Dunleavy administration makes false claims on Harvard endowment

It’s a great idea to overdraw $3 billion from the Alaska Permanent Fund because Harvard University is overdrawing its endowment and Alaska should follow suit, according to the administration of Gov. Mike Dunleavy and his revenue experts—Lucinda Mahoney and Mike Barnhill.

“We have noted that there are other endowments throughout the United States that are actually overdrawing their endowment, and one notable example is Harvard, you know the prestigious endowment that is so highly talked about in the press,” Mahoney said.

“They are going to increase their withdrawal from 5 percent to seven-and-a-half percent because of phenomenal returns,” she told the Senate Community and Regional Affairs Committee Thursday.

She made the same comment to the House Judiciary Committee Monday. Anchorage Rep. Matt Claman asked a simple question—how much of Harvard’s total expenses are covered by withdrawals from its endowment?

The Alaska Permanent Fund, which is Alaska’s endowment, is now responsible for more than two-thirds of the money that pays for state and local government services. Since the experts in the Dunleavy administration brought Harvard into the picture, they should have done more than look at two newspaper articles to inform themselves.

“Our current endowment spending to support state government is 70 percent. How much of Harvard’s annual spending is coming from the endowment?”

Barnhill, the deputy revenue commissioner, had no clue.

To try to appear informed, he offered the irrelevant observation that there are hundreds of university endowments. Some rely on their endowments for a tiny percentage of operating expenses, while others rely on endowments for a much larger percentage of operating expenses.

Two years ago, Barnhill told the University of Alaska that it could find $35 million from unidentified donors to pay for research activities, citing Harvard as an example of an institution that does well without state money.

For her part, Mahoney did have an answer for Claman.

“I was advised that it was 70 percent,” Mahoney said. “However, we can provide that specific data to you. I was surprised. I was very surprised at that number.”

She was surprised? I was surprised when I looked up the number on the Harvard website. She was not even close to being correct.

“The endowment distributed $2 billion in the fiscal year ending June 30, 2020 contributing over a third of Harvard’s total operating revenue in that year,” the Harvard University finance office says.

“In fiscal year 2020, endowment distributions for operations represented 37 percent of the university’s revenue—ranging from 85 percent of Radcliffe Institute for Advanced Study revenue down to 19 percent for the Harvard T.H. Chan School of Public Health.”

So about two-thirds of Harvard’s operating expenses are from sources other than the endowment.

Alaska is far more dependent on its endowment than Harvard. That the Alaska revenue experts did not know this is another reason to distrust their glib assertions that the miracle cure to Alaska’s fiscal crisis is redefine the budget deficit out of existence with a $3 billion overdraw from the Permanent Fund.

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