Dust off your futon and get your alma mater's sweatshirt out of the closet! Students are packing their lives into their cars and heading back to school. And with college football season set to kick off on Friday, we're about to usher in the time of year where, in college towns around the country, school spirit reaches a fever pitch.
But before you get too caught up in that swell of pride, you may want to consider the fact that the university you hold near and dear may be costing you more on your tax bill.
In February, the Senate Committee on Finance, the House Committee on Ways and Means and its Oversight Subcommittee sent a joint letter to the 56 billionaire campuses asking for detailed information on the size and use of their endowments. The universities were also asked about the size of their tax-exempt property holdings and the extent to which they were making payments in lieu of taxes ("PILOTs") to their local communities to help meet the public cost of supplying police, fire, and other municipal services to these institutions.
The responses that have been revealed thus far are astounding. Public documents show that Harvard, for example, had 650 buildings comprising 25 million square feet and an annual PILOT of $5.9 million. Brown University had a PILOT of $6.5 million for 236 buildings totaling 6.8 million square feet. And, thanks to the Santa Clara County assessor, we also know that Stanford University holds one of California's largest property tax exemptions, with about $8 billion worth of property removed from the tax rolls, meaning Stanford is receiving a tax break worth at least $80 million a year.
I recently spoke to Mark Schneider, vice president and an Institute Fellow at American Institutes for Research. Prior to joining AIR, Dr. Schneider served as Commissioner of the National Center for Education Statistics from 2005-2008. In 2013, the Chronicle of Higher Education selected him as one of the 10 people who had the most impact on higher education policy in that year.
Schneider told me that the heart of the issue is the evolution of not-for-profits, and it colors the way schools are evaluated from a tax perspective.
"No one expected so many not-for-profits to be the big money making machines they are now. Many not-for-profit private universities are huge property owners with even greater wealth," he explained. "The biggest property owners in most cities are going to be these large universities, churches, governments, and hospitals. But the difference between all of them is simple. You walk into a hospital emergency room, you get treated no matter what. If you walk into a church, no one says, 'What's your income, and are you going to donate?' You can't say the same about universities."
The resulting tax implications for people who live in the shadow of these big schools are resounding. Quite simply, the revenue lost to college tax breaks has to come from somewhere, and if the universities aren't paying, it means local citizens' property tax bills are going to rise.
Schneider says the schools try to combat this by making themselves "partners" in the community, allowing the public to come to complimentary shows and other activities on campus, but it comes nowhere near compensating them for the extra tax costs.
"I asked one of my co-workers who lives near American University here in DC. This is a school that has a huge endowment and owns a lot of property," Schneider explained. "I said, 'Does it bother you that they pay no taxes?' and she said no. 'They have a nice theater there, and I go to concerts and other activities on campus.' But I don't think people even know how much money it's costing them. I don't think anyone sat down and did these calculations. No one has campaigned on these numbers. But people should know them. If we don't have any idea what it's costing, it'll just go on."
So why hasn't anything been done about this? Turns out, there almost was. But like a late fourth-quarter Alabama Crimson Tide two-minute drill, the Great Recession swept in at the last moment and saved the day for these universities.
"In 2008, the economy changed, and the zeitgeist shifted with it," Schneider explained. "Eliminating these tax breaks was on the agenda, and at the time, it was mostly focused in the Senate. Then the Great Recession happened, and it eliminated most of the concerns, because suddenly university endowments decreased, and the Senate wasn't going to go after schools that seemed to be on the ropes. Now that we've experienced some economic recovery and schools are seeing endowments rebound, we need to revisit the issue."
So as everyone makes their pilgrimage back to campus this week and drives past these storied buildings of higher learning, maybe it's time to ask what all of it is truly costing and who is footing the bill.