Page 145 - Crisis in Higher Education

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dollars of spendable earnings. Endowments usually have a well-
defined purpose that must be followed or the donor can ask to have
the funds returned.
3. Donation/gifts: Like endowments, these gifts may come from indi-
viduals, companies, or foundations; funds can be spent on the
same kinds of activities; and they often have identified spending
restrictions. The difference is that the entire donation can be spent.
Amounts vary widely, with nationally and internationally known
institutions receiving the most.

5.4.2 Uses of Funds

The mission and goals of universities identify activities that consume
resources: instruction, research and innovation, service to the acad-
emy, and outreach and engagement. As illustrated in Figure 5.4, funds
received for research (12% from federal sources) and endowments and
other gifts (27%) typically have well-defined spending requirements, so
universities must spend them as directed. For the small portion of these
funds that give universities discretion, the institution is within its rights
to spend the money in any way that helps it achieve it mission and goals.
One thing is clear, however, this spending, which totals 39% of univer-
sity revenue, is typically subject to a generous charge for administrative
overhead. This includes indirect costs for things like libraries, facilities,
and administrative staff, and it can be 30% to 70% of the dollars in a
research grant. 10
The challenge is to know if tuition payments and government tuition
subsidies, which total about 61% of the revenue shown in Figure 5.4, are
used effectively. Not all of these funds are spent on instruction. Some,
probably more than necessary, are consumed by administration in the
colleges and the central bureaucracy. In addition, some funds are spent on
research and innovation because, as described previously, not all research
is externally funded. Professional faculty members spend little time on
research, and instructional faculty members spend none, while tenured
faculty may spend 40% to 50%, or even more time. This is consistent with
the fact that many tenured faculty members teach about half as many
student credit hours or even less than full-time instructional faculty. It is
unclear whether students, especially undergraduate students, benefit suf-
ficiently from the time that tenured faculty members spend on research.
This becomes a less significant concern as the portion of tenured faculty,