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Higher Education Watch
Taxpayers Eye the Ivory Tower

There seems to be no safe haven for America’s wealthiest colleges these days. Congressional Republicans have been asking pointed to college presidents presiding over endowments in excess of $1 billion about how the funds are being spent; Connecticut legislators briefly pondered stripping the Yale endowment ($24 billion) of its tax-exempt status; and now, local taxpayers in Princeton, New Jersey, are trying to force their local university (endowment: $23 billion) to pay property taxes on its large swathes of real estate. Bloomberg reports:

Free lectures, admission to athletic games and concerts, even shuttles to Trader Joe’s are some of the perks that neighbors of Princeton University get from New Jersey’s only Ivy League school.

A growing number of residents, though, resent the gestures. Riding a national wave of discontent with nonprofit institutions, they’re suing to challenge the tax-exempt status of Princeton, whose $22.7 billion endowment makes it the fourth-richest U.S. university. The outcome could cut homeowners’ annual property taxes, averaging $17,699, by a third. It also could end the freebies that make Princeton a cushy oasis while other New Jersey towns, burdened by high public-worker costs and flat state aid, struggle to maintain basic services.

Part of the impulse in Connecticut and New Jersey is the result of failed governance of these states, which have massive unfunded pension obligations and bloated public sector workforces that make it impossible to fund basic social services without squeezing taxpayers for more and more. But part of the impulse also stems from the failure of the elite higher education establishment, which seems to more and more Americans like an expensive luxury that primarily functions to perpetuate the privileges of the already-wealthy or the politically favored, all while reaping expensive tax subsidies from ordinary Americans who can never dream of an Ivy League education. Highly-endowed colleges, in other words, seem like an underperforming asset, whose wealth would better be put to use for other purposes.

Unless and until universities take steps to reinvigorate their public mission—either by opening their doors to more students, or investing more heavily in their states and communities, or making a full-court press for accessible online education—this conflict may only get worse. The Connecticut initiative failed, and the Princeton lawsuit may fail as well—but, if universities continue on their current course, it’s only a matter of time before the taxman starts knocking on the Ivory Tower’s door.

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