iiiiSifiii @^ ■ I ill I 111 .1!! ''lil 1 \ 1 ■'1 1 fi C81 Cornell University Library LB 2334.C81 Reply of Cornell university to the Carne 3 1924 013 004 845 CONFIDENTIAL Reply of Cornell University to the Carnegie Foundation for the Advancement of Teaching March, 1916 The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013004845 To the Board of Trustees of the Carnegie Foundation for the Adi'ancetnent of Teaching, Gentlembn : In your resolution of November 17, 1915, you present to Cornell University, as one of the associated institutions, the report of the Presi- dent of the Foundation upon a comprehensive pension system to be applied in the future. From the letter of the President transmitting the report and from subsequent correspondence it appears that the initial annual cost of the new plan to Cornell University, provided its participation is limited to the pension feature, is estimated at $11,398, that being five per cent of the salaries paid to professors and instruc- tors on our staff who are less than 45 years of age. Even if we assume that the number of teachers and the average salary at Cornell Uni- versity remain stationary, the cost would rise year by year as these persons advanced in grade and salary to a total estimated at five per cent of the salaries now paid to all professors and instructors, that is, to about $45,000 a year. If teachers and 'salaries increase, this estimate would need to be raised. Before considering whether it would be expedient for Cornell Uni- versity to enter into the proposed arrangement, we have felt bound to scrutinize the financial ability of the Carnegie Foundation to satisfy the just expectations of persons now receiving retiring allowances and of those who would in time receive them under the present rules, the pensionables. Doubtless the expectations in the mind of all who have already received allowances can and will be met. How far the Foundation can and will meet, also, the expectations of every one who has been looking forward with confidence to receiving an allowance in the future, even the distant future, and has allowed that expectation to influence the ordering of his life is a more difficult question the answer to which cannot be assumed. With the help of the informa- tion in the annual reports of the Carnegie Foundation that question has been examined and the results are set forth in the appendix. If the number of teachers does not increase, if salaries do not rise, if the mortality of teachers goes up to the rates indicated by McClintock's table, if the average retiring allowance remains at its present figure, if teachers continue to retire at the age of 67, and if all teachers retain their present connections until death or retirement, the Carnegie Foundation apparently needs $20,000,000 to $23,000,000 ^in hand to take care of the pensionables, the amount depending on whether it can obtain 4>< or 5 per cent interest on its investments. In the end that sum, both interest and principal, would be exhausted. But if the retiring age should fall to 65, the initial sum needed would be $25,000,000 to $29,000,000, depending again on the rate of interest. On the other hand, if the class of pensionables is seriously de- pleted by emigration to another occupation or to an institution not associated with the Foundation, the sum needed would be correspond- ingly reduced. Regarding the weight to be attached to this con- tingency we have found no evidence on which to base an opinion. In view of the conclusion which Cornell University has been con- strained to draw from the evidence, it has answered the question raised by your report. What expectations can and should be met ? in the following resolution unanimously adopted on March 8 by the Uni- versity Faculty at a special meeting called to consider the subject, and unanimously approved on March 1 1 by the Committee of the Trustees to which the matter had been referred with power. " The University Faculty believes that the privileges and expecta- tions which have been created under existing rules of the Carn pgie Foundation constitute moral claims against its endowment on i^e part of such teachers and administrative officers now on the staffs c^ associated institutions as under the present rules would receive retir- ing allowances and that adequate provision for scrupulously satisfy- ing all these claims should be made before the fund is otherwise drawn upon." The University has further replied in the following resolution unanimously adopted March 11 at a joint meeting of a Committee of the Board of Trustees to which the subject had been referred with power and of a committee of the University Faculty to which the sub- ject had been referred. " Whereas it appears that the Foundation is not financially strong enough to carry the burden of the obligations which it has already assumed, therefore, the change in the character of its work and enlarge- ment of its scope which the Report proposes are inadvisable, unless some way can be found either by additional endowment or otherwise to relieve the Foundation of such burden." The University has further replied in the following resolution unanimously adopted on March 8 by the University Faculty and unanimously approved on March 1 1 by the Committee of the Trustees. ' ' The University Faculty is not at present prepared to approved an arrangement with the Carnegie Foundation or a subsidiary corpora- tion whereby the cost of a teacher's insurance and of a retiring annuity or either of them shall be defrayed wholly or in part by withholding a portion of such teacher's salary." The committees at their joint meeting further considered the re- quest of the Carnegie Foundation for alternative plans or suggestions and in compliance with that request unanimously adopted the follow- ing resolutions : " If relief from the burden of obligations already assumed can. be secured, the Foundation should (a) pay .out of its income, under rules to be adopted, disability annuities to such teachers in associated institutions as have purchased and are continuing annuity contracts with approved insurance companies maturing at 65 to 68 years of age and of f 1,000 to |4,ooo in value, such disability anquities to cease when the disability is relieved and in any event when such purchased annuities respectively become payable ; and (b) distribute annually to such teachers equally the balance of its income." "The amounts and terms of these annuities and the questions whether the purchase of them is to be voluntary or required and whether they are to be paid for wholly or in part by the professors and instructors should be determined by each institution. ' ' At a special meeting of the University Faculty held on March 15 the foregoing report was presented and approved. C. E. CoRNBLL I. P. Church M. VanClbef J. E. Crkighton J. Du P. White W. A. Hammond E. I/. Williams C. H. Hull R. B. Williams D. S. Kimball J. G. SCHURMAN J. McMAHON Trustee Committee. E. MerriTT W. A. Riley W. F. WiLLCOx Faculty Committee. Ithaca, New York March 22, 1916. APPENDIX The phrase, just expectations, used by the Board of Trustees of the Carnegie Foundation in their resolution of Nov. 17, is understood to mean those expectations which have been aroused by a belief that the existing rules of the Foundation will be applied to all persons now on the staffs of the associated institutions. This implies that changes, disadvantageous to beneficiaries will be applied only to such persons as are added to the staffs of these institutions after a specified future date While this seems to be the proper interpretation of the phrase, the fol- lowing computation gives a clue also to the amount of the payments which would be required, if all persons under a certain age, such as 45, should lose the privileges conferred by the present rules. No means are at hand for determining the amount that would be required if teachers of any age belonging to a certain grade, like that of in- structor, should lose those privileges. The word, pensionables, in this discussion includes every person holding a position in an associated institution, the retention of which to the age of retirement would entitle him or her to claim a retiring allowance or pension. To estimate the total amount of the future payments to pensionables and the present sum which should be at interest to meet those pay- ments as they fall due the following information is needed. 1. The number of pensionables. 2. The number of each sex and at each age. 3. The age at which they will retire. 4. The number of each sex who will survive to that age. 5. The expectation of life of each sex at the retiring age. 6. The total number of years of life, male and female, through which the annuities must run. 7. The average retiring allowance for each sex. I. The number of pensionables. Five years ago the Carnegie Foundation gathered statistics from the 72 institutions which showed that on June 30, 191 1, their staffs included 5,025 teachers in active service who might ultimately claim pensions under the rules.' The 1 Seventh Report, page 93. present number is probably much greater. In default of recent information the following method of estimate will give an ap- proximation. The World Almanac gives the number of instructors or members of the teaching staff in 65 of these 72 associated institu- tions as 8,979 in 1910 and 11,685 in 1915. an increase of 30.1 per cent in the five year period. Probably the pensionables in the 72 institu- tions increased between 191 1 and 1916 at about this rate. On that hypothesis there are now about 6,540 pensionables in the 72 institu- tions. But Rensselaer Polytechnic Institute, which has recently been added to the roll of associated institutions, has 63 instructors, of whom perhaps 33 are pensionable. This indicates a total of 6,573 pension- ables in the 73 associated institutions. 2. The nuntber of each sex and at each age. Two returns for differ- ent dates' show that 9.8 per cent of the pensionables are women, and it is therefore probable that about 5,929 of the pensionables are men and 644 women. The age distribution of the men was ascertained in 1911^ and probably has not taaterially changed. Assuming it to be the same, these 5,929 men are distributed as follows : Distribution Probable Age Period in igri Distribution Number Per Cent in 1916 20-64 4,453 100. 5,929 20-24 86 1-9 III 25-29 575 12.9 752 30-34 894 20.1 1,171 35-39 904 20.3 1,182 40-44 715 16. 1 939 45-49 550 12.4 723 50-54 359 8.1 472 55-59 211 4-7 274 60-64 159 3-5 204 65 + (78) 101 3. The age at which the pensionables will retire. They cannot re- tire below the age of 65 and many have retired at a higher age. The annual reports of the Carnegie Foundation give two series of figures throwing light on the probable retiring age in future years, namely, the average age at retirement of all professors and officers in associated institutions ( i ) who had retired on the basis of age and were in re- ceipt of allowances on September 30, of successive years; and (2) who had thus retired duriijg the calendar year preceding. The fol- lowing table brings these figures together. 'Seventh Report, page 93, and Ninth Report, page 6. ^Seventh Report, page 93. 8 Pensioners in associated institutions retiring on basis of age and receiving pen- during preced- Year sions on Sept. 30 ing calendar of year specified year had an had an average average age age of of 1906 71-0 1907 69.2 1908 , 70.0- 69.0 1909 69.7 69.1 1910 69.6 69.9 1911 69.5 67.9 1912 69.3 68.2 1913 69.0 67.6 1914 68.8 65.7 1915 68.7 66.9 The foregoing figures show that the average age at retirement is falling. For the last three years it has been below 68 and for the last two years below 67. It seems clear that during the next generation the average age of retirement will lie between 65 and 67 years. But it cannot now be more closely determined. Under these conditions the best procedure is to carry through the computation with each of these ages as limits. 4. The nuinber of each sex who will survive to the retiring age. At this point some life table must be accepted as a guide. The report shows (p. 24) that the McClintock table for annuitants yields results which come nearer than those of the others to agreeing with the ex- perience of the Foundation, but that the longevity of the Foundation's pensioners is decidedly above that of the annuitants. In view of the general evidence that teachers as a class are long-lived, this table should probably be regarded as showing a minimum expectation of life. If so, the results from using it will understate the future outlay and the present sum that will be needed. It is now possible to estimate how many of the 5,929 men will survive to ages 65 and 67. The results appear below. Age Present Per cent who will Number who will period number survive to age survive to age 65 67 65 67 20-24 III 52.4 ' 48.2 58 53 25-29 752 54-5 50.2 410 378 30-34 1,171 56.9 52.4 666 613 35-39 1,182 59.6 54.9 704 648 40-44 939 62.8 57.8 590 543 45-49 723 66.7 61.4 482 444 50-54 472 71.8 66.2 339 312 55-59 274 77.4 72.9 212 200 60-64 204 90.2 83.0 184 169 65!+ loi lOO.O lOO.O lOI lOI All ages 5,929 3^746 346J Thesefiguresindicatethat 63. 2 per cent will survive to age 65 and 58.4 per cent to age 67. The 644 women probably average somewhat younger than the men but at equal ages women have a greater ex- pectation of life. Assuming that these two differences counterbalance and that the proportions of women surviving to the.ages of 65 and 67 are the same as above, 407 of the women will reach age 65 and 376 age 67. ' 5. The expectation of life of each sex at the retiring age. The average expectation of life of the 3,746 men who will reach 65 is 11.76 years ; that of the 3,461 who will reach 67 is 10.69 years. McClintock's table applies only to male lives but other tables for the sexes separ- ately show that at ages 65 and 67 a woman's expectation of life ex- ceeds a man's by from 8 to 1 1 per cent. To allow for this difference, the male expectation of life has been increased ten per cent., giving to the women at age 65 an expectation of life of 12.94 years and at age 67 of 11.76 years. 6. The total nutnber of years of life, through which the annuities must run. The total years of life for which pensions would need to be paid would then be ; At age 65— Males 3746 X ii-76 = 44,053 Females 407 X 12.94= 5,256 At age 67 — Males 3461 X 10.69=36,998 Females 376X11-76=: 4,422 7. The average retiring allowance for each sex. In estimating the average pension the following figures will be serviceable. Average Amount of Ai,i,owance on Basis of Age TO Professors and Officers in Associated Institutions Allowances in force Sept. 30 Allowances granted during of year specified preceding calendar year Year Number Average amount. Number Average amount. I1492 1534 1688 1735 17S8 1806 1856 1900 These figures show that in seven years the average amount of all the retiring allowances in force at a given date has . increased 28 per cent and of the new allowances granted during a year has increased 40 per cent. In view of the increased cost of living and the concur- rent upward trend of salaries, this change is likely to continue. The average retiring allowance granted during the five years, 191 1-15, ex- ceeded $2,000 and that figure seems none too high. This sum is the average for both sexes, and earlier returns ' show that the retiring ' Seventh Report, page 93. 1908 60 1909 88 I9I0 114 I9II 132 I9I2 154 I9I3 166 I9I4 i8r I9I5 187 18 JS1567 29 1650 26 2166 21 1929 29 2006 22 1981 25 2075 21 2196 lO allowance for a man exceeds by one twentieth and that for a woman falls short by one third of the general average. Accordingly the retiring allowance for a man may be set at $2, loo and for a -woman at $1,300. The amount of the allowances to be paid these pensionables under present rules, provided each retires at the age of 65, can now be computed. 12,100X44,053=192,511,300 1,300 X 5,256= 6,832,800 f 99,344, 100 The amount to be paid provided each retires at the age of 67 would be: $2, 100 X 36,998 = 177.695,800 1,300 X 4,422= 5,748,600 183,444,400 This computation shows that, if all pensionables now on the staffs of associated institutions are given the benefits which the present rules have led them to expect and if the group is reduced only by death and not at all by emigration, the pensions to which they will ultimately become entitled will amount to between eighty and one hundred million dollars depending mainly upon whether the retiring age is 67 or 65. It is probably more important to know how much money now in hand would be required to supply these payments as they become due. This can readily be ascertained by discounting the value at age 65 or 67 of the annuities beginning at that age discounted for the time elapsing before the first payment is due. As most of the endowment of the Carnegie Foundation now draws interest at 5 per cent but seems likely to earn a lower rate in future, the payments have been discounted at 5 and 4% per cent. The results are as follows : Rate of interest for Discounted present value of discounting these annuities for age 65 67 5 $25,600,000 $20,300,000 4/4 28,800,000 23,000,000 The sums mentioned above would be used up, principal and in- terest, in making the future payments indicated as necessary. Regarding the degree to which these sums would be reduced by proper allowance for emigration no basis for an estimate is at hand. The decrease would probably be a large one and it may be appropriate to suggest that, if the Carnegie Foundation should repeat for June, 1916, the inquiry it made for June, igii, it would be able by compar- ing the two results to throw light on that important element of its problem. Fhotomount Pamphlet Binder Gay lord Bros. Inc. Makers Syracuse, N. Y, MT. JAH 21, 19IU f !|ll IW!, ill l'*' 11 ■ ' l' ' l' I'l 'i'''i , ■ 'i ■ '. 1 u I i| 1 I I ■ i m I'i'i'f''''' W