At Princeton, they like to do things in style. One of the newer dorms on the university’s New Jersey campus has triple-glazed windows framed in mahogany.
Princeton — and the rest of America’s elite private universities — can easily afford such exquisite touches. These institutions of higher education are sitting on mountainous caches of cash, as the just-released new annual numbers on collegiate charitable contributions make abundantly clear.
Three elite schools — Harvard, Stanford, and Columbia — each received over $1 billion in new donations last year. The 20 universities with the year’s highest charitable hauls took in 28 percent of the contributions America’s colleges and universities pocketed in 2018. These 20 schools enroll just 1.6 percent of the nation’s college students.
Princeton, according to the latest public figures, holds an endowment worth $23.4 billion, the equivalent of over $2.8 million per student.
Should any of this concern you? Should those mahogany windows particularly bother you in any way? Probably should. You, after all, are helping pay for that mahogany.
Billionaires like former eBay CEO Meg Whitman, the patron of Princeton’s triple-glazed-window dorm, get to deduct off their taxable income the millions they contribute to their elite alma maters. Before last year, Americans with deep pockets could use charitable donations to write off up to 50 percent of their annual income. Today, thanks to the Trump tax cut enacted in 2017, our wealthiest can use those donations to write off up to 60 percent of that income.
In other words, average taxpayers are subsidizing billionaire contributions to “Grand Old Ivy.” For every $1 million billionaires make in contributions, they currently save in federal income taxes — and the federal treasury loses in revenue — $370,000. State governments lose dollars, too.
This revenue shortfall, in turn, leaves fewer tax dollars available for public colleges and universities, and the resulting budget squeeze has these institutions regularly raising tuitions and sending their graduates out into the world facing decades of student debt payments.
But the damage to higher education from our nation’s top-heavy distribution of income and wealth goes much deeper. Elite universities don’t just luxuriously accessorize their dorm windows. They regularly use their excesses of cash to raid public institutions for their most accomplished professors — and the research grant these professors control.
These raids usually succeed. Extravagantly endowed elite universities can always outbid budget-squeezed public institutions. Full professors at Harvard average $245,800. On the nearby campus of the University of Massachusetts-Boston, full professors average over $100,000 a year less.
Numbers like these force public universities into no-win choices. If they stretch to match what their elite counterparts can shell out for faculty talent, they end up having to cut back in other areas. If they step back and don’t try to compete, they lose their best faculty. Either way, their students lose.
In the best of all possible worlds, boards of trustees at public colleges and universities would react to these horrible choices with righteous indignation. They’d march up to Congress and state capitols and demand adequate funding for public higher education, the sort of funding that flowed throughout the mid-20th century, a time when America seriously taxed the nation’s richest and built, with those tax dollars, the finest and broadest system of higher education the world had ever seen.
Trustees at public institutions of higher learning today have not chosen that path. They’ve opted instead to redouble their efforts to find their own Rich Uncle billionaires. They’re shelling out big bucks — the ten highest-paid presidents of public universities now all make over $1 million a year — in the search for rainmakers who can navigate the worlds of corporate execs and hedge-fund kingpins.
Sometimes the rainmakers succeed and do snare a deep pocket or two, who then typically, as the philanthropy analyst Anand Giridharadas puts it, end up providing dollars to fund their own “gilded whims.”
Some students appreciate the resulting mahogany, others not so much.
Explains Giridharadas: “It’s very uninspiring when you’re 19-years-old to be walking in a beautiful quad and see the name of hedge fund managers.”