Weekly Market Update
WHO WILL PAY ENDOWMENT TAXES?
Thursday, January 18, 2018
The tax bill signed into law by President Trump last month levies endowment taxes on private colleges and universities with at least 500 students and $500,000 of total endowment per student. While the rules were intended to apply to large, wealthy institutions, many smaller, liberal arts schools with large endowments--including colleges like Claremont McKenna and Bowdoin--will see significantly increased tax burdens. These changes are compounded by the fact that some large universities with endowments exceeding $3 billion will avoid the new taxes altogether, and for those schools who fall under the new rule, it remains unclear how the taxes will be calculated. The bill's intent was to encourage colleges to spend more on tuition assistance, but some worry that it may not have the intended effect. Institutions may instead seek to minimize investment income in hopes of limiting tax exposure.
In Other News
- Purdue University plans to rename Kaplan University as Purdue University Global. The decision is still pending, awaiting the Higher Learning Commission's approval.
- Indiana University broke ground on IU Health Bloomington and Regional Academic Health Center on Tuesday. In addition to serving as a hospital, the health center will house academic health science programs.
- A California pilot program allowed some community colleges to offer bachelor's degrees. Policy analysts and two-year system leaders are now expressing concerns about expanding the program without sufficient evidence of positive outcomes.
- William H. Miller III will give Johns Hopkins University's philosophy department $75 million, likely the largest gift for any philosophy program.
- The University of Wyoming's Board of Trustees will discuss the university's student housing plan this week. The plan covers the ~$250 million demolition and renovation of six residential halls.
- With a 47.2 basis point spread between 5-year and 30-year Treasury yields, the yield curve reached its flattest shape in 10 years, signaling expectations of further Fed tightening.
Rating Agency Update
- Moody's assigned Aaa to University of Washington's Series 2018 General Revenue Bonds. The outlook was revised to negative from stable.
- Moody's expected to maintain Aaa on Yale University's Series X-2 and Series 2010A-3 Revenue Bonds. The outlook is stable.
- S&P assigned AAA to Yale University's Series X-2 and Series 2010A-3 Revenue Bonds. The outlook is stable.
- S&P assigned AA+ to University of Washington's Series 2018 General Revenue Bonds. The outlook is stable.
- S&P affirmed Vaughn College of Aeronautics and Technology's BB- rating. The outlook is revised to stable from negative.