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OSU spends freely from $38M fund

There are few rules on how interest from the private gift can be used.

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By Laura A. Bischoff and Christopher Magan
Staff Writer 12:01 PM Saturday, September 3, 2011

COLUMBUS — Ohio State University President E. Gordon Gee enjoys premium cable channels, international travel, plenty of free meals and even tickets to see Lady Gaga — all courtesy of inventor Ralph Mershon’s gift to the university in 1952.

Spending from private endowments like this one receive far less scrutiny than public aid to colleges and universities. In fact, the institutions can spend much of the money however they see fit.

About 20 percent of the $346 billion in endowment funds held by universities — or more than $69 billion —is “unrestricted,” said John Walda, president of the National Association of College and University Business Officers, which surveys endowments each year. When spending from unrestricted endowments, universities need follow only basic rules, which can be as simple as “supporting the mission of the institution,” Walda said.

At Ohio State, administrators have used the annual interest off the Mershon Unrestricted Endowment Fund — $5.7 million since 2009 — for subsidizing golf memberships, joining the Ohio Chamber of Commerce, renting a suite at Nationwide Arena, throwing holiday parties, buying a time-share in NetJets and catering meals for trustees and faculty.

For several years the fund was tapped to pay Republican John Kasich to serve as a presidential fellow on campus. Kasich, a former congressman, received $50,000 a year to give lectures occasionally and meet with students, while his long-time aide received another $20,000 a year. Now governor, Kasich no longer receives the stipend, but Gee recently dipped into the fund to cover the $128 it cost to send the governor and his wife, Karen, flowers for their anniversary.

In February the fund covered the $8,142 catering bill at a two-day trustee meeting. The meals were catered by Cameron Mitchell Catering, a high-end restaurant company based in Columbus, and the menus included forest mushroom tart with Vidalia onions and tellagio cheese, fire-roasted apples with gorgonzola and poppadoms, and white chocolate key lime tart with whipped cream and vanilla.

China and linens alone cost $1,293.

The $8,142 tab for three meals and three rounds of snacks nearly reached the $9,600 cost for one year of OSU undergraduate tuition and fees.

Ohio State spokesman Jim Lynch defended the spending from the Mershon Fund, saying it provides flexibility so that the university doesn’t have to use tuition or tax dollars for special projects.

“It might be good to look at this fund as seed money that is put to work on behalf of the university,” added OSU spokeswoman Shelly Hoffman.

But Mary Ann Van Atta of Waynesville, who has 11 children including one who just graduated from OSU and another one who is a sophmore there, said some of the spending choices set a bad precedent. Van Atta said she recognizes that university leaders need to wine and dine potential donors and do some travel, and she was quick to praise Gee for how he interacts with the public and with students.

But, she said, “Couldn’t he (Gee) pay for the flowers?”

“So many people are suffering in our economy and we have young adults coming out of college with such crushing debt,” Van Atta said. “If the university has some money to help stem that tide of rising tuition costs, I would hope that they would use that instead of just raising tuition.”

Namesake a pioneer in electric transmission

The namesake for the fund is Ralph Mershon, who graduated with a mechanical engineering degree from OSU in 1890. He bequeathed $11.2 million to his alma mater upon his death in 1952, specifying in part how he wanted the money to be spent.

Mershon, who served in World War I, was a pioneer in electric power transmission and a leader in establishing Reserve Officer Training Corps at land-grant universities. Before his death he specified that the fund be divided evenly — half for civilian military education and half for discretionary spending by the university trustees. His only demand on the discretionary fund was that it did not go to support intercollegiate athletics.

The fund, the university’s largest unrestricted endowment, stands at $38.9 million. Last year it generated about $1.8 million a year in interest income.

Bruce Johnson, president of the Inter-University Council of Ohio, a higher education advocate, said universities use the vast majority of their endowment funds for academic purposes such as scholarships for students, funding research and endowing department chairs.

Using some of the money for business purposes “is a completely legitimate use of private funds,” he said.

But Johnson also said unrestricted endowment gifts are on the decline, in part because of a lack of accountability.

“People don’t part with their money easily,” he said. “I keep hearing talk of donors wanting to know where their money is going.”

Toilet paper and a trip to China

As Ohio State’s president, E. Gordon Gee oversees an enterprise with a $5 billion budget, 64,000 students and 40,000 employees.

Although he is not the highest paid employee at OSU — former football coach Jim Tressel made considerably more — he is the highest paid public university president in the U.S., according to the Chronicle of Higher Education. In the 2010-2011 academic year, Gee’s salary, bonus, deferred compensation and supplemental retirement totaled $1.9 million. Gee donated his $296,786 bonus back to the university.

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E. Gordon Gee’s expenses

Ohio State University uses annual interest from the Mershon Unrestricted Endowment Fund to pay for a variety of expenses. For several years, for example, the fund was used to pay Republican John Kasich $50,000 a year to serve as a presidential fellow on campus.

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