There’s a political fight raging in Hartford over the use of Yale’s endowment, and the scent of baloney hangs heavy in the air.
State legislators recently proposed two bills — Senate Bills 413 and 414 — that would increase Yale’s financial obligations to Connecticut. In response, the University issued a flurry of finger-wagging press releases, alleging that the bills would “force the University to spend down the endowment” and “revoke [Yale’s] tax-exempt status.”
These claims are hogwash. The two bills would do no such thing. So what would this legislation change?
Senate Bill 413 has been carelessly labeled an endowment tax, but it wouldn’t reduce Yale’s ostentatiously large existing endowment of nearly $26 billion by a single penny. It also won’t touch a cent of any endowment profits that Yale chooses to spend on financial aid or professor salaries. Any criticism that the measure would threaten the quality or accessibility of a Yale education should be viewed as misleading at best and alarmist at worst.
Instead, the bill would levy a 7.5 percent tax on any profits from the endowment that Yale does not invest in education, but instead adds back into the endowment. (The tax would only apply to Connecticut universities with endowments over $10 billion, i.e. just Yale.)
Senate Bill 414 has largely ceded the spotlight to the more audacious Senate Bill 413, which is a shame, as the former is more broadly palatable and has the public support of Mayor Toni Harp. Currently, Yale pays taxes on its retail properties, such as The Shops at Yale on Broadway, but pays no taxes on its more than $2.5 billion in academic property. S.B. 414 doesn’t change the tax-exempt status of Yale’s academic property, but instead subjects Yale’s property usage to closer scrutiny.
Several buildings that Yale has designated as “academic” in fact are used for commercial purposes. For example. the Yale Center for Genome Analysis in West Haven “offers DNA sequencing and genetic testing to for-profit companies,” West Haven Mayor Ed O’Brien recently told the New Haven Register. The law needs to be clarified, and it hardly seems absurd to say that Yale should pay some taxes on property it uses for both academic and commercial purposes.
Will these bills pass? S.B. 414 might, but S.B. 413 appears unlikely to pass as acknowledged by Sen. Martin Looney yesterday. Still, these efforts represent a bold and smart move by a coalition of progressives, led by the UNITE HERE unions that represent Yale’s workers, to bring attention to Yale’s astounding wealth at a time when the University is engaged in contract negotiations with the unions.
Their message is clear: Yale has money — more than enough — and it should spend it, not hoard it. These appeals have worked in the past — it was under threat of taxation in the 1990s that Yale started making its first voluntary contributions to New Haven.
Which brings us to the questions that are really being debated: What can Yale afford to give, and what are its moral obligations?
Yale’s insinuations that these new tax measures would threaten its ability to provide financial aid or high-quality education to students are complete nonsense. Yale’s endowment is more than the endowments of MIT, UC Berkeley, Georgetown, NYU and Brown — combined. In the fiscal 2014 Yale Endowment Report, the University reported $4 billion in investment income, enough to entirely cover Yale’s operating budget with nearly $1 billion left over.
Yale can afford to pay a little more in taxes to Connecticut, it can afford to provide better child care to graduate students, it can afford to guarantee the security of union jobs, it can afford to eliminate the student contribution — it could even afford to make tuition free.
A healthy endowment is important for Yale’s future. But it’s worth asking — how big does our endowment actually need to be to subsidize a high-quality education? At a certain point, we’re not growing our endowment for security, we’re growing it for prestige, stashing away billions to win an Ivy League pissing contest, an example of old-money affluenza run amok.
There’s a line from the Gospel of John that reads: “But if anyone has the world’s goods and sees his brother in need, yet closes his heart against him, how does God’s love abide in him?” Yale’s no longer a religious school, but we are still bound to the same principles of shared humanity on which we were founded. We can afford to pay what state lawmakers are asking. Yale should stop twisting the facts and use its wealth to fulfill its moral obligations to its city, its workers and its students.
Fish Stark is a junior in Jonathan Edwards College. His column runs on alternate Tuesdays. Contact him at firstname.lastname@example.org .