“We just want a little.”
That’s the motto of Democrats in Massachusetts who want to tax endowment assets above the first billion dollars for colleges. Just a little.
“Why do we want to tax the poor all the time, but we let off the hook the richest of the rich?” said State Rep. Angelo Scaccia, a Democrat, said during the course of Monday’s debate, according to the Metrowest Daily News. “We’re not going to break them,” he added of colleges’ endowment funds. “We just want a little.”
The sponsor of the proposal, Rep. Paul Kujawski, another Democrat, said in a telephone interview late Wednesday that “when you realize that you do have some institutions of higher learning where wealth has grown above and beyond where you really wouldn’t imagine, you say to yourself, When does a nonprofit stop being a nonprofit? How on Earth can they possibly utilize $35 or $36 billion?” Kujawski, who sits on the House Ways and Means Committee, which is responsible for tax policy, said that “from the standpoint of a responsible legislator, when you are operating in a budget deficit, you have to look towards each and every way there’s a possibility of acquiring new revenues. Every type of revenue should be on the table.”
Let’s do the math of what a “little” is to these folks. I’m taking the what the numbers for the first year take would be if they were applied to the 2007 numbers.
- Harvard – $840,872,650
- MIT – $224,510,250
- Williams – $22,301,375
- Boston College – $16,752,300
- Amherst – $16,559,425
- Wellesley – $16,414,125
- Tufts – $11,301,450
- Smith – $9,024,150
- Boston University – $2,534,650
That takes the one year total from those nine schools to $1,160,270,375.
“A billion dollars is a lot of money.” – Rep. Kujawski
Indeed, it is. So why take that from them in their first year alone? What bothers me more is if you look at the rest of his quotes:
“How on Earth can they possibly utilize $35 or $36 billion?”
“We were saying the first billion isn’t going to be touched. So maybe more of these schools might provide more funds for their students, to stay under the billion.”
He actually wants to encourage schools to avoid investing donor dollars effectively. Many funds are restricted, so if the schools are forced to give up a portion to taxes, then less will be available for scholarships. As a former scholarship student to a school that could end up impacted by such a policy in the future, I have a huge freakin’ problem with this idea! Because my career has been so closely tied to the work I did at my unique institution, I can’t even imagine what kind of job I would be in today if I hadn’t been able to afford my alma mater. The ability for my school to give away such generous scholarships made a difference in my life, as I’m sure it has with many other women. But these guys aren’t even looking at that opportunity cost of swiping the scholarship funds.
The Massachusetts politicians seem to have a problem with the fact that some of these colleges have an active donor base and make successful investments to grow the assets. Why is success in higher education a bad thing to them? Kujawski believes that once an organization reaches some mysterious number that only he can make up in his head that they no longer are a non-profit institution. I can’t fathom how he reasons that one out. If the non-profit status is based on work done, how does financial standing make any difference?
When they say they just want a little, they really want a billion.
(Original links stolen from Instapundit.)
No obviously related posts.
“How on Earth can they possibly utilize $35 or $36 billion?”
This attitude from state and federal politicians who spend trillions on vote buying schemes.
Any university with any stones will abandon it’s campus and move into tents in another state before paying a dime.
From a rational economic standpoint, your argument has merit.
But as Aristotle said way back in BCE, arguments have elements of character and emotion too. In this case, the emotion on the university’s part is arrogance, which undercuts any argument about how deserving they are.
Harvard, for example, is so rich (with a fresh infusion of Rockefeller money just recently) that it could stop charging tuition altogether.
But it has not. Perhaps giving 100-percent scholarships would devalue the brand or something.
As Margaret Soltan, one of the best academic bloggers, points out,
pressure is mounting not just from legislators but from alumni. (The alumni part might be in her earlier posts on the subject.)
At some point, there is a desire to bring the rich and arrogant down a few pegs, so the managers in Cambridge, Mass., had better come up with a new approach, for the university’s own good.
They need to show that they are deserving of their nonprofit status, not just using it to get richer and richer — or there will be several varieties of backlash.
So are you arguing that colleges should ignore donor restrictions, Chas?
A recent NYT article on the subject noted that about 80% of the endowment at Harvard is of restricted use. If you encourage such willful deceit of donors, then where shall the money for the legal bills come from when the donors or families sue schools over the misuse of funds, a situation Princeton finds itself in now?
These are important issues to consider if you want to do away with respect to donor intent.
You also don’t explain how the application of non-profit status changes with regard to wealth. Non-profit status is applied based on the actions of the university, and those haven’t changed since its founding. They still educate. So do you favor politicizing non-profit status? Again, important questions you have to answer that could fundamentally change many things not just for colleges, but also for non-profits around the state.
Another fantastically bad idea emerges from the Great and General Court of the Commonwealth…this is news?
“When does a nonprofit stop being a nonprofit?¹
How on Earth can they possibly utilize $35 or $36 billion?² 
”
¹
When it is a government agency. Not the government itself [chortle deleted], necessarily, but certainly bureaus, agencies, bodies, comissions, etc.
²
When it is a government of greater than 200 members, or a corporation of more than 100000 employees.
To Chas,
I’m not sure I understand how “the emotion on the University’s part is arrogance.” Is the right of the probably wealthy donor to select how one’s money is most effectively utilized, arrogant? As a woman who also earned scholarship money for a college that can be credited for defining much of who I am today, I hate to think that other children of lower middle class families could be denied similar funds. From a different angle, I would also hate to think that if I, or a group that I am involved in, chose to donate money marked for a specific cause that we were passionate about (whether it be political based, social promotion, or the flowers on the campus green) that I would have no say in the restrictions of the use of that money.
If the arrogance that you are referring to is in regards to the colleges having a great amount of money, “Harvard…is so rich … that it could stop charging tuition altogether” then I feel the need to point out that they also have to employ and continuously recruit top specialist in the fields that they educate. What is it worth to be taught by the best person at … in the world?
I feel that taking money from institutions of higher learning for the sake of “bringing the rich and arrogant down a few pegs” is irresponsible, immature, and desperate. I am sorely disappointed in my state… as I have been as long for as I’ve lived here.
Of course, I may have misunderstood your comment. I’m not entirely sober right now. If this is the case, I apologize.
(also back from the dead)
Playing devil’s advocate, I’ll say I’m not sure Chas is actually advocating “bringing the rich and famous down a few pegs”, but he is making a good point. There IS that desire out there on the part of many. Yes, those many are ignorant and stupid, but they’re there and in a republic their desires carry some weight. So while I fully agree that this kerfuffle over college endowments is ridiculous and in some technical sense un-American, the college administrations would be dumb to ignore it.
Bitter, Stacy:
I don’t think my earlier post was as coherent as it could have been. I blame lack of caffeine.
In Harvard’s case, setting aside the other schools, I suggest that the university is increasingly accused (by others in higher ed, by alumni, and now by legislators, of violating a basic social contract.
That contract — the one between govt. and all nonprofits and/or tax-exempt organizations, says, “Do good works, and you will get some breaks on taxation, etc.”
But when a very rich university appears to be piling up more and more money yet not spending it proportionately on the “good works,” people are going to ask if that university is keeping their side of the bargain.
Alumni begin to ask, “Why do they keep soliciting donations if they have billions already?”
Take a look at Prof. Soltan’s comments, if you have not already.
(Me, I teach at an underfunded state university that can barely keep the walls painted. Our situation is totally different. But I am not writing from a place of resentment–I like where I am.)
Nevertheless, I would hate to see legislators step into the process. If the Harvard trustees have any brains, they will figure out how to share the wealth, earn good will, and put out the fire.
What you cite is certain an education issue – educating alumni and other audiences about the nature of endowments and what a healthy endowment record should be. However, you still fail to cite how you get around the fact that 80% of the endowment is restricted.
I’m quite curious to see the explanation for dealing with donor intent on this matter. Are you proposing that Harvard continue to solicit donations but refuse any and all donations that come with any kind of donor restrictions? That’s the only way they could grow the endowment or even keep the 20% that’s unrestricted remotely stable in order to do the things you suggest, Chas.
If that is what you suggest, then how will they deal with the new PR problem of refusing to honor donor input?
When a University could let everyone attend for free for the forssable future and then still charge a bunch of money to attend, the question has to be asked, why are they tax exempt?
PJJ,
I’m not going to repeat the same questions over and over for different commenters bringing up the same points. See above RE:
1) Why do you want to politicize non-profit status that is currently awarded on mission?
2) How is the school going to pay all of the legal fees for the court challenges they will face when they begin ignoring donor intent?
3) Does such a position put you in favor of having the government nullifying all contracts donors had with the school and awarding the cash to Harvard without concern to those previous contracts?
If you have ideas and defenses for the positions, share them.
I should add that since Spooky and I were both scholarship kids to our school that could potentially fall into such a legislative scheme, it’s worth noting that we’re against it even though we benefit from additional school spending on tuition. Hell, I even supported the school not being completely need blind when it come to admission.
Bitter,
As Prof. Soltan pointed out, Harvard has “fuck-you money.”
They don’t really need donations, and they could conceivably say so.
Hypothetically, they could tell donors, “Either your gift is unrestricted, or we don’t want it. And tra la la.”
Actually, I have seen colleges and universities in the past overrule donors’ wishes, particularly in the donors were deceased.
My point, however, is that such arrogance on their part could bear bitter fruit, such as provoking the reaction from the legislators.
And now back to your DVD sorting.
So you support them telling donors to fuck off if some newbie in the development office doesn’t like their ideas? Wow, talk about creating a PR problem.
As for ignoring donor intent, you still haven’t addressed the very valid question re: Princeton. They are immersed in a lawsuit right now. I wonder about the schools you’ve observed ignoring donor intent and what kind of donors they were dealing with. Is it possible that the general donor to a place like Harvard is more likely to structure their donation in a more legally binding way? I’d argue it’s possible.
No more dvd sorting for me. Going to the fancy ass expensive school taught me to alphabetize quickly. Perhaps that education is also what gives me the upper hand in seeking the legal advice to direct my donations in directions I see fit to institutions that will honor my requests instead of disrespectfully running off with the cash.
“How on Earth can they possibly utilize $35 or $36 billion?”
We might well ask the same question of Rep. Kujawski. The arrogance is in believing that you can make “better” use of someone else’s property than they can. Sounds a lot like a mugger.
Maybe if the state government had been half as intelligent in investing tax dollars over the past few decades, they would have been in a similar position.