stated by F. D. Patterson. Writing on the erosion of the financial viability of institutions of higher educa tion, Patterson concludes A major cause of their financial problems The negative impact of the factors just noted is exacerbated by the fact that higher education is a labor intensive industry, since the largest portion of the budget is spent for salaries and wages. There are too often adverse relationships between expenditures needed to meet salary and wage obligations and institutional income. 3 The financial crisis has affected the financial stability of all classes of institutions. For institutions in the developing category, already financially marginal, the financial situation is especially critical. "Financial Stability" was considered by Hodgkinson and Schenkel to be the second most important measure of institutional viability. Of the 41 institutions in their case study sample, only two institutions in the high range category received a rating of excellent, and only 11 institutions in both the high and medium range categories ure.4 received a rating "good" on that measure. The student clientele an institution serves foretells, to a great degree, the economic status of its alumni and, hence, the character of the gifts it will receive. Institutions serving Black and predominantly low-income students must, of necessity, look beyond the Alumni for the type of financial assistance necessary to keep their institutions financially viable. Salary Changes in the economics of higher education are clearly linked with changes in the general economy. and wage structures external to higher education impact other economic indices in such a way that cost of living demands tend to lure away all but the most dedicated faculty and staff from institutions with low salaries and other less favorable conditions of work to institutions offering more favorable working circumstances. inflation and other upward spiralling changes in the economy tend to activate "push-pull" pressure on key personnel at financially weak institutions. The inability to arrive at a point of financial stability on the part of an institution leads to academic instability. What is needed is a system of financing higher education that will In short, allow an institution to develop long term support elements and, hence, insure the delivery of a high quality of educational services. Private institutions are suffering more acutely from inflation and other systemic changes in the economy than institutions sustained by public support. Whether under public or private control, however, the quality of all higher education declines when the institutions in either sector find their delivery systems impaired because of the lack of funds. Viable alternatives to meet such exigences are all too few. Private gifts have not kept pace with the rising costs of higher education. Indeed, the percentage of institutional budgets derived from gifts has drastically Funds for general operation expenses constitute declined. the major need. The main pertinency of the foregoing discussion for Title III funding strategies is its relationship to the AIDP Fund replacement requirement. In too many instances, target funding through federal grants results in enlarging operating budgets with support for the grant period only, leaving the institutions with increased obligations and no funds for meeting them. This paper presents two strong options for dealing with this problem: (1) an endowment funding plan, and (2) an educational access funding option. Endowment Funding Plan Theoretically and practically, endowments as a vehicle for funding higher educational institutions is both an old and widespread practice. A study made in 1962 showed that there were 1,365 institutions with endowments of less than $500,000 cash but only 46 with endowments of over $25 million. The statement below is a useful summary of the status of endowments in higher education since 1969. 5 A 1969 study found that although at least 2,000 of the Nations's post secondary institutions had endowment funds, 23% of all endowment assets were held by five institutions. The Boston Fund's annual survey of the endowment funds of 70 odd institutions bears out this trend, for seven or eight schools are invariably found to represent over one-half of the total value of the endowments at the schools surveyed. Although Harvard has endowment funds approximately $1 billion in value, and there are perhaps 150 other institutions in the United States possessing endowments of $10 million or more each, most institutions have little or no resources of this type. For example, in Fiscal year 1971, there were 2,556 institutions possessing endowment funds with an estimated market value of $14 billion; however, only 112 million was in the hands of 2-year institutions. 6 In addition to the concentration of the bulk of endowment monies in the hands of a comparatively small number of institutions, such funds are also concentrated to a considerable extent in private colleges and universities. In Fiscal Year 1973, American institutions of higher education possessed endowments estimated as having a market value of over $15 billion. Of this total, only $2.5 billion or approximately 16% of the total sum was held by publicly controlled institutions. Thus, endowment funds have been a much larger source of income, relatively, for well-established, selective, private colleges and universities than they have been for less-selective, poorly financed private institutions or for most public institutions. Although the relative importance of endowments as a source of income has tended to diminish over the years, as enrollment has risen and other sources of income, particularly Federal aid, have increased in importance, endowments are still a highly significant source of revenue for many private institutions. These institutions tend to pursue vigorous policies aimed at attracting additions to their endowment portfolios. When data on endowment per student is examined, the same type of profile emerges. In 1962, more than half of approximately 400 private liberal arts colleges were found to have endowments of less than $2,500 per student, but 13 percent had endowments per student of over $10,000. The same report found that 21.6 percent of the endowed private universities had endowments per student of over $10,000. The conclusion is inescapable that the bulk of endowment funds both on a per institution and a per student basis is lodged in a few highly endowed private colleges and universities. Also, it is easy to conclude that the relatively small, low prestige, unknown |