I remember how it was -- JR
Sunday, February 18, 2024
The Poison Ivy League: How Taxpayers Subsidize Wealthy Universities
The federal government provides enormous subsidies to the wealthiest universities in the country. People may imagine that the bulk of these subsidies assist low-income students in covering the high and rising costs of attending these universities, but that is not what the federal government primarily funds. The largest type of subsidy that wealthy universities receive is in the form of payments for overhead costs on federal research grants. During fiscal year (FY) 2022, Ivy League universities received $1.8 billion for overhead on government-funded research grants. That represents 84 percent of the total amount of government subsidy those universities received.
Research grants are not subsidies, because every dollar received has to be spent according to the terms of the grant. But for every dollar Ivy League universities receive for research, they charge the government an additional 64 cents, on average, for overhead. Ostensibly, overhead covers things such as the cost of the building where the research takes place and the electricity that keeps the lights on. But universities do not have to account for the use of these funds for overhead. They can be used for virtually any purposes that university administrators prefer, and, as past research has demonstrated, these discretionary uses of overhead funds include building diversity, equity, and inclusion (DEI) bureaucracies and indulging whatever other ideological activity they wish..
The money that directly funds research may not be a subsidy, but the overhead—or, as it is often called, “indirect” money—is clearly a subsidy, because it is almost entirely fungible and unaccountable.
The eight universities in the Ivy League receive $1.8 billion each year from taxpayers despite the fact that these universities are sitting on $192 billion in endowment funds. If they need money for buildings and electricity, donors have already given them plenty. There is no need for taxpayers to give the richest universities $1.8 billion each year to cover the costs of buildings that their donors have already enabled them to maintain and update.
It makes no sense for taxpayers to continue to subsidize the construction of new research infrastructure at wealthy universities unless there is a specific justification, such as supporting the construction of a particular telescope, laser, or particle accelerator. Giving taxpayer money to wealthy universities that already have plenty of resources for buildings, laboratories, and maintenance is simply providing those institutions with a slush fund that they can use for any purpose, including those hostile to taxpayers’ preferences and interests.
Just as the tax code often phases out subsidies such as the child tax credit for wealthier individuals, governmental programs that fund university research could phase out the provision of overhead funding for wealthier universities. Arguably, universities with more than $5 billion in endowment do not require any money from taxpayers to build and maintain their research infrastructure. And perhaps the rate for overhead could be capped at 15 cents for every dollar meant for research for universities with more than $2 billion in endowment—significantly less than the overhead rates in excess of 60 cents now common at universities.
There is no reason to fear a mass abandonment of research if taxpayers fail to lavish extra money for overhead on universities that already have the research infrastructure. Those universities have reputational reasons to conduct research even if doing so does not generate a slush fund for administrators. And there is reason to hope that redirecting overhead subsidies outside of the few dozen universities that are too rich to need it might help spread research expertise more evenly around the country, improving educational and economic opportunities in large parts of the country that currently have their best researchers hired away to the coasts by the richest universities.
Capping and eliminating overhead subsidies is likely to be broadly popular. The only opposition is most likely to come from the highly paid administrators and researchers at wealthy universities. But universities and researchers at other institutions would be helped or unaffected, because their overhead funding would not change or might increase. Those interested in maximizing the benefits of government-funded research would also be helped or unaffected because the nation’s total capacity to produce research would remain unchanged or expand. And most importantly, taxpayers would benefit by no longer having to pay for unaccountable slush funds at wealthy universities that do not need that money to do their jobs.
The Origin and Purpose of Overhead on Research Grants
The federal government began systematically funding scientific research at universities following World War II. Several federal agencies pay for this research, including the National Science Foundation, National Institutes of Health, Office of Naval Research, and U.S. Department of Education. From the beginning, federal sponsors of research provided some funds for overhead with their research grants.2
Greene and Schoof, “Indirect Costs: How Taxpayers Subsidize University Nonsense.”
At first, the rate was capped at 8 percent, meaning that for every dollar supporting itemized research costs, universities could get an additional 8 cents to cover the fixed costs of building and maintaining a research infrastructure. That cap was raised to 15 percent and then 20 percent. In 1966 the cap was removed and universities were simply allowed to set rates based on an arbitrary cost formula that is easily inflated but provides a “patina of objectivity and technical respectability.”
Once the cap was removed, the rate universities charged for overhead rose dramatically so that by 1990 the rate at Stanford was 70 percent. A series of scandals revealed that these overhead funds were being used for things such as yachts and redecorating the offices of university administrators. Rates dropped below 50 percent before creeping up over 60 percent in recent years.
There is no question that research activity involves both direct costs that can be attributed to the specific project and indirect costs that have to be spread across the entire set of research activities at a university. The amount required for these indirect or overhead costs is ambiguous and has clearly varied dramatically across time.
Universities that have less private support may need public assistance in building and maintaining their research infrastructure if it is a priority to increase total research activity. But universities that have generous private support, as indicated by very large endowments, do not require public assistance to have significant research capacity. To put in perspective how rich U.S. universities can be, Harvard’s endowment of $53 billion exceeds the gross domestic product of 124 countries, including Tunisia, Uganda, Bolivia, and Estonia.
With endowments that big, they have enough funding to build and maintain research infrastructure. And given the nonprofit status these universities have been granted to pursue the discovery and dissemination of knowledge, they have an obligation to use their resources to build and maintain research infrastructure even if taxpayers do not provide them with additional funds for that purpose.
Data and Methodology
Information on the resources Ivy League universities have at their disposal from private donations as well as from government funding is readily available.
********************************************
Reversing the Department of Education’s Anti-Market Orientation in Higher Education
For two decades, during the tenures of the Obama and Biden Administrations, the Department of Education has tried to curtail access to for-profit colleges and universities (known as the “proprietary” sector in higher education) through a growing tome of federal regulations.1
U.S.C. § 1002(a)(1)(A).
Oversight of the nonprofit and public sectors has been much slower in coming. Indeed, rather than cast a critical eye at the return on investment of traditional higher education, the Biden Administration is pursuing every possible avenue for student loan debt amnesty, a massive handout to nonprofit and public colleges and universities. Rather than singling out the for-profit sector, which is meeting the needs of non-traditional students in particular, the department should hold all sectors to the same standards instead of expressing the anti-market biases described in the following.
Furthermore, while it continues to exist, the department should strive to encourage innovation in postsecondary education. Nascent technology companies—in whatever ways they intend to serve postsecondary institutions—cannot easily take the financial risk of building partnerships when the department’s regulatory regime stifles them and threatens their finances. Instead, the next Administration should rescind many of the anti-market regulations promulgated in recent years.
Summary of Anti-Market Regulations Under Secretary Cardona
The U.S. Department of Education, under Secretary Miguel Cardona, has taken a heavy-handed approach against for-profit enterprises in postsecondary education, whether those enterprises are institutions or simply for-profit partners of nonprofit institutions. This Backgrounder summarizes the policies that have been explained in more detail elsewhere.
“Gainful Employment.” The Higher Education Act defines a proprietary (for-profit) institution primarily as a “school” that is neither public nor nonprofit and “provides an eligible program of training to prepare students for gainful employment in a recognized occupation.”2
U.S.C. § 1002(b)(1).
From this one reference, the department has produced a significant cascade of “gainful employment” regulations. These rules set alumni income and debt standards almost exclusively for proprietary institutions. Meanwhile, the agency has not produced similar regulations to hold public or nonprofit institutions accountable for the outcomes of their students. Gainful employment regulations were promulgated under President Obama, but the Trump Administration rescinded them, correctly arguing that the set of regulations “wrongfully targets some academic programs and institutions while ignoring other programs that may result in lesser outcomes and higher student debt.”
“Borrower Defense.” The Higher Education Act authorizes the Department of Education to “specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment.”5
U.S.C. § 1087e(h).
Since the 1990s, such regulations have focused on “any act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law (the State law standard),” and only 10 claims were recorded prior to 2015.
But the “borrower defense” regulations today extend far past the department’s authorization to describe possible defenses that a borrower may assert against repayment. A traditional borrower defense would be, for instance, that an institution intentionally misstated material information about future employment prospects or the license required to accompany a degree in order for a graduate to be allowed to work in a state. But the department has also asserted its own authority to “initiate a proceeding to collect” loan amounts from the school on behalf of the student even in the absence of a successful claim in court.7
C.F.R. § 685.206(c)(4).
Once the department successfully collects the funds, it cancels the student’s debt. These regulations make the department judge, jury, and executioner in order to cancel student loans and claw back student aid funding.
During the Obama Administration, the department went a step beyond its alleged authority to “collect.” The department required institutions to have the money available just in case the department came to collect it. This requirement took the form of astronomical letters of credit (certifications from banks that the money would be provided, if needed), which successfully knocked proprietary institutions out of the education market.
******************************************************
Australian university chiefs lecture schools on maths and science teaching
University chiefs have caned schools for failing to prepare “Zoomers” for tertiary education, with domestic enrolments diving 10 per cent as Gen Z teenagers shun study for gap years, jobs and travel.
As the Albanese government prepares to launch its landmark Universities Accord reforms, cash-strapped universities are demanding more financial assistance for students struggling to pay the rent during a cost of living crisis that is pushing poorer teenagers straight from school into the workforce.
University of Sydney vice-chancellor Mark Scott – a former teacher and director-general of the NSW Education Department – said schools were struggling with a shortage of maths and science teachers to prepare teenagers for university.
“Students at some schools are being discouraged from attempting that more demanding maths, perhaps not linked to the ability of the student, but more the availability of staff,’’ he said.
“There’s a chronic, entrenched shortage of mathematics teachers around the country now. I think the true shortage is often concealed because … there are plenty of PE (physical education) teachers who are being retrained in maths to just try and get a qualified teacher in front of the class.’’
Professor Scott said universities might need to offer more summer schools and intensive tutoring to get school leavers “up to speed’’ for university degrees.
“We are increasingly concerned, as we target students from low SES (socio-economic) backgrounds, that they are not getting the opportunity to study maths at a level that has been an important prerequisite for entry to some of our courses,’’ he said.
“There are a range of courses, from economics and business to science and engineering, that have required maths prerequisites, that we can see fewer and fewer students reaching because fewer students are doing maths at that advanced level.’’
Australian National University deputy vice-chancellor Grady Venville, a former high school teacher, said schools must ensure more students were taught maths and science at the highest level.
“We’ve got kids coming right through from primary school and falling behind, and when they get to high school … they’re often not encouraged or supported to do the higher level mathematics,’’ Professor Venville said.
“We don’t have enough highly qualified maths teaching staff (in schools), so that means it’s easier for the school to encourage the students to do an easier maths. What that does is narrow down the pipeline of students who can go into things like physics or engineering, pure mathematics and even our science subjects.’’
Professor Scott said his sandstone university – renowned for its medicine and engineering faculties – was considering removing the prerequisite for advanced high school mathematics for some degrees. “We wouldn’t be decreasing the standards for our programs, but providing more help for students … without watering down our courses,’’ he said.
“Perhaps more summer programs, more introductory programs, where the university takes on a greater responsibility to get students up to speed.’’
Professor Scott said the high cost of living was discouraging students from enrolling at university, or studying full-time.
He said the University of Sydney was lobbying the NSW government to grant it social housing development concessions to build more student accommodation.
“When I was a student here in the 1980s, some of the cheapest accommodation anywhere in the Greater Sydney area was surrounding the university,’’ he said.
“You could live cheaply in Glebe and Redfern and Newtown in a way that is often not possible now at all. We’re talking to our alumni about making more scholarships available that provide accommodation support.’’
Professor Venville said university students were taking longer to finish degrees as they juggle study with part-time work or travel. She said Gen-Zs, known as “Zoomers’’, seemed less mature than previous generations of university students and were keen to take a “gap year’’ after school.
In Brisbane, Griffith University vice-chancellor Carolyn Evans said schools were encouraging too many students to take vocational subjects, rather than the more difficult academic subjects.
“(This) means perhaps not as many people are as well prepared for university as they used to be,’’ Professor Evans said. “We’re quite concerned about the decline in the number of students taking high-level maths and some of the harder science subjects. There are a lot of applied subjects being done at school level, which are appropriate for some students. But they don’t necessarily get a really strong foundation to go on and do some of the things that we critically need in this country … like engineering, medicine and some of the health disciplines.”
Professor Scott noted that teenagers were dropping out of high school at the highest rate in 30 years. In public schools, 26.4 per cent of high school students had left before finishing Year 12 last year – up from 17 per cent in 2018, the Australian Bureau of Statistics revealed this week.
The latest federal Education Department data shows the number of students starting a degree fell 10.4 per cent last year to a nine-year low. First-year enrolments by domestic students fell 5.5 per cent between 2018 and 2022 – a trend that is sabotaging the federal government’s ambition to increase student numbers by one-third, to 1.2 million, over the next decade.
Federal Education Minister Jason Clare said skilling school-leavers for work was “not just the job of universities’’. “We need more people to finish school,’’ he said. “We need to fully fund all schools and tie that money to the reforms that will help kids who fall behind to catch up, keep up and finish school and then be able to go to TAFE or university.’’
Mr Clare said that “going to university opened up opportunities and makes you money’’.
******************************************************
My other blogs: Main ones below
http://dissectleft.blogspot.com (DISSECTING LEFTISM)
http://antigreen.blogspot.com (GREENIE WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://australian-politics.blogspot.com/ (AUSTRALIAN POLITICS)
http://snorphty.blogspot.com/ (TONGUE-TIED)
http://jonjayray.com/blogall.html More blogs
******************************************************
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment