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To ensure access and excellence in our public research universities, we need a 21st century Morrill Act

Robert Birgeneau, professor of physics, former chancellor | September 1, 2015

At the present time, Congress and the Obama administration are addressing two important issues, the progressive deterioration of the nation’s physical infrastructure and the enormous sums of money that are being held offshore by U.S. corporations unwilling to pay federal taxes on these funds. Any repatriation of these offshore funds will inevitably involve some compromise on taxes. It is rumored that the administration would like to use any taxes gained in such a compromise agreement to address the nation’s physical infrastructure challenges.

It is my view, and that of my fellow members of the Lincoln Project of the American Academy of Arts & Sciences, that our nation’s public higher-education infrastructure is in a similar state of deterioration and should be part of any such tax agreement. The letter below — from Mary Sue Coleman, president emerita of the University of Michigan, and myself, chancellor emeritus of UC Berkeley — addresses this issue.

In our letter we do not make any specific financial proposals. However, to make this concrete, I would like to propose one possible use of new tax revenues gained from the repatriation of corporate funds held offshore. I welcome other ideas.

Here is my proposal: The funds currently held offshore by U.S. corporations total approximately $2.1 trillion. A tax of 1 percent committed to public higher education and, specifically, to our country’s great network of public research universities, would yield $21 billion. If this were distributed to all 145 public research universities in proportion to the population of their respective states, the University of California would receive approximately $2.4 billion.

How would we spend this money? Surely, it should go first to our faculty and our students. I propose that we follow the very successful model of UC Berkeley’s Hewlett Chairs, using the funds for challenge grants, with a 1-to-1 match, to support faculty chairs and student scholarships. If $1 billion were devoted to senior faculty chairs, this would create a thousand $2-million chairs, along with 1,000 graduate fellowships across the UC system.

I would propose that we commit the next $500 million as challenge grants for junior-faculty chairs. This would create 500 $1-million junior-faculty chairs and 500 more graduate fellowships funded at $25,000 each.

The remaining $900 million would be for challenge grants, again on a 1-to-1 basis, to create a $1.8 billion UC-wide endowment for financial aid for low and middle income undergraduates. If the state were to provide a match as well, all of the above numbers would be increased by 50 percent. The impact of such a program on the University of California – and public research universities across the country — would be transformational.

Letter to key members of Congress and the Obama Cabinet

As Congress and the Executive branch consider new ways to fund improvements in the nation’s physical infrastructure, including its highways, we respectfully urge policy makers to consider new ways to support the nation’s intellectual infrastructure, including its public research universities.

We write as citizens, scholars, and administrators who have dedicated our professional lives to the nation’s leading public research universities. These institutions are engines of innovation, growth, and opportunity for Americans of all backgrounds, yet we are concerned about their future prospects. Every state in the union has now reduced its investment in higher education, and budget constraint appears to be the order of the day at the federal level as well. Our country’s leadership in the realm of ideas — in education, in research and innovation — is now in jeopardy. If we allow these institutions to deteriorate the way that our physical infrastructure has deteriorated, we will have neglected a vital public good, one that affects the whole society.

Many organizations are addressing aspects of this national problem. In particular, we strongly recommend the work of The Lincoln Project, an initiative of the American Academy of Arts and Sciences that is developing strategies to ensure that these institutions survive and thrive as centers of education and innovation.

The Lincoln Project is named for Abraham Lincoln, the president who signed the Morrill Act to establish public universities in every corner of the union. Even at a perilous time in our nation’s history, Lincoln understood that an investment in infrastructure — intellectual as well as physical — was an investment in the future. He signed the Morrill Act on July 2, 1862. A day earlier, he signed The Pacific Railroad Act, initiating the construction of the transcontinental railroad. The railroads made it easier for Americans to develop new territory; public universities helped Americans decide what to do with the newly-accessible land, offering opportunities for nascent industrialization and spurring economic development.

As a result of Lincoln’s foresight, there is now at least one public research university in every state. Each is a center of education and cultural activity. Each expands knowledge in the sciences, social sciences, humanities, and the arts. Together, these institutions educate four million students annually. They award 60 percent of the nation’s doctoral degrees. As defined by the federal government, 41 percent of degrees granted are in areas of national need.

Every American benefits from these institutions, not just those who attend them as students or work for them as employees. Public research universities encourage and support our creativity, help us to understand the mysteries of science and technology, advance the research that enhances our lives (at home and abroad), and prepare us for the jobs and responsibilities of the future. Indeed, no governmental initiative unrelated to national defense has ever achieved as much, as efficiently, for so many people as our network of public research universities.

It has been reported that Congress and the Executive branch are contemplating several plans to incentivize the return of corporate earnings from abroad; at least one such plan contemplates a modest tax on returned earnings to create a new fund for infrastructure projects. As these and other proposals are considered, we urge policy makers to follow President Lincoln’s lead and include public research universities in any plan to fund our nation’s imperiled infrastructure.

If America is to remain internationally competitive as a hub of research as well as education, our public research universities will require an increased public/private investment. In essence, we need a 21st century version of the Morrill Act and, in addition, reconsideration of a new National Defense Education Act that Congress passed over half a century ago in the wake of Sputnik to spur science, math, and international studies. We would be pleased to suggest specific funding mechanisms for consideration, but in writing this memo we are less concerned with the details of programmatic approaches than we are with the principles at stake: the most important being that a great nation requires a great system of public higher education and a sustained commitment to basic and applied research.

Public research universities, after all, are key elements of our technological ascendancy and democratic vitality. They are critical components of the infrastructure that supports the intellectual life of the nation. And they require our steadfast support.

Sincerely,

Robert J. Birgeneau, University of California, Berkeley
Mary Sue Coleman, University of Michigan

Comments to “To ensure access and excellence in our public research universities, we need a 21st century Morrill Act

  1. Wow, for those reading, apologies for all my typos above. Was writing very quickly.

    HERE’S A GREAT ARTICLE BY ROBERT REICH THAT LAYS OUT THE FACTS:

    Imagine a system of college education supported by high and growing government spending on elite private universities that mainly educate children of the wealthy and upper-middle class, and low and declining government spending on public universities that educate large numbers of children from the working class and the poor.

    You can stop imagining. That’s the American system right now.

    Government subsidies to elite private universities take the form of tax deductions for people who make charitable contributions to them. In economic terms a tax deduction is the same as government spending. It has to be made up by other taxpayers.

    These tax subsidies are on the rise because in recent years a relatively few very rich people have had far more money than they can possibly spend or even give away to their children. So they’re donating it to causes they believe in, such as the elite private universities that educated them or that they want their children to attend.

    Private university endowments are now around $550 billion, centered in a handful of prestigious institutions. Harvard’s endowment is over $32 billion, followed by Yale at $20.8 billion, Stanford at $18.6 billion, and Princeton at $18.2 billion.

    Each of these endowments increased last year by more than $1 billion, and these universities are actively seeking additional support. Last year Harvard launched a capital campaign for another $6.5 billion.

    Because of the charitable tax deduction, the amount of government subsidy to these institutions in the form of tax deductions is about one out of every three dollars contributed.

    A few years back, Meg Whitman, now CEO of Hewlett-Packard, contributed $30 million to Princeton. In return she received a tax break estimated to be around $10 million.

    In effect, Princeton received $20 million from Whitman and $10 million from the U.S. Treasury – that is, from you and me and other taxpayers who made up the difference.

    Add in these endowments’ exemptions from taxes on capital gains and on income they earn, and the total government expenditures is even larger.

    Divide by the relatively small number of students attending these institutions, and the amount of subsidy per student is huge.

    The annual government subsidy to Princeton University, for example, is about $54,000 per student, according to an estimate by economist Richard Vedder. Other elite privates aren’t far behind.

    Public universities, by contrast, have little or no endowment income. They get almost all their funding from state governments. But these subsidies have been shrinking.

    State and local financing for public higher education came to about $76 billion last year, nearly 10 percent less than a decade before.

    Since more students attend public universities now than ten years ago, that decline represents a 30 percent drop per student.

  2. To answer Dave’s question, for most of it’s existence, UC was funded primarily by the state. State taxpayers contributed to UC via their taxes, obviating the need for fundraising and endowments. It is only in the last few decades that the state has drastically reduced funding, requiring UC to quickly ramp up the types of fundraising that Stanford and other privates have done for decades.

    I think UC has done a credible job at encouraging alumni giving, but UC isn’t going to catch up for a long time, especially given the difference in the class backgrounds of the students the two institutions admit (although this, too is changing).

  3. Cal Berkeley has far more graduates than Stanford, yet Stanford has a much much larger endowment. Why?
    Public research universities are failing miserably to entice their prosperous alumni to give back to their university endowment funds in anywhere near the same proportion that prosperous private university alumni give back to their universities.

    Hence elite public universities like Cal and Michigan et al must work much smarter to increase their endowments rather than simply solicit preferential funding from the Federal Government.

    Repatriating corporate overseas profits with an earmark for higher education has a lot of merit … but would have much more appeal to Americans’ innate sense of fair play if the funds were applied to ALL research universities, public and private, and not limited simply to a gerrymandered list of 145 concocted by the Lincoln Project.

    • This is a great proposal. Chancellor Birgeneau is to be commended — yet again.

      There is a very good reason for earmarking these funds to public universities and for letting private universities fend for themselves — and most people simply aren’t aware of them. Dave’s attitude is, with all due respect, entirely naive and devoid of real context — and it is all too common an attitude:

      1) Public research universities are said to be “failing miserably” at enticing their prosperous alumni to give back. That is such a wrong-headed statement I don’t even know where to begin. It’s complete bollocks, as the Brits would say.

      Take the UCs, as but one example: they educate far, far higher numbers of less well off people than do comparable private institutions.

      Private institutions’ admissions, especially at the most elite levels, are naturally skewed to very wealthy people. Do the math. Guess what? When one asks people for money — even wealthy ones — who started life without wealth for money, not surprisingly, it is much tougher to get their donations than from those who already have charitable donations.

      But more than that, their alumni populations are far less affluent on an average and per capita basis. What the heck does “failing miserably” even mean? The UCs do quite well — without all the advantages of legacy or development-driven admissions. “Work smarter.” Another total inanity devoid of realism.

      Look at the national fundraising totals for different institutions from 2014:

      UC Berkeley raises money in the top 20, ranking just above MIT. Stanford raises the second most, ranking below Harvard. Harvard and Stanford’s totals include medical schools which are huge attractors of capital. MIT, similar to Berkeley, doesn’t have a med school — and for UC Berkeley, if you combined its totals with its historical affiliated med school, UCSF. Firstly, the UC schools do quite respectably compared to other universities — and especially given that they simply don’t serve such populations of concentrated wealth — in other words they actually use the money they raise to educate people. (See this piece in Inside Higher Ed.)

      2) The other comment relates to “sense of fair play.” Are you joking? All the billions that the top universities raise — such as the $400 million that John Paulson ludicrously some would say gave to Harvard (endowment $35+ billion) is tax free which means it effectively benefits rich people at expense of the population as a whole.

      The money is taken out of the tax system; it is used to educate people far wealthier than the average public university student — and now calls are being made that it would be somehow unfair to take money to support institutions that serve much more population having much less money. Talk about speaking for the 1%.

      Look into it, Dave. I suspect that you haven’t a clue about the realities.

      The fact is that the UCs do relatively well — and they give back far more to parts of our society in some many ways than to institutions of concentrated wealth. What about public institutions in poorer regions or that don’t serve the uppermost intellectual echelon.

      And if you are an alumnus of the UC, are you giving?

      – Signed a UC alum who has worked at both private and public universities.

      • University fund raising numbers cut through the alumni stinginess smokescreen and ad hominems like a knife through butter:

        ========================
        Top Fund-Raisers in 2014

        1. Harvard U. $1.16 billion
        2. Stanford U. $929 million
        3. U. of Southern California $732 million
        4. Northwestern U. $616 million
        5. Johns Hopkins U. $615 million
        6. Cornell U. $546 million
        7. U. of Texas at Austin $529 million
        8. U. of Pennsylvania $484 million
        9. U. of Washington $478 million
        10. Columbia U. $470 million
        11. New York U. $456 million
        12. U. of California at San Francisco $445 million
        13. Duke U. $437 million
        14. U. of Michigan $433 million
        15. Yale U. $430.31 million
        16. U. of California at Los Angeles $430.28 million
        17. U. of Chicago $405 million
        18. U of California at Berkeley $390 million

        ======================

        All of these universities have prosperous alumni.

        And note, Cal has a total alumni population that is multiples larger than most of the universities that raise more money from their alumni. Can anyone honestly look at the above list and still deny that Cal alumni are missing in action when it comes to give back?!

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