Our universities at work: Soaring endowments, sinking academic culture

On the front page of today’s Boston Globe, higher-education beat writer Peter Schworm reports on the emerging power struggle between, on the one hand, universities that boast increasingly large endowments, and on the other, members of Congress. Several politicians have proposed using the tax code to pressure those institutions to use more of their endowment money for decreasing the sky-high costs of private college educations, making such educations more affordable to working class and poor families.

The universities claim that they need to hold on to the money for a rainy day – and that while investment results and alumni donations have proven healthy in recent years, they are unlikely to keep up that pace. Congressional representatives counter that they have granted favorable tax status to donations to universities (the donors deduct them from gross reportable income for income tax purposes) and to endowment portfolio investment returns (which are non-taxable, as for all certified charitable and educational institutions). On this view, the public interest requires that the universities’ largesse, which can be credited in part to this preferential tax treatment, be devoted to socially beneficial purposes in real time.

If those are the positions, that means that there’s a lot of misunderstanding on both sides of the debate.

Politicians inadequately appreciate how government mandates as to how private institutions must spend their money pose a great potential for mischief. As happens altogether too often when the government seeks to exert control in exchange for doling out public funded largess, catastrophic failure can result. University lawyers already face hassles in wading through bureaucratic requirements and dictates that make traditional educational values take a back seat to government mandates. For example, colleges have often wrongly interpreted government regulations prohibiting “harassment” of various kinds as trumping free speech and academic freedom – even where these values are most important to preserve in an educational context. And the general counsel of on Ivy League school a couple of years ago complained to me that he spends more time trying to understand government regulations than on any of his other duties.

And for their part, universities are inviting government intervention by acting as if they were business corporations. Their behavior certainly quacks like the proverbial duck, as colleges are morphing slowly into the model of business corporations, increasing their coffers while decreasing the quality of their product (which is supposed to be the traditional educational mission, not the promotion of the “brand”). Presidents of colleges and universities have increasingly become fund-raisers and overseers of institutional expansion, rather than educational leaders. This week’s Chronicle of Higher Education, for example, reports mind-boggling recent fund-raising figures (subscription required), with huge annual takes from alumni and other donors despite record-breaking multi-billion dollar endowment investment returns. The article reports that

“Stanford University raised the most of any institution, $832.3-million, followed by Harvard University ($614.0-million) the University of Southern California ($469.6-million), the Johns Hopkins University ($430.5-million), and Columbia University ($423.8-million).”
And this is on top of multi-billion-dollar harvests from the richest universities’ ample portfolios.

Locally, Harvard is planning an expansion into Allston, while Boston College intends to alter part of Brighton near its own campus.

A more recent phenomenon is equally indicative of the direction in which colleges and universities are intent on heading. Recent reports in The New York Times (here and here) tell us that an increasing number of American universities are opening branches abroad, particularly in the oil-rich sheikdoms of the Middle East. Given that these monarchies and oligarchies are not the most obvious and friendly environments for liberal arts institutions -- which are supposed to operate under conditions of academic freedom -- one naturally has a strong suspicion that the universities are doing it for the money, as well as for whatever other commercial and corporate advantages accrue to spreading one’s “brand” abroad.

Remember, too, that former Harvard President Lawrence Summers was forced out of his position by faculty who were upset at his remarks on science, education, and culture. (I wrote about that campus putsch in the Boston Phoenix, here, here, and here.) The Harvard Corporation, a self-perpetuating group of six members with life tenure and near-absolute authority, caved in and sent Summers packing. They likely did it out of fear that the controversy might negatively impact fund-raising. Even the President of the nation’s richest and most powerful university did not have academic freedom when other “values” (such as the value of the $30-plus billion portfolio) conflicted. And when Summers tried to answer his critics shortly before his departure, his response came from the university’s public relations office, rather than from Summers himself. Talk about how corporate culture has overtaken academic culture!

If universities want to ward off government regulation – a goal with which I agree heartily – they need to begin acting like educational institutions once again. For as soon as they start heading down the corporate path, they should expect the kind of governmental regulation and intervention imposed upon business corporations. The allure of money, power and influence may be too tempting, however, so I wouldn’t hold my breath.

                                       -- Harvey Silverglate

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