And that elsewhere is in the university’s move to behave more and more like a hedge fund, mobilizing donated capital to secure new revenue streams. It does this by taking advantage of its tax-exempt status to build up a hoard of money that it then invests around the world in shady funds and places it would rather the university community did not know about. In so doing, the university is slowly becoming an important player on Wall Street but to play with the “big boys” it needs more and more capital, which requires constant fundraising campaigns. This money is destined for investment not students. Little of it will ever reach students in the form of scholarships or be used to offset increases in tuition.
This then is the dirty secret of the university: the real money that circulates through it is primarily student tuition and, as a result, student debt. No number of high profile or “mom n’ pop” donations is going to make that fact disappear. Why? Because to lower tuition significantly without making major changes to its business model (i.e. stopping its construction spree or eliminating costly administrative bloat), the university would have to raise between $500 million and $1 billion in donations every single year for the rest of its existence.