How A 1 Percent Fee On College Endowments Could Benefit All Students

(Rob Bye/Unsplash)
(Rob Bye/Unsplash)

Gubernatorial candidate Jay Gonzalez’s proposal to tax educational endowments has drawn a mixed response. To many voters, taking a relative pittance from the billions amassed by private institutions seems only fair, given the shortage of funds for public education and transportation. Opponents reject this approach, pointing out that the tax would divert donations to educational institutions from their intended purpose and arbitrarily punish a handful of highly successful schools.

Gonzalez’s plan has drawn fierce and probably fatal criticism, but before it fades we should seize the opportunity to fix the outdated and inequitable relationship between public and private universities in Massachusetts.

We needn’t amend the state Constitution or rescind the tax-exempt status of educational endowments. Instead, we can adopt a policy that uplifts all schools, private and public, enriching students at Williams as much as those at Bunker Hill.

Let’s charge all educational endowments a 1 percent fee to fund a public library of digital educational materials that would be accessible to every student in the state. To my knowledge, nobody has proposed this idea before, even though in Massachusetts — in contrast to every other state — students on one public campus can’t access the libraries on other public campuses. (That is, students at UMass Lowell can’t access UMass Amherst or Salem State or any other college library.)

... we can adopt a policy that uplifts all schools, private and public, enriching students at Williams as much as those at Bunker Hill.

The 1 percent fee, which could be waived or reduced in special cases, wouldn’t unduly burden upscale schools. It would, however, generate hundreds of millions of dollars that could be used to purchase or produce digital textbooks, landmark editions, monographs, documentaries, interactive courseware and other curricular resources that could reach students in every classroom, including those at the schools that paid the fee.

By promoting education in general, rather than redirecting revenue or targeting specific institutions, the fee would restore wealthy universities to their proper footing as public charities, a legal designation in the state that entails obligations that many rich schools seem to have forsaken.

According to the Massachusetts attorney general’s office, public charities share these characteristics: They are nonprofit organizations, they have a purpose which is primarily charitable, and they benefit an indefinite class or number of people.

The third characteristic is crucial because it provided the rationale for exempting Harvard from taxation over a century ago. Other colleges existed back then, but it was Charles Eliot, president of Harvard from 1869 to 1909, who almost singlehandedly defined and defended the tax exemptions that private colleges and universities operate under today.

For Eliot, the key to tax-exempt status was that colleges performed a service that improved the quality of life for the general public, rather than any particular group. “An endowment,” he argued, “is property, once private, which has been consecrated forever to public uses,” and those who call for taxing these funds “forget that it is the public which is the real enjoyer of all such property.”

Eliot never envisioned the development of technologies that would make it possible for the public to become “the real enjoyer” of the world’s great libraries. He also didn’t foresee that endowments would grow to dwarf state spending on education in Massachusetts, including allocations to public colleges and universities, which he rejected as unfeasible.

We certainly don’t know how he might react if he were to visit the admissions page at Harvard today, where he could read that, thanks to financial aid, “90 percent of American families would pay the same or less to send their children to Harvard as they would a state school,” and that “100 percent of students can graduate debt-free.”

This promise may please the few who get into Harvard, but it can only sting students who attend other schools in Massachusetts.

... the least we can do is equalize available resources so that students at public institutions don’t have to choose between books and food.

Unlike Harvard’s debt-free graduates, for instance, UMass students end up around $30,250 in the hole to earn a bachelor’s degree. Of course, decreasing or abolishing tuition at public colleges and universities would ease this inequality. But until that change occurs, the least we can do is equalize available resources so that students at public institutions don’t have to choose between books and food.

It’s hard to overstate the good that would come from making all or most of the materials used in college courses accessible to all enrolled students.

We could create a treasure trove of academic e-books, journal articles and classic texts, and integrate historical collections such as those already available on Digital Commonwealth. We could also draw from the vast array of cultural and educational organizations in Massachusetts to create multimedia resources to facilitate learning in fields ranging from art history to zoology.

Under this system, professors at community colleges could adopt readings assigned by instructors at private universities, or they could decide to make a different set of resources available to their students. The difference will be — not that educators’ choices will be restricted in any way — but that the 1 percent fund will cover the cost of all assigned materials.

Yes, this plan will involve negotiations with publishers and careful attention to copyright restrictions, but as these issues are resolved over the long term, the short-term solution is to draw from the 1 percent fund to provide all students with direct grants to purchase e-books and other required materials, an expenditure that will decrease over time as library holdings include expanding collections of curricular resources in all disciplines.

In our times, public libraries stand nearly alone as truly commendable institutions, serving a population more diverse and democratic than Charles Eliot ever dreamed. By placing a public digital library at the heart of higher education in Massachusetts, we can turn our state’s celebrated commitment to academic opportunity into a grand and practical reality.


Headshot of Susan E. Gallagher

Susan E. Gallagher Cognoscenti contributor
Susan E. Gallagher is an associate professor of political science at  UMass Lowell who focuses mainly on the history of inequality in the U.S.



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