Time to pop bloated university endowments

HARVARD University announced last week that it will dramatically change the way it oversees its massive $35.7 billion college endowment.

It isn’t often that an elite money manager — or an elite university — fires half of its investment team. And it isn’t often that you get such a great opening to discuss one of the more egregious examples of unbridled greed at the expense of students and taxpayers.

Since the quality of American education has fallen while the costs have risen, isn’t it time we dramatically overhaul our education system?

The answer is yes. So let’s begin with a top-down economics lesson for our nation’s well-endowed elite universities.

Harvard and other universities are tax-free entities because they are beacons of education, not because they are globe-trotting asset managers.

But at Harvard and other universities, the performance of their endowment is of the utmost importance and defines their pride.

Last week, the chief executive of Harvard Management Co., N.P. “Narv” Narvekar, announced it will cut its staff of 230 in half, and begin to farm out its tens of billions to outside talent to manage.

This is a major shift for Harvard, which has managed the bulk of its assets inhouse for years.

However, reality must have set in as last year turned out to be another losing one, down 2 percent. In fact, Harvard’s returns have paled over the past 10 years when compared with those of Princeton, Columbia, Yale, Dartmouth and the other Ivy League schools.

A handful of major universities have become the bastion of over-entitled elitists, clearly incapable of understanding the breadth or depth of how they abuse the US tax code.

Colleges and universities don’t pay taxes because they drape themselves as “not for profit” institutions.

But today’s tax law has no ceiling on size or an aggressive enough mandate to keep tuition down, or to prevent exorbitant salaries to university presidents and hired-gun private equity fund managers.

While most colleges and universities do a great job of helping kids and families, there is not a university in the world that needs more than $1 billion in its endowment coffers. And certainly not tax free. Colleges and universities should be able to maintain their tax-free status only with endowments of under $1 billion, and they should be given five years to get their bloated endowment balance sheets down to size.

Those schools should be dramatically subsidizing tuition and helping pay off prior and active student loans.

If a university wishes to remain a globe-trotting macro investor — this is America, after all — then it should pay taxes like the rest of the country.

President Trump and Congress should close this loophole in the tax code as part of their pledge to American education reforms.