Alumni Perspective on College Endowment & Competitiveness

To the Editors:

Oberlin College’s financial distress is easily understood. The endowment, tiny by comparison with institutions with which the administration prefers to compare itself, is being attacked by its own stewards. At $479 million it has hardly grown since I was there (the late ’70s). If memory serves, the endowment then stood around $200 million. [I may be wrong, and if so I apologize, but after all, I think we can all agree the College is hardly trumpeting historical endowment performance.] The Dow Industrial Average, meanwhile, has grown from 814.10 on Nov. 13, 1979 to close last Friday at 8537.30.. This 10x growth should be the minimum expected growth rate for a major institutional fund such as Oberlin. To underperform it by 75 percent is mindblowing. If the College chooses to liquidate capital to fund systemic operating deficits, then like any other business it will hit the wall and ultimately fail. Prudence would have suggested an investment policy that attracts and husbands capital, and reinvests interest income — and releases some fraction of interest income for operating purposes. This is doubly important when the capital account is undersized at the outset. Markets are efficient, and markets punish those who burn capital to band-aid the present. You don’t sell stocks and bonds (or paintings) to buy groceries and gas. Oberlin does. Grinnell doesn’t.
It is important to note that it doesn’t matter how much capital the Oberlin Development Office raises in the form of Alumni contributions, if in practice those capital contributions are liquidated to pay operating expenses.
It is a remarkable to see Oberlin continuing to fail at either building a capital base or managing it wisely. The result of this failure is manifest in its competitive position. At the time I (an Iowan) applied to Oberlin in 1975, there was simply no question that Oberlin was a superior institution to either Grinnell or Carleton, where I didn’t even bother to apply because I wasn’t interested in going to a second-tier school. My father went to Oberlin, it was the best college in the midwest, and the only other places I thought about attending were Williams and (Connecticut) Wesleyan. The University of Chicago and Northwestern were not in the same league then, and I don’t mean they were held in higher regard than Oberlin. At that time, most people automatically placed Oberlin in the top three to five liberal arts institutions in the country. It remained, for many students, a first choice, not a safety school. Today it sits deciles below all of these supposed peers, by any of several objective measures. As a result, just as in the case of the paltry endowment, markets are proving efficient: the better students are going to better schools. Unfortunately, graduates value their education upon departure. Oberlin’s endowment, by most measures, is a shadow of its peer group. US News and World Report knows this, and reports it, because it is measurable.
Benchmarking Oberlin, as Professor Piron does, is a useful exercise. Oberlin does not exist in a vacuum. It does not get to lecture the external world as to what is, and what is not, a correct measure of its value. Its financial vulnerability reveals that it exists in a competitive market: alumni can contribute their surplus capital to other schools, other philanthropies, other activities. Objectively it is irrefutable that they are doing just that. One might ask: how will Oberlin restore its financial resources absent a renaissance of alumni involvement and capital funding? However, one might better ask: why are so many alumni, who in fact have the resources to contribute, sidelined by administration politics?
There is enough money lying around to keep things going for another generation of steady state decline, meanwhile funding long-term comp for college executives and maintaining the status quo in regard to the “genteel poverty” that is the life of an academic. There is not enough money, however, to restore Oberlin’s historically important role in the highly competitive higher education marketplace. New money needs to step up. That won’t happen until the dominant culture, which punishes dissent and dismisses peer group innovation as either illusory or irrelevant, changes. And it won’t happen until the donors suspect their money will do more than sustain current spending pathologies.

–Drew Eginton
OC ’79