As reported on this Blog in past postings:
1. The for-profit portion of the private sector is being gutted by the U.S. Department of Education. Witness the recent demise of ITT and Corinthian Colleges.
2. Small to medium sized private non-profit colleges and universities, which are tuition dependent, are facing a fiscal crisis, driven by declining enrollments and deepening tuition discounts.
And now even the wealthiest players in the not-for-profit sector are facing serious, though hardly existential, challenges.
A case in point is Princeton University, which has agreed to pay millions of dollars to settle a challenge by neighborhood taxpayers to its tax-exempt status. The settlement was announced a few days ago. Here's what the university had to say:
Princeton University will help lower-income Princeton residents pay
their property tax bills under a settlement agreement that ends the
litigation challenging the University's property tax exemptions. The
litigation had been scheduled for trial beginning October 17.
Under the agreement, the University will contribute $2 million in
2017 and then $1.6 million a year for the following five years to a fund
that will distribute annual payments to Princeton homeowners who
received a homestead benefit under the New Jersey Homestead Property Tax
Credit Act. The 2017 distributions will establish a maximum amount per
household and any excess after making all eligible distributions will be
donated to 101: Inc., a non-profit organization that provides
need-based scholarships for graduates of Princeton High School attending
post-secondary educational institutions other than Princeton
University.
In addition, the University will make three contributions of $416,700
to the Witherspoon Jackson Development Corporation, annually from 2017
through 2019. The Witherspoon Jackson Development Corporation is a
non-profit entity, and the funds are to be used to aid and facilitate
housing and related needs of economically disadvantaged residents in the
Witherspoon Jackson neighborhood and elsewhere in Princeton.
The University also agreed to make a $3,480,000 annual voluntary
contribution to the town of Princeton in 2021 and again in 2022, the
same amount it is scheduled to contribute in 2020, the final year of the
University's current seven-year agreement with the municipality.
"Princeton University cares deeply about preserving the diversity of
the Princeton community, and the contributions we have agreed to make
will help to achieve that," said Princeton President Christopher L.
Eisgruber. "We have a long history of contributing to the well-being of
our community, not only through our annual unrestricted contributions
and targeted contributions for affordable housing, the schools and the
library, and community services of various kinds, but in the
educational, cultural and other opportunities we provide to members of
the community.
"We had every confidence that the courts ultimately would have
affirmed the University's continuing eligibility for property tax
exemption on buildings and facilities that support its educational,
research and service missions, but we concluded that the contributions
we will make under the settlement agreement are a better expenditure of
funds than continuing to incur the considerable costs of litigation," he
said.
Under the agreement between the plaintiffs and the University, the
plaintiffs agreed to withdraw their pending complaints for tax years
2011, 2014, 2015 and 2016. The plaintiffs acknowledged that the
agreement "is not to be construed as an admission that any of the
University's exempt property should be subject to taxation," and they
agreed that the settlement "aligns with the University's commitment to
supporting the affordability and socioeconomic diversity of the
Princeton community."
Putting the best possible face on the capitulation, the press release is posted under a headline proclaiming assistance to low-income homeowners.
In the face of this assault, those of us working in the private sector of higher education need to 'fess up to some hard truths:
1. Many for-profit players in the higher ed scramble for students have abused their access to federal loans to exploit both the students and Uncle Sam.
2. Small and medium sized private colleges have allowed their budgets and tuitions to blossom far ahead of national inflation rates, pricing themselves out of the reach of many families.
3. The big R1 universities certainly do walk and quack like their for-profit corporate counterparts.
The major "correction" that seems to be occurring in our sector of the higher ed "industry" may be a necessary purgative. But necessary or not, it is painful, and will become more so.
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