"Tax-exempt hedge funds that conduct classes"

What?

 

 

Yeah. Basically, an eloquent expose of the cumulative consequences of neoliberal kleptocracy—uhhh..."public/private partnerships"—run amok in the academic space.

 

I got onto this book via an interview with the author the other day on PBS Amanpour & Co. Topically relevant in what I've come to regard as priority overlapping exigencies brought to the fore by the Covid-19 pandemic: ECON disruption, Academic turmoil, racial/social justice upheavals, climate change mitigation, pollution, and threats to Democracy.

 Grateful for having run into this heads-up. An excellent read. I'm now in the Epilogue. Stay tuned.

UPDATE

 

Finished. Nice. Very nice. Written in the consistently engaging style of a fine piece of "investigative journalism." I hope it gets wide airing—all the way up to the Biden White House. 

 

Core takeaway: Blatant abuse of 501(c)(3) non-profit status by elite postsecondary schools (mostly private) is a foundational tactic for their engaging in lucrative (often eminent domain-assisted) commercial gentrification real estate businesses and intellectual property / patent endeavors, all to the detriment of students, lower-echelon staffs, and local residents—replete with armed, largely unaccountable private "campus" police forces exceeding their legitimate briefs, beyond campus borders into adjacent, usually at-risk sociodemographic neighborhoods. Not to mention property tax payers in general.

 

A few Kindle edition snips **:

 

** These come from a new Kindle reader platform feature contained in the version downloaded to my new iPad. Pretty cool. You can easily share stuff straight to Twitter, Facebook, email, etc, or save to file.

Quite the revealing tour of colleges and universities, including Yale, Columbia, NYU, Johns Hopkins, UChicago, ASU, and Trinity College. A salient excerpt:

Yale University often gets credit for “saving” the once beat-down city of New Haven, making it safer while attracting new industry and development. But the truth is much more complicated. In March 2016, New Haven was struggling to balance its shrinking budget. And then-mayor Toni Harp joined local politicians and labor unions to set their sights on Yale. They called for a state senate bill to help fine-tune the university’s property tax-exempt status, an area where the school’s prosperity was directly tied to the city’s despair. Universities and their medical centers are registered with the Internal Revenue Service as 501(c)(3) charitable nonprofits.

Because of the public services that higher education institutions ostensibly provide to surrounding communities, their property holdings are exempt from taxation in all fifty states. But New Haven officials said Yale’s multimillion-dollar tax exemption actually contributed to the budget deficit of the city. The Connecticut bill, SB 414, would have allowed the state to tax university properties that generate $6,000 or more in annual income.

At a city hall press conference, Harp immediately acknowledged the need to uphold the tax protections for nonprofit organizations, including Yale. She celebrated the university’s undeniable role “in the city’s transformation.” Over the past forty years, Yale had become the single largest commercial power in New Haven. But Harp also warned that although cities rely “more and more on eds and meds,” New Haven leaders must “be clear… about the fiscal impact of this transition.” The mayor reminded listeners that “we still have to run a city.” Yale offered, as a compromise, an annual $8 million “payment in lieu of taxes,” or PILOT. By 2019, that payment jumped to more than $12 million. These contributions are voluntary, however, and are a fraction of the taxes Yale would pay based on the assessed value of its properties. But Yale didn’t have to worry; SB 414 did not pass, and the city of New Haven still struggles while its largest local economic entity remains exempt from property taxes.

Yale’s financial dominance in New Haven is tied to the meteoric ascendancy of the knowledge economy. Here, academic research is used to create profitable, commercial goods or patents in a range of fields, from the pharmaceutical industries and software products to military defense weaponry. Yale, in particular, has cultivated relationships with a number of biotech firms to produce new jobs and draw commercial revenue to the university and its host city. But this partnership between private industry and academic research has also created a property-tax “gray area” where profitable research produced for private companies is conducted in educational buildings that are not on the tax rolls.

Yale’s revenues from patent licenses grew from just more than $5 million in 1996 to more than $45 million in 2000.4 And it has also been difficult for New Haven to attract investors to this unlevel playing field. New businesses must pay taxes, and they struggle to coexist with competitors in the same market that are affiliated with the tax-exempt behemoth of Yale. Local politicians such as Harp simply wanted the university to contribute its fair share to the broader community.

But Yale’s financial position in New Haven is the result of more than just biotech. The school also oversees a lucrative portfolio of commercial and residential assets managed by its University Properties. Both students and alumni marvel at the transformation of the area from what was once dingy and even a bit dangerous. Now, when walking through the blocks surrounding the campus, they enjoy a new range of restaurants, shops, and housing options. By 2014, Yale’s more than four hundred downtown properties totaled roughly $2.44 billion in value…

Baldwin, Davarian L. In the Shadow of the Ivory Tower (pp. 17-19). PublicAffairs. Kindle Edition.

Similar stories are recounted from a number of cities around the nation. Several were of particular personal interest to me: My late younger daughter Danielle did her Master's in Religion at UChicago's Meadeville Seminary. I'm hip to the South Side. Second, I now live "in the shadow" of the Baltimore quasi-autonomous "Vatican City" of Johns Hopkins. And, I lived in Las Vegas for 21 years (where I got my Master's at UNLV in 1998). I'm no stranger to Phoenix, which is a quite similar socioeconomic, cultural, and desert environment.

Dr. Balwin's accounts of the NYU and Columbia U machinations were also acutely illuminating.

Erratum: Among the phrases that cause my hand to slide reflexively over my wallet are [1] "Gaussian Distribution" (where it goes to non-physical phenomena), and [2] "Public-Private Partnerships." The latter too often comprise havens for economically rapacious scoundrels.

For now, just let me observe that we are lucky to have the likes of Dr. Davarian L. Baldwin. Heartily recommend his new book.

 

Cool photo.

SOME RELATED READING

IVY-COVERED CASTE SYSTEM
We like to position education as the great leveler. But in fact it has become a caste system, a means of passing privilege on to the next generation. Sure, we let in a few freakishly remarkable kids from the masses so we can pretend to be a meritocracy, but between legacy admissions, high school inequality, and straight up pay-to-play arrangements, the wealthy are wildly overrepresented in our colleges. Wealthy kids today are over twice as likely to go to college as poor kids, and over five times as likely to attend an elite school.8 At 38 of the top 100 colleges in America, including 5 of the Ivies, there are more students from the top 1% of income than there are from the bottom 60%.9 You could argue that at this point, the Ivy League undergraduate programs are not colleges, but hedge funds that educate the children of their investors…

Galloway, Scott. Post Corona (pp. 130-131). Penguin Publishing Group. Kindle Edition.

DESPERATE
Why would college presidents put their students, employees, and neighbors at risk like this? The ugly truth is that many believe they have no choice. College is an expensive operation with a relatively inflexible cost structure. Tenure and union contracts render the largest cost (faculty and administrator salaries) near-immovable objects. The bulk of the teaching is done by adjuncts and assistants, who receive anemic compensation (and grad students, who work for nearly nothing), while the aristocracy of higher ed, the full professors, have their high salaries protected by tenure. In addition, universities have let their non-teaching staff costs bloat obscenely—growing head count is always easier than shrinking it. After working in higher ed for two decades, I believe nearly every decision is made with one goal in mind: how to increase the compensation and decrease the accountability of tenured faculty and administrators.

Government support for education has also been on the decline for generations. The result is that while some universities enjoy revenue streams from technology transfer, hospitals, returns on multibillion-dollar endowments, and public funding, the bulk of colleges have become tuition dependent. If students don’t return in any given semester, many colleges will have to take drastic action that could have serious long-term impacts on their ability to fulfill their missions… (ibid, pp. 138-139).

See also

 

These books add some useful broader context to Dr. Baldwin's eye-opening work.

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