Special Problems in Public Relations

Abstract

PERHAPS one of the special investment problems of the state university is to become more like the successful endowed colleges in its attitude and operations. I shall not limit my remarks to this one statement, but I think it may be central. The problems of a state university in investment matters differ from those of the endowed colleges in several respects, which are intermingled in their effect. These may be briefly stated as the size of the fund, amount of legislative control, federal obligation, and obligations to a different ownership. It is quite possible that the general form of legislative control or the activities of the university itself in its investment matters may stem from the first Morrill Act, sometimes called the Land Grant Act, of I862. By that Act, each state, or through each state the university designated as a state university in each state, was given 3o,ooo acres of public land for each senator and representative, and the provisions of the sale of this land were set forth. Quite probably this was the first endowment of many of the state universities. Indeed, many of the state universities did not exist in I862, and those which did exist were small in size. The endowment created by this grant was required to be invested in bonds of the United States or of the states, or in some other safe bonds. If the state had no bonds, the legislature could direct the investment in any manner which would yield a fair and reasonable return on investments, and the principal thereof was to be forever unimpaired. It is quite apparent that this set the general pattern for the investment of state university funds, and state governments which had legislative control over all the affairs of the university have been slow to release this restriction. And, in general, they have not released the restriction insofar as it affects the money received from this particular grant. As time goes along this ceases to be a significant matter with the larger state universities. For example, in the case of the University of California, the socalled Federal Endowment Fund of the proceeds of this land, together with the proceeds from two other smaller grants, now represents only a little over i per cent of the total book value of the permanent endowment fund. Whether or not these funds are kept invested in bonds does not have a significant effect on our university, but it does have a very significant effect for many of the other universities. The annual report by Vance, Sanders & Company entitled Brevits, which lists college endowment funds, lists only ten state universities. Provided Cornell University, which is the state university in agriculture and a few other departments, and the University of Pennsylvania, which receives some support from the state, are not regarded as state universities, the number falls to eight. Another which should be eliminated is the University of Texas, which has benefited so much from its west Texas oil lands that it has a fund larger than any other state fund. The University of Illinois should be omitted, since it does not have a large fund compared to the funds represented here. Finally, Rutgers was mentioned, but it was formerly a private university and probably has not had the influences that have been brought to bear upon the investments of the other state universities. With these eliminations, the information presently at hand would indicate that there are perhaps only six state institutions of higher education that have endowment funds exceeding $io million. The pattern of state fund investments is therefore controlled in large measure by size. The small size of most funds is probably chiefly responsible for the control exercised by state authorities and the historical limitation to the investment in fixed income securities, and then largely in governmental securities of national and state origin. This in turn points back to the influence of the grant from the government in support of the Morrill Act. State control of investments is diminishing in institutions with $5 million or more of investment assets. It seems that the smaller funds are inclined to hold a smaller percentage of equity investments, and in these cases real