Wheaton's endowment reaches $450 million, avoids potential new tax

November 16, 2017
When Republican lawmakers introduced national tax reforms in the House of Representatives on Nov. 2, Wheaton’s endowment was one of 140 colleges which, according to the Chronicle of Higher Education, could potentially have had a 1.4 percent federal tax placed on its endowment. Wheaton’s endowment, which supplies $171,953.51 per student, would be subject to the tax because it exceeds a proposed threshold of $100,000 per student. After pushback from many voices in higher education, Senate Republicans introduced their own tax reform bill, which raised the tax threshold to include only colleges whose endowments exceed $250,000 per full-time student.
“Along with fellow institutions in the Council of Christian Colleges and Universities and the National Association of Independent Colleges and Universities, we are expressing our concerns on Capitol Hill about the potential impact of a proposed endowment tax on our ability to serve students and their families,” Director of Media Relations LaTonya Taylor told the Record in an email. “However, based on the current proposed threshold of $250,000 per student, we would not be affected.”
Valued at $458.6 million on Sept. 30, 2017, Wheaton’s endowment has grown by $352 million in the past 25 years. The fund is managed by the Wheaton College Trust Company, a nationally chartered bank owned by the college which, according to Investment Manager Ken Larson, “exists to advance the mission of Wheaton College by offering constituents the opportunity to use various trust arrangements to accomplish their stewardship goals and to facilitate gifts to the college.” In other words, the Trust Company manages several funds which contribute to the college’s operating revenue. It provides these services for 178 different accounts, a major one of which is the college endowment.
“As a national bank, the Trust Company provides trust administration services beyond the scope available under the college’s not-for-profit status,” Larson said. “These services include a wide array of trust arrangements that benefit both the college and the donors who establish them.”
Endowment funds play a large role in creating many aspects of a student’s “Wheaton experience.” Aside from reducing dependence on tuition to fund the college’s operation, the endowment is also allocated to various programs across the college. This includes, most prominently, almost $7 million towards scholarships and over $2 million for faculty endowed chairs and for “buildings and facilities,” respectively.
But how does the endowment work? Despite the substantial amount of funding which comes from it each year, many students remain unclear on what, exactly, the endowment is. The Record asked Larson a few frequently asked questions about Wheaton’s endowment.
What is an endowment?
An endowment is a fixed set of funds which a college or other organization can use for investment. The college or organization can then spend the income from these investments, often in a manner stipulated by the donor. For example, someone who donates $1,000 towards the “endowed scholarships” component of Wheaton’s “From the Heart, For the Kingdom” giving campaign is adding that money to a pool that the college could use to invest in the stock market and, with a return of 10 percent, turn into $1,100.
Do all colleges have endowments like Wheaton’s?
The short answer is no. According to the American Council on Education, the median endowment value for private colleges in the U.S. was $7.9 million in 2014. Some colleges do not have endowments, while many others maintain fairly modest ones. According to the Congressional Research Service (CRS), 28 percent of colleges and universities in 2014 had endowments of less than $2.5 million. Eleven percent of schools with sizable endowments — US News reported that Harvard, for example, had an endowment of over $35 billion at the end of 2016 — held 74 percent of the $516 billion held in endowment assets for colleges and universities nationwide in 2014. According to statistics from the CRS, Wheaton’s endowment of $450 million makes it more valuable than nearly half of all other college endowments. If the endowment were to continue its current trajectory of growth ($14 million per year over the past 25 years), it would surpass $500 million within the next three years. Based on CRS statistics, this would make it higher than 80 percent of college endowments in the nations. In short, Wheaton’s endowment is large, especially for a college of its size.
How does the endowment get bigger?
There are two primary ways: investment performance and donations. Over the past 25 years, the endowment grew by $164 million from investment and $149 million from gifts.
How big of a role does the endowment play in Wheaton’s expenses?
Income from the endowment provides 14 percent of the college’s operating revenue — $17.9 million during the 2017 fiscal year.