POLICY EXPERT JORGE KLOR DE ALVA TO SPEAK ON CONTROVERSIAL ENDOWMENT TAX BREAKS FOR PRIVATE UNIVERSITIES Primary tabs

September 11, 2015

BERKELEY, CA, September 11, 2015 –  Dr. Jorge Klor de Alva, president of Nexus Research and Policy Center , will spotlight the findings of a controversial study, “Rich Schools, Poor Students: Tapping Large University Endowments to Improve Student Outcomes” in a Sept. 16 presentation at Berkeley sponsored by the Center for Studies in Higher Education and the Social Science Matrix. The study demonstrates that private universities are not necessarily private.  Many are sitting on millions, if not billions, of dollars in tax-exempt endowments. These tax exemptions are government subsidies and dwarf appropriations for public universities.  To address the issue of funding equity, the study recommends restructuring the tax breaks to pay for additional student services that would replace the Obama administration’s plan for free tuition at community colleges.

On a per-student basis, the government subsidizes wealthy private institutions with large endowments at far greater rates than public universities, which are responsible for the education of the majority of Americans.  Klor de Alva states in the study:

At first glance, this seems unlikely because many low-income students attend public institutions supported by state and local appropriations.  In contrast, students who attend private not-for-profit colleges and universities, while on average coming from wealthier families, receive far lower—and often no—directgovernment subsidies.  However, as we detail in this study, these private institutions are tax exempt and the per-student value of that tax exemption can far surpass the level of direct government subsidies.

For example, we estimate, that in 2013, Princeton University’s tax exempt status generated more than $100,000 per full-time equivalent student in taxpayer subsidies, compared to around $12,000 per student at Rutgers University, $4,700 per student at nearby regional Montclair State University, and only $2,400 per student at Essex Community College.

In many cases, taxpayers are subsidizing the education of students in well-endowed more selective schools to a far greater extent than they are their own children, most of whom attend public institutions.  In other words, the majority of taxpayers are poorly served by the tax-exempt status of large college endowments.

In January, 2015, President Obama initiated a nationwide conversation with a tuition-free community college plan.  Klor de Alva’s study maintains that students need support services and retention programs more than free tuition, which already exists for most students who need it. To pay for these services and programs, the study proposes restructuring current tax exemptions enjoyed by a small number of wealthy private institutions with large endowments.

The study notes, “Given the Administration’s tuition-free community college proposal, the pending renewal of the Higher Education Act, and the recent report on the dramatic growth of college endowments in 2014, the time is right for an inquiry into the tax status of endowments.”

Carol Christ, Director of Center for Studies in Higher Education, will moderate the presentation by Dr. Klor de Alva at The MATRIX, 8th Floor Barrows Hall, from 4:00-6:00 pm on Sept. 16. 

Research study: http://www.air.org/resource/rich-schools-poor-students-tapping-large-university-endowments-improve-student-outcomes

Should Stanford's Endowment be Taxed? KQED Radio- September 14th 2015  

 "Are Harvard, Yale, Stanford Really Public Universities"The Washington Post. April 6. 2015

"Tax-Exempt Status of Large College Endowments Hurts Taxpayers, Report Argues" The Chronicle of Higher Education. April 6. 2015.

"Widening the Wealth Gap" Inside Higher Education.May 21. 2015