Hillary Clinton’s Speaking Fees And The Colleges That Are Paying Them

The Washington Post carried an interesting article yesterday about the enormous fees that colleges are paying for the privilege of hearing a speech from Hillary Clinton.

UCLA paid Mrs. Clinton $300,000 — $300,000 — for a speech in March.  (According to the Post, UCLA also paid Bill Clinton $250,000 for a speech in 2012.)  The University of Connecticut paid $251,250 for a speech from Mrs. Clinton in April, and the University of Nevada at Las Vegas is set to pay $225,000 for a speech in October.  Five other schools — the University at Buffalo, Colgate University, and Hamilton College in New York, Simmons College in Massachusetts, and the University of Miami in Florida — also have paid for speeches from Mrs. Clinton but have not disclosed the amounts of the payments.  The Post article helpfully notes, however, that her standard speaking fee is $200,000.

This is no surprise from the Clinton standpoint.  Hillary Clinton’s ill-advised “dead broke” comments were made in the context of attempting to explain why the Clintons needed to amass a considerable personal fortune, estimated to exceed $100 million, in the 14 years since President Clinton left office.  To the extent she is keeping some of the fees for herself — at least two of the big payments, from UCLA and UNLV, apparently are dedicated to the Clinton Foundation — Hillary Clinton may simply feel she needs to further add to that wealth.  Or, she may be gearing up for another presidential run and want to add to her personal campaign war chest.  Or, she may think she is a hugely important historical and cultural figure who reasonably should be paid outlandish fees to speak at college events.  Either way, if colleges are willing to throw hundreds of thousands of dollars her way for a speech, who is she to say no?

What about the colleges, though?  Seven of the eight said Mrs. Clinton’s fees were paid by a lecture series endowment or private donations and not through tuition, student fees or public dollars; at UNLV she will be headlining a glittering fundraising event at the Bellagio Casino where school trustees hope her “star power” will boost donations.  There’s no doubt that private underwriting is better than using endowment or tuition dollars to pay Mrs. Clinton’s high fees, but there’s still something unseemly about it all.  When we constantly hear about the problem of crushing student debt and annual tuition hikes, how can colleges be affiliated with events where any speaker is paid hundreds of thousands of dollars?  Has Hillary Clinton suddenly vaulted into the pantheon of compelling public speakers next to Lincoln and Churchill?  Or, is it possible that at least part of the decision to agree to pay such amounts to Hillary Clinton was motivated by a desire to curry favor with a person who many think is likely to be the next President of the United States?

The ability of political figures to take a break from public office and immediately be showered with money from colleges and public corporations alike is a deeply troubling reality in modern America.  The willingness of colleges to pay a current political figure like Hillary Clinton many multiples of the average annual income of Americans for a single speech, and her willingness to accept such amounts, is just another example.

Antioch Reopens At Bubble Time

This week classes began again at Antioch College in Yellow Springs, Ohio.  It will be interesting to see how the school fares as it tries to reestablish itself.

Ohio is a state of terrific colleges, and Antioch is one of the most well-known.  It was founded in 1852, and it has a long history of being a ground-breaking institution.  It was non-denominational in an era when most colleges had a religious affiliation.  It was at the forefront of the abolitionist movement.  It was one of the first American colleges to accept women and African-Americans.

In the 20th century Antioch again was at the forefront of educational experimentation and change — and, unfortunately for the institution, some of its experiments didn’t work.  The undergraduate college at Yellow Springs experienced continuing financial problems and after enrollment declined to only a few hundred students the Board of Trustees decided to close the Yellow Springs campus.  The school closed in 2008.

These are not easy times to reopen a college.  Many people are talking about “higher education bubbles” and questioning the cost and value of a liberal arts education.  I hope Antioch makes it — and not just because its success is important to the pretty little town of Yellow Springs.  Antioch has made a real contribution to higher education in America.  It would be a shame to see the voice of change and experimentation that emanates from Antioch stilled forever.

Not Smart (Cont.)

I’ve written before on the enormous losses Harvard recently sustained as a result of the investments of its endowment funds and capital accounts.   The Boston Globe has now published an article on how the losses happened.  It’s a familiar story and good lesson for anyone managing their 401(k) account.  People made aggressive investments notwithstanding cautions about risks, the aggressive investments produced very strong returns for a time, and the investment decisionmakers overlooked the risks, focused on the returns, and then took an uppercut when the markets went south.  They forgot the basic questions all investors should ask:  what am I looking to achieve with my account, and how much risk am I willing to take to try to achieve that goal?  These questions should be asked regularly — not just when the markets experience a downturn.

No Surprise To Parents Of College Students

The College Board reports that, once again, tuition and fee costs at both public and private colleges have increased at a rate faster than inflation.  For private four-year colleges in the United States, costs for the 2009-2010 year increased by an average 4.4 percent.  Average costs for public universities increased by an even larger amount — 6.5 percent.

There seems to be endless elasticity of demand for degrees from elite American colleges.  There undoubtedly are people who would gladly pay $100,000 a year for the privilege of seeing Junior get his sheepskin from Harvard or Yale.  As a result, there is no effective incentive for such schools to really try to control costs.  Why make cuts that will anger faculty and staff when tuition increases can be implemented without meaningful opposition?  Hiking tuition is simply the path of least resistance.

Interestingly, although politicians often talk about how important it is to try to make college affordable, they always do so in the context of government-backed loans to pay the tuitions and related costs set by the educational institutions.  In contrast, they never criticize college administrators for failing to control costs.  Colleges and universities have worked out a pretty sweet deal — they get lots of research funding and grant money from federal and state governments, and those governments then guarantee loans, at favorable interest rates, to help students pay the constantly increasing price tab for tuition and room and board.

Kish and I are now in our fifth year of paying college tuition costs, and the annual tuition increase notices come with the same certain regularity as the swallows returning to San Juan Capistrano.  In reality, the ever-increasing cost of a higher education will not be reined in until the law of supply and demand once again comes to apply to the process of getting a college diploma, and that day still appears to be a long way off.

Not Smart

Harvard University has announced that it paid hundreds of millions of dollars to get out of interest rate swaps.  The school also said that its General Operating Account, which is the principal account that funds the schools’ operations, lost close to half its value in the last fiscal year, falling from $6.6 billion to $3.7 billion.  The value of the school’s endowment fund, on the other hand, dropped from $36.9 billion to $26 billion during the fiscal year.

What’s interesting about this story is not that Harvard’s investment accounts lost value — virtually all investment portfolios, except those invested exclusively in gold, have declined in value since the economy and the credit markets hit the wall last fall — but how much Harvard has lost and the nature of its investments.  Any kind of swap investment is risky; you really have to know what you are doing and what the potential downside risks are to make a properly informed investment decision.  It is curious that Harvard would invest hundreds of millions in interest rate swaps.  You have to wonder if its investment advisors really described the risks to the university body that oversees investments and, if so, whether that body really understood those risks.  As for Harvard’s endowment, losing more than $10 billion in one year is extraordinary.

Many colleges and universities have been aggressively raising money to up their endowments, and it appears that they have been investing those funds with, perhaps, even more aggressiveness.  That seems to defeat the traditional purpose of an endowment fund, which is to provide a financial cushion and regular investment income for the institution.  Given that purpose, you would expect endowment funds to be invested more conservatively, and not in a way in which the endowment fund could conceivably lose more than 25 percent of its value in one year.

If you have been a contributor to a university’s endowment fund, only to see the value of your contribution go poof in the past year, what do you say when the college comes back to you this year to ask for help?