, Salem, MA

August 27, 2013

Column: Private universities should pay more taxes

Taylor Armerding
The Salem News

---- — Private colleges and universities haven’t lost their property tax-exempt status — yet. But it shouldn’t surprise anybody, least of all those running those institutions, if they do sometime during the next few years. And they will have only themselves to blame.

Even the little game they play with local officials — making a “voluntary” PILOT (payment in lieu of taxes) every year — isn’t going to work, since that generally amounts to 25 percent or less of what they would owe if their property were taxable.

I’ve openly mocked this arrangement for decades: If a class of property is legally tax exempt, then its owners shouldn’t have to submit to a shakedown from local officials to “donate” even a percentage of the money instead. If they should not be tax exempt, change the law.

And this is not to endorse the arguments of city and town officials — that they need this money because of all the fabulous services they are supplying to the institutions. They have presumably been providing those services for the nearly 100 years that educational institutions have been tax exempt.

The reason they “need” the money is because they long ago gave away the store to the public employee unions, giving them lavish, unsustainable benefits including early retirement and pension packages vastly more generous than most of those who pay the bill receive.

Still, the argument of colleges and universities that they are “nonprofit” is wearing very thin, thanks to their own greed — raising pay and benefits for administrators and tenured faculty while sucking ever more money from students that in increasing measure comes from government grants and loans.

One of the latest dustups over this is in Princeton, N.J., where residents have sued to overturn the tax-exempt status of their local Ivy League university.

Among their arguments: Princeton University has the largest endowment per student in the country; it made $115 million from scientific patents in 2011 and turned $35 million of that over to various faculty members; it makes money from ticketed concerts, TV rights to athletic games and other events. In short, it operates like a business and ought to be taxed as such.

Princeton may be an outlier — so far — in having its residents challenge the tax-exempt status of a university, but they are just one of many communities where local officials are looking hungrily at the avalanche of money flowing into colleges and universities and, from there, into the pockets of its more privileged employees.

Providence Mayor Angel Taveras wants Brown University to “volunteer” more money. Boston Mayor Tom Menino wants all the nonprofits in the city to “contribute” more.

And given the rhetoric at the top of government, from President Obama himself, that people and organizations should have to pay what government thinks they can afford, and that “at some point you’ve made enough money,” why not?

The Chronicle of Higher Education reported earlier this year that the median salary of public university presidents increased 4.7 percent in 2011-12 — again outpacing inflation — to $440,000 a year. At the top of that food chain was Penn State’s Graham Spanier, at $2.9 million. You may have heard Spanier’s name even if you’re not from Pennsylvania. He was forced to resign in November 2011 after presiding over the worst athletic scandal in the history of higher education — the Jerry Sandusky sex-abuse case.

The university defended the payout by pointing out that his base salary was “only” $351,000 and that the rest was in deferred compensation, payments to his retirement account and $1.2 million in severance.

That makes taxpayers everywhere feel much better, I’m sure.

At private institutions, the Chronicle reported that 36 presidents were paid more than $1 million, with the average base salary at $397,860.

It’s not only big salaries either — look around a bit and you can find numerous stories about college presidents and other high-level administrators with lavish expense account spending at expensive hotels and restaurants.

Richard Vedder, director of the Center for College Affordability and Productivity who teaches economics at Ohio University and has tracked higher education costs for decades, noted just one example of an administrator living large in a recent column for Bloomberg: Gordon Gee of Ohio State University (paid more than $1.8 million last year), spent $532 for a shower curtain in the presidential mansion.

While most colleges and universities treat (and pay) their adjunct faculty like serfs, those on tenure get big bucks for barely breaking a sweat. One of them, new superstar Sen. Elizabeth Warren (D-Mass.), self-proclaimed champion of the middle class, somehow found a way to accept $350,000 for teaching one course at Harvard Law School.

All the while, universities are charging students more and more tuition, leaving many of them of them with crippling debt when they graduate.

Add to that the fact that more than $40 billion gushing into these institutions is coming from taxpayers, in the form of research grants or loans and grants to students, and the case for being exempt from property taxes essentially collapses.

When university presidents are asked about their outsized salaries and perks, they frequently talk about establishing the “brand identity” of their institution. That’s an admission that they themselves perceive their operation as a business.

So, welcome to the taxpaying world, ladies and gentlemen of the academy. You’re making the case for it better than the politicians could.

Taylor Armerding is an independent columnist. Contact him at