Edu

Educational Endowment Funding

Funding is always an issue for public education.  Some private educational institutions may also have funding issues from time to time.

The solution, while being a very forward looking option, is to create endowments for every school.  At some point in the future every school could run completely off of their endowment, thereby ending the need for public tax money to be spent on schools.  As mentioned, this is a very forward looking idea and will take multiple decades, most likely into the centuries mark.

Let’s take a look at an example.

Example:

School A has an annual budget of $20 million dollars.
School A is required to set aside 1% of their annual budget towards the endowment each year.
1% of $20 million is  $200,000.
The interest rate on the endowment account is 1%.

After 10 years the endowment account would be worth $220,924.
After 100 years the endowment account would be worth $34,978,202.
After 200 years the endowment account would be worth $129,046,764.

50% of interest after 10 years is: $462
50% of interest after 100 years is: $7,489,101
50% of interest after 200 years is: $44,523,382

If School A is allowed to use a maximum 50% of the interest that is funded to the endowment each year after maturity the endowment would be constantly growing and the endowment would reach maturity in a bit over 200 years if there is any inflation.  By restricting the school to work with only a portion of the interest the endowment would keep growing and allow the school to adjust the budget for inflation.  There could also be clauses built in for the construction of buildings.  The key is that the endowment fund will keep growing over time and relieve the burden of paying for education from all taxpayers.