Fri 9 May 2008
Ephblogger Wick Sloane is featured in this article about the Massachusetts Legislature’s idiotic proposal to tax university endowments (which will certainly never pass — given that this would severely undermine the Commonwealth’s most prominent industry, higher education). See here for a response from Williams and its supporters — note that the ample reservoir of local goodwill Williams has earned from its donations to local schools is among the best ways to counter this type of legislative initiative.
May 9th, 2008 at 12:46 pm
“… note that the ample reservoir of local goodwill Williams has earned from its donations to local schools is among the best ways to counter this type of legislative initiative.”
Well, Dave, whether it was right or wrong for Williams to do that, this is one of the dividends it has paid.
May 9th, 2008 at 1:12 pm
Looking over the 2007 financial reports, two interesting items jump out.
a) The proposed $20 million tax relative to the size of the endowment spending at over the last few years. Anyone looking up these figures is going to understand whether this tax threat is a serious financial problem or not.
b) Due to an anomoly, all the colleges I looked at reported atypical spending as a percentage of endowment in 2007 relative to the years I’ve been tracking college financial reports and relative to the colleges own spending targets. Anyone looking up the endowment spending percentages percentages reported in 2007 will see whether colleges are going face a challenge defending themselves against charges they aren’t spending endowment returns.
May 9th, 2008 at 2:30 pm
I’d love to see tuition prices vs. gas prices over the last 25 years.
The only differences between “windfall profits” of oil companies and the increase in college endowments are: (1) the oil companies have much less control over gas prices; (2) tuition has increased much more; (3) The companies and their shareholders already pay taxes on what they bring in and distribute; and (4) the “windfall profits” actually make their way into shareholders pockets and do some good for the shareholders, and thus, trickles down to the economy as a whole; “windfall endowment” doesn’t do that to nearly the same extent.
I don’t really care one way or the other — but if you’re going to look at oil companies and give them a special tax, they should be waiting in line after college endowments.
May 9th, 2008 at 2:35 pm
endowments also aren’t being created by charging the average american extra for a needed commodity. you forgot that comparison.
May 9th, 2008 at 3:02 pm
OK, you work on the gas end and I’ll give you the college end.
This is a comparsion between 1970 and thirty-five years later in 2005. All comparisons are based on constant 2005 dollars, so these are increases above and beyond inflation.
229% increase in sticker price
408% increase in per student financial aid
195% increase in per student net price
246% increase in per student oper. exp (inc. aid)
231% increase in per student oper. exp (not inc. aid)
Bottom line. In constant inflations adjusted dollars, elite colleges are charging twice as much for a product that costs twice as much to deliver compared to 35 years ago.
Any parent of a college student today can easily see where elite colleges are providing a much more expensive product with more premium features, more luxury amenities, and more student services.
May 9th, 2008 at 3:13 pm
OK. Non inflation adusted:
978% increase in net price per student
In 1970, the average price of gasoline in the United States was 34 cents per gallon.
So, basically it’s a wash. Net college tuition (at high end schools like Williams) and gasoline have both increased roughly ten-fold before inflation adjustment to currency.
May 9th, 2008 at 3:15 pm
does this help for the gas side?
http://zfacts.com/p/35.html
so we pay about as much as we did during the worst of it in the early 1980s.
(note: this is from a google search. i have no idea the reliability of the graph or site except that the other google results seem to agree with it)
May 9th, 2008 at 3:16 pm
except, as you note hwc, gas hasn’t changed while the college experience has changed dramatically.
May 9th, 2008 at 3:23 pm
Gas has changed in one way — there’s less of it left on the planet.
May 9th, 2008 at 3:27 pm
rory:
But, I would also add a caveat that these numbers (and noting of the additional ammenities) apply only to super-ritzy big endowment colleges. These are extreme outliers, just a few dozen colleges and universities tops.
I’m not sure the same camparisons hold for “real” colleges and universities.
May 9th, 2008 at 3:28 pm
It’s the same old-same old principle. If you believe that you need some tangible or intangible asset, irrespective of your deservedness (or lack thereof), then greedily use politics to transfer it to you from some one who has it, irrespective of his virtue in having gained and possessed it.
May 9th, 2008 at 3:31 pm
“Gas” has also changed in that a gallon of it drives me a whole bunch further and pollutes a whole lot less than it did in my mom’s Pontiac LeMans or my dad’s Buick Wildcat or my neighbor’s Camaro SS or my buddy’s Dodge Hemi.
May 9th, 2008 at 3:53 pm
gas has also changed in that we drive a lot more than we used to drive as a country.
the point is, it looks like lowell’s “difference” #2 is factually incorrect and difference #4 is certainly a debatable “good” especially when compared to the “good” of providing education.
May 9th, 2008 at 4:01 pm
BTW, I wouldn’t dismiss the chances of a bill like this passing the Massachusetts state house.
This is really a piece of “Let’s Screw Harvard” legislation, which is a general proposition with broad public support.
If I were Morty, my lobbying strategy here would be to disssociate Williams from Harvard, perhaps focusing on modifying the bill to only tax endowments above $5 billion or whatever. Let the folk in Cambridge fight their own battles.
May 10th, 2008 at 8:44 am
I agree with hwc. Don’t underestimate the ability of the Massachusetts legislature to decide this is a great idea (and yes, I’ve lived in Massachusetts for 30 years, so I know its propensity to make wacky decisions). Massachusetts gains millions of dollars in tax revenue, and unlike businesses, universities aren’t about to pick up and leave. The other “free money” initiative in Massachusetts recently failed (casinos), and taxing universities has all the upside of casinos with none of the downsides: millions in revenue, no new traffic congestion or crime issues, and the universities can’t move out of state.
An impact of this bill if it passes will be to increase the drive for contributions to alumni funds, as that way a university can gain money for operating expenses without increasing the size of its taxable endowment.
May 12th, 2008 at 4:23 pm
One thing you seem to be missing is the fact that the tax effectively eliminates the position of these colleges as non-profit institutions, based solely on the amount of money which they have. The fact is if the bill does pass, other states, and possibly the federal government, could follow suit and it will likely only be a matter of time before the lower limit drops and starts to effect smaller schools. The long term effect of this could be to remove the non-profit status of all colleges. If it passes this will see a long and drawn out court battle, and I think the colleges can manage their money much better than any of our governments.