Last Sunday, Wesleyan Student Assembly (WSA) President Matt Ball ’08 introduced a plan to create an endowment financed and managed by the student government. The authors of the proposal believe that this program would be the first of its kind.
“It’s an innovative idea and it’s financially prudent,” said University Vice President for Finance and Administration John Meerts.
Each year, the Student Budgetary Committee (SBC) of the WSA allocates its entire budget to student groups. If a group does not spend all of its allocated funds by the end of the academic year the SBC reassumes it. These funds are added to the next academic year’s WSA budget, or used to pay off the debts of other student organizations. According to Ball, the entire budget should get allocated, but that would be highly unusual. Each year, around $10,000 is reabsorbed, but this year WSA members are expecting a surplus of at least $20,000.
WSA representatives assert that the budget surplus is not the result of the SBC’s allocation policies. WSA Representative Benedict Bernstein ’09 indicated that cancelled events and issues surrounding Spring Fling and Senior Cocktails were responsible for the expected excess. However, the WSA won’t know whether it has a surplus until the end of the academic year.
“We’re not going to have more money because of the increase in the student activities fee,” Bernstein said.
Ball’s proposal calls for each year’s budget surplus to be invested, rather than used the following year. The investments would be managed by a WSA Endowment Committee. The Committee would include the WSA President, the WSA Vice-President, the Chair of the SBC, and another committee Chairperson and three University Vice Presidents that would serve in an advisory capacity. Chief Investment Officer Tom Kannam decided that the WSA would be able to tie its new endowment to the University’s once it reaches $50,000. It’s not certain that the WSA would choose to take this measure.
“The basic idea behind the creation of a WSA Endowment is two-fold,” Ball said. “It would increase the amount of money the SBC has to spend on students groups and decrease the amount of money students pay for the Student Activities Fee. Short-term, this will entail a small decrease in the amount of money the SBC has. But in five to 10 years, we’ll have more money to spend on student activities, and in 20 or 30 years, we may have the resources to stop charging students for the Student Activities Fee altogether.”
Given the current volatility of financial markets, Ball and Meerts have proposed that the endowment initially be placed in certificates of deposit, which are extremely secure investments with interest rates tied to inflation. Ball suggested that now is a good time to begin an endowment, because of the current low cost of investments
For the first few years, the WSA would not draw any money from the endowment. Initially, the SBC’s budget would shrink since funds would no longer be rolled over from year to year. Once the endowment reached $100,000, two percent would be withdrawn and used each year. At that point, the WSA would be withdrawing more than it invests each year, but the endowment would continue to grow, due to interest. The amount withdrawn would increase to three percent at $150,000, and finally to four percent at $200,000. Any predictions are uncertain but withdrawals would likely begin in five to six years.
Representatives hope that revenue from the endowment could be used to reduce the student activities fee. Eventually, the endowment might allow the total elimination of the student activities fee. However, this is an extremely long-term goal. Even optimistic projections suggest that it would take 25-to-50 years to eliminate the fee.
Many on the WSA worry that future students would not be responsible managers of such a long-term investment. Ball initially proposed that a 75-percent majority of the WSA be required to approve any withdrawal of the endowment’s initial investment, which the vast majority of the assembly supported.
Brian Langenmayr ’10, a WSA representative, believes that students should never have access to the investment’s principle.
“If we have a readily available bailout fund,” Langenmayr said. “There will be a strong incentive to use it for a short term benefit, like a bigger spring fling, at the expense of future endowment growth,” he wrote via e-mail. “This is because the time horizon for students is at most 4 years—the endowment should be around for much longer!”
So far, the plan has not been revised, but it probably will be in upcoming meetings. Once the endowment is created, some hope that the WSA will pursue a socially responsible investing policy.
Kathy Stavis ’10, WSA representative and member of SEWI who championed the resolution endorsing divestment from weapons contractors, believes that failure to pursue socially responsible investments would “open a can of worms,” given the WSA’s policies with regard to the University’s endowment.
Most representatives seem to support the creation of an endowment, but plans have not yet been finalized. Students are encouraged to express their views on the endowment plan. They will have a chance at the next WSA meeting this Sunday.