Johns Hopkins University Endowment: Size, Performance, and Challenges
Johns Hopkins University, like many other non-profit institutions, relies on its endowment to support its mission. This article delves into the size and performance of the Johns Hopkins University endowment, its role in the university's finances, and the challenges it faces, particularly in light of potential federal funding cuts and proposed changes to endowment taxation.
Understanding University Endowments
Most nonprofits, from colleges to hospitals to zoos, have endowments. An endowment is a collection of donated funds that the college invests to support its mission for years to come. “Those that give to an endowment want the institution to be able to rely on their gift forever,” said Liz Clark, vice president for policy and research for the National Association of College and University Business Officers. “If invested properly, it will keep growing.”
Universities invest their endowments so that the money doesn’t run out. The investments are set up so that the college can withdraw some of the money every year, but not all of it. They’re a long-term financial strategy not intended to be used as rainy-day funds for emergencies like federal funding cuts. Like any investment, an endowment can yield big returns or lose money from year to year, depending on market fluctuations and how leaders decided to invest the funds.
Johns Hopkins Endowment: A Significant Asset
Hopkins has a much larger endowment than most other universities. Data from the National Center for Education Statistics shows that by the end of fiscal year 2022, the majority of four-year colleges had endowments of less than $50 million or no endowment at all. Among colleges that do have endowments, the average is roughly $43.3 million.
As of fiscal year 2024, Johns Hopkins University's endowment stood at $13.06 billion, placing it among the top 20 largest university endowments in the United States. The largest university endowment in the country is Harvard University’s, which sits at about $53 billion. “The larger an endowment is, the more revenue that the institution will be able to pull yearly,” Clark explained. A university like Hopkins is able to draw much more per year than a college with a smaller endowment, like Mount St. Mary’s, which has a $59.2 million endowment.
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Endowment Performance and Spending
College and university endowments saw an average 11.2% net return for fiscal year 2024, according to the 2024 NACUBO-Commonfund Study of Endowments. That gain was an improvement over the 7.7% net return in FY 2023 and the dismal negative return of -8.0% for FY 2022. The overall 10-year return averaged 6.8%. The years following the coronavirus pandemic saw some of the biggest fluctuations in average endowment returns. In 2021, colleges got an average of 20.6% of the endowment money they invested, but then lost an average of 8% the following year. To weather economic ups and downs, colleges spend their endowment returns in ways that might seem counterintuitive. When investment returns are higher, colleges don’t spend as much. When the economy is worse and endowments pull in less money, like during the Great Recession, for example, colleges tend to increase spending endowment dollars.
Hopkins takes out between 4.5% and 5.5% of its endowment yearly, which is pretty standard across most colleges and universities. That means that every year, the university gets between $594 million to $726 million to spend towards its operating budget. The university hasn’t shared how much of its endowment it will take out this year to help offset federal funding losses.
Institutions spent $30 billion from their endowments during FY 2024, compared to $28.4 billion in the prior year. The largest share of endowment spending - 48.1% - went to student financial aid, up slightly from the prior year. Other spending categories included endowed faculty positions (10.8%), operation and maintenance of campus facilities (6.7%), and all other purposes (16.6%). On average, institutions participating in this year’s study used their endowments to fund 14% of their annual operating expenses. Schools in the two largest endowments groups - those over $5 billion and those from $1 billion to $5 billion - used their endowments to fund a bit more than 17.6% and 18.9%, respectively, of their annual operating budgets. Colleges in the smaller endowment groups relied on endowments to fund between 11.2% to 15.6% of their budgets. The average endowment spending rate in FY 2024 was 4.8%, up slightly from 4.6% the previous year. In general, colleges with smaller endowments reported somewhat larger spending rates than those with larger endowments. Private institutions reported an average spending rate of 5.2%, while public institutions reported a 4.2% spending average.
Restrictions on Endowment Use
Here’s where things get tricky. While Hopkins might take out $726 million this year, a lot of the money is restricted, meaning it can only be used for specific programs, according to Hopkins’ financial statements. When a donor gives money, it’s often for a certain academic program or financial aid, for example. The endowment, according to recent financial documents released by the university, has approximately 4,700 different funds. Hopkins is unlikely to just take out $1 billion of its endowment to help plug federal funding gaps. The university needs to reinvest its endowment to make sure that the pot of money continues to grow, keep up with inflation and sustain itself.
Challenges and Controversies
The Johns Hopkins University faces a dramatic loss of up to $1 billion - so far - amid the Trump administration’s cuts to research, foreign aid and higher education. On Monday, the university announced it was using some of its endowment earnings to temporarily replace some federal grants, a rare stopgap measure to sustain what the university considers critical research. The university tapped endowment earnings to replace some research grants, a highly unusual move. Staff have lost jobs. Faculty grants have vanished. Graduate programs have stopped accepting as many students.
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Some politicians are in favor of taxing endowments, which is “really unprecedented,” Clark said, because nonprofit colleges are tax exempt. In 2017, Congress implemented the first-ever endowment excise tax, applying a 1.4% tax on endowment income for universities with at least $500,000 per student in endowment funds. That didn’t impact Hopkins, but it did affect other wealthy universities like Harvard and Yale. “For colleges and universities, the tax simply takes away from the revenues that they have to support scholarships, faculty salaries, research and investments,” Clark warned. There are two proposals this year, both by Republican congressmen, to increase that tax. New York Congressman Mike Lawler introduced a bill in February to lower the per-student endowment threshold from $500,000 to $200,000 and raise the excise tax rate from 1.4% to 10% of endowment income. Congressman Troy Nehls wants to go a step further. The Texas representative proposed a bill in January which would raise the tax to 21%. If either of those bills were to pass, Hopkins would see its endowment taxed. That, Clark said, would likely mean less money to go to student financial aid, academic programs and more.
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