Show Me the Money
Disparities in U-M’s sizable endowment fund
—By Imani Ahmad
What would you do with 19 billion dollars? Some may choose to solve world hunger, or eliminate poverty. Others might buy a mansion on a remote island and retire early. For the University of Michigan, however, this decision is more nuanced.
With an endowment fund valued at 19.2 billion dollars during fiscal year 2024, The University of Michigan boasts one of the top 10 largest endowments in the nation and the third among public universities. With this large sum of money—the result of over decades of investment and alumni contributions—comes much attention, both internally and externally, thrusting UM decision-makers into the spotlight. As UM’s endowment fund continues to expand, its constituents fail to reap the benefits, complaining of unfair distribution, lack of transparency, and immoral dealings, and demanding answers for why their needs are not addressed.
The low-down on endowment
According to Harvard University, “an endowment is a dedicated source of long-term funding, made up of donated gifts, that supports the mission and work of a philanthropic organization like a university.” It ensures that an organization’s donations will fulfill its mission while remaining financially stable during uncertain economic times.
UM’s endowment fund, like most university endowments, is divided into restricted and unrestricted funds. Restricted funds, which make up the majority of the endowment, can only be used for specific purposes that have been determined by their respective donors. Within this category, donors can dedicate money to the School of Education or to a scholarship for students majoring in Digital Studies, ensuring their donations contribute to causes they are passionate about.
Unrestricted funds, as the name suggests, do not come with such stipulations. Instead, it is up to UM’s Board of Regents and investment office to decide where funds will be distributed to have the greatest impact and best meet the university’s goals. For this reason, while the available unrestricted funds are considerably smaller than the restricted ones, they provide more freedom to address pressing needs and organizational priorities.
To ensure that the endowment funds will be equally beneficial for current students and those a decade from now, universities develop spending rules to guide their decisions. These rules ensure that there is ample cushioning after endowment spending. UM Regents set this rule to allow distribution of 4.5 percent of the endowment each year, or about 506 million dollars, aligning with the 4 to 5 percent average of most schools in the nation.
A level playing field?
UM’s annual unrestricted fund distributions are divided among several key areas, including academics and research, financial aid, infrastructure, and more. However, many believe that the distributions are biased towards programs and initiatives known to promise high returns, especially when it comes to athletics.
UM Central Student Government (CSG) held a meeting in February regarding the University’s lack of investment in the U-M Department of Recreational Sports and the possibility of restructuring its funding model. At the meeting, CSG Vice President Bipasha Ray discussed the deficiencies of recreational sports programs and facilities at the university, saying, “Despite the large impact that (the Department of Recreational Sports) has on student life, it is severely underfunded.”
According to Ray, the current funding model raises participation costs while limiting operation hours. “Restructuring the funding system would alleviate this problem,” he claims. “With the way that the operational fee is currently structured, the facility will only be able to open six to seven hours per day. Thus, we’re encouraging more investment into recreational sports to get the University of Michigan up to par with our peer institutions.”
Ray expresses the frustration it feels to be unable to enjoy a sport one is passionate about simply because they are not a “professional athlete. You see the football team getting all the funding they need, and then some more,” he says. “There’s a major discrepancy between our facilities and theirs. Some balance needs to be met. If we had even five percent of the funding these teams receive annually, many more students would feel comfortable signing up for team sports, meeting new people, and staying healthy within their budget.”
UM Senior and Women’s Track athlete Yasmine Mansi acknowledges this bias towards funding of the University’s professional athletics programs,“Every year we get a ‘gear drop’ that contains all the shoes, shirts, and clothing that we would need as athletes. I would say I have about 8 pairs of sprinter spikes that I’m not using right now.” UM Sophomore and Women’s Rowing athlete, Rumaysa Siddiqui, echoes this sentiment. “I have so much Michigan gear at this point, I’m not sure what to do with all of it,” she confesses.
Instructional inequities
Inequities in funding extend far beyond the football field. The divide between different departments and schools at UM is a topic that has been contested for years.
Hanaan Haque, photographer and senior at UM Penny Stamps School of Art and Design, complains about the expense of purchasing materials due to lack of program funding. “Camera equipment quickly adds up. A lens alone can be thousands of dollars, and certain projects call for a specific kind of lens that I don’t have access to through the school’s resources.” This limits those with lower-income backgrounds to materials and tools at hand, which may restrict them from pushing their creative limits. Without a sizable endowment value to fund basic operations and salaries, Stamps is left to rely heavily on tuition revenue and state funding.
In contrast, the UM School of Engineering is ranked 5th in the nation for undergraduate and 9th for graduate programs. It boasts an endowment market value of $878,966,449, providing ample funding to offer its students state-of-the-art laboratory spaces, scholarships, and competitive faculty salaries, which in turn delivers more enriching educational experiences to its students. Recent School of Engineering graduate, Raiyan Ahmed, explains the extent of this privilege, saying, “I was able to write off hundreds of dollars for class projects, flights, computer chips, and more. It really helped me to get the most out of my education and build some amazing projects that I wouldn’t have had the opportunity to be part of at another university.”
Not only does this discrepancy weigh on students, but on staff and faculty as well. The UM Graduate Employees Organization (GEO) recently challenged LSA’s decision to reduce the number of graduate student instructor positions by 8% this semester. GEO Vice President Ariana Haidari expressed great frustration with the decision, saying, “The University, by having an $18 billion endowment, has decided to choose austerity and to cut positions, rather than to prioritize the quality of education, the workplaces we deserve and generally—as a surprise to no one—doing the right thing.” She claims that graduate employees on campus are severely overworked and underpaid as a result of unfair allocation of funds.
In fact, according to UM alum Dora Guo, “UM graduate students are paid via employment fractions, meaning their pay is based on an approximation of effort devoted to their job, instead of actual hours worked.” This suggests that even if a GSI works 40 hours in a week, if their employment fraction suggests a lower amount, they will be paid based on the latter. “The University’s Board of Regents are taking from University faculty and GSIs to increase the University’s endowment,” says Haidari.
“One percent more in distributions would be an additional $100 million that could do more for the Flint and Dearborn campuses,” says Andrew Thompson, lecturer at Stamps. “We’re a very wealthy institution with great disparities amongst our ranks, and the endowment is under-serving our communities on several fronts. I do not see this as something to celebrate.”
Missing a moral compass?
A major contributor to UM’s endowment growth over the years is its investment portfolio. Residual unrestricted endowment donations that aren’t used to address immediate needs are reinvested in order to ensure maximum benefit. However, there are worries about the high risk with little thought for consequences or upholding values.
In an article for The Nation, Astra Taylor, cofounder of the Debt Collective, explains that over the years, universities went from being “careful stewards of endowment income” who prioritized social impact in their investments, to “high-risk gamblers, with finance overtaking fundraising as the main engine of endowment growth.”
Many have criticized this approach for its emphasis on financing over academics, with pro-Palestinian collective Tahrir Coalition claiming, “UM has become a hedge fund with a school (and a hospital system) attached.”
In their Endowment Guide, Tahrir states that “To support its increasingly risky investment strategy, UM has become increasingly nontransparent and suppressed public disclosure laws.” This lack of transparency opened the door for several profitable investments of questionable ethical standing.
This phenomenon was seen in the context of fossil fuels in late 2019, when UM experienced a series of large-scale strikes against climate change. Among protester concerns was the $1 billion of fossil fuel investments in the university’s investment portfolio, despite President Mark Schlissel’s announced efforts to reverse climate change earlier that year.
Instead of protesters’ divestment concerns being heard and addressed, environmental doctoral student Jonathan Morris recalls in an interview that “ten students were arrested. After two weeks of continued daily sit-ins, the president agreed to a public forum where he stated this time, unequivocally, ‘We don’t divest.’” It was not until a larger socio-economic shift occurred globally—which put pressure on UM to reduce emissions—that the university agreed to divest from fossil fuels. This case and many similar ones demonstrate the willingness of the University to deny moral misgivings solely for the sake of a profitable investment.
Today, five years later, students across campus and those in the Tahrir Coalition call for divestment from companies that fund Israeli corporations. Myles Zhang, PhD candidate at the Taubman College of Architecture, criticizes UM’s complicity in the conflict through investment in known US arms dealers such as General Dynamics and Lockheed Martin. He explains that “the value of General Dynamics Corporation’s stock has grown 72% in the past year. Do we need so much as to imagine where this money comes from, and the human consequences of our profit?”
“The University of Michigan knows where its endowment is spent. They know how much of this endowment profits from the sale of tear gas, 2,000-pound bombs, machine guns, and the tools of apartheid—not just in Israel, but in the 800 plus military bases this US war machine has built around the world,” Zhang insists.
Despite protests, the University seems to remain resolute in their decision. Regent Michael Behm states, “We are not moving to make any divestment of any kind from the university endowment. The endowment has no direct investment in any Israeli company.” This topic has become a major concern for constituents, who demand that they have a say in where the University invests their money.
Taking accountability into account
While it is clear that the discontent surrounding UM’s endowment continues to fester, there are methods that the University can employ to address these concerns and prioritize transparency for its constituents.
Proposed legislation such as the Endowment Transparency Act, sponsored by U.S. Representative Emanuel Cleaver, II (D-MO) and Senator Cory Booker (D-NJ), and similar endowment inquiries would “require information about investments with women and minority-owned firms” and encourage “institutions of higher education and investment advisors, firms, and consultants to develop professional networks and increase the visibility of business opportunities.” Adopting these regulations would eliminate bias in the sources of university investment, ensuring a more equitable decision-making process.
Formation of diverse student advisory boards, such as that of Poole College of Management, would also help to support ethical investing. Serving as a voice of caution and reason amid the race to maximize profit, these boards allow students to diplomatically provide reasoning for why particular investments concern them. Whatever the solution, constituents simply want the opportunity to weigh in on the university’s decision-making process in a civil, unbiased manner.
This demand is not new. A 2018 statement from a UM student coalition echoes the same sentiments of many student groups today. “The university’s investment and endowment spending decisions have eroded our trust in U-M,” the statement says. “Instituting these reforms would begin to restore it.”
Feature photo: Group of people holding money in their hands, by M Jahid on Unsplash