U.S. colleges and universities lately have lost some credibility. Surveys of the American public conducted this past spring by the Pew Research Center, in cooperation with The Chronicle Of Higher Education, indicate significant concerns about the direction and goals of colleges and universities.
Not only has the cost of an undergraduate education edged up by the barely sustainable level of 6.3 percent annually, but the mission of higher education is being eroded by serious ethical issues. Many colleges function as businesses, while administrators uphold the notion that they deserve to maintain their nonprofit tax status. Meanwhile, tens of millions of dollars of tax revenue from sheltered business activities are being denied to state and local governments.
Local examples of questionable business activities worthy of serious scrutiny include the 2007 sale of naming rights of the Siena athletic center floor to UHY Advisors and the intention of Union College to earn rental income from its newly donated IBM supercomputer. In addition, the president of Rensselaer Polytechnic Institute, Shirley Jackson, sits on the boards of directors of private corporations, such as IBM, that are involved with RPI in technology research and development. The RPI plan to build a 9,000-square-foot presidential mansion for the purpose of “entertaining potential donors” is very curious for an institution that enjoys the privilege of non-profit tax status.
“So what?” may be the response of many people. We live, after all, in a business-dominated society. Why then, beyond the ethical issue of the tax exemptions, should anyone really care about colleges evolving into tax-privileged organizations whose first priority is money? This is the way of the world, isn’t it?
Why shouldn’t Harvard University, for example, accumulate a hoard of $28 billion (!) in a non-taxable endowment? The same Harvard that, in 2009, gloated about increasing financial aid to undergraduates by a paltry $22 million dollars.
In 2003, according to Harvard Magazine, Harvard paid one director of its endowment portfolio no less than $35.1 million, and another one $34.1 million. Is this really a “non-profit” institution entitled to tax exemptions?
Quality of education
There’s another dilemma: the problem of the quality of public education. From the perspective of the public-school classroom, the single overriding issue impeding student achievement is not the quality of public-school teachers. The problem is basic student motivation itself. Too many students are cruising through their secondary education with little effort.
As Peter Berger has pointed out in a series of excellent columns in The Sunday Gazette Opinion section, university experts on public education, many of whom have little actual experience working in public schools, have taken the schools on a rodeo ride of fad educational theories.
The end result of such tampering with the schools has been a steep decline in rigor under slogans such as “collaborative teaching,” “portfolio assessment,” “curriculum mapping” and a half-dozen other academic fads. Most of these fads have come from college- and university-centered “experts.”
Given the current practices of higher education in the U.S., why should most students even try to do well in secondary school?
As long as college and universities operate on the business model, they need students. Students represent revenue. Most students see this situation. The fact is, some college somewhere will take them for a price, no matter what their high school record might be. This sends a demoralizing message to students and faculty in high schools, that high-school performance doesn’t mean much.
Most students get the message that going to college is more about family finance than about actual effort and achievement. Here is the point at which the higher education system, a more or less unregulated sector of the economy, with special tax privileges, is undermining the quality of public education.
Time to pay up
It is high time for higher-education “business” leaders to acknowledge their role in the ineffectiveness of many public schools. And while they are at it, it is high time to pony up some tax revenue for the public good.
Our financially troubled cities and states need the revenue from the tax-sheltered business activities of colleges. If the average rate of growth in U.S. college and university endowments was 11.9 percent in 2010, and if, indeed, the total amount of money hidden in U.S. college endowments is between $360 billion and $375 billion, then $42 billion represents the amount of endowment growth for fiscal 2010. Consequently, the amount of tax revenue lost to local and state governments is in the billions of dollars.
Once a special privilege is granted, it is difficult to take back. Rational reform is a slow, painstaking process. Tax exemptions for colleges, and other so-called
“nonprofit” organizations, will be hard to remove, even in the interest of fairness, even if for blatant business activities. But it’s clear that the laws governing these organizations are in need of revision.
L.D. Davidson lives in Amsterdam and is a regular contributor to the Sunday Opinion section.