Op-Ed: The Hand That Feeds Doesn’t Like to Get Bit

If you overreact with hysteria every time President Trump opens his mouth, you’ll have to double your Prozac prescription on a regular basis. The healthier approach is to give it a few days and see if it has legs or if it goes away.

In a recent fight with liberal colleges and universities over antisemitism, the President floated the idea of freezing the federal grants and removing their tax-exempt status, and rather than ignore this bluster and positioning, he had our full attention, considering Providence’s precarious financial position. As we go to press, it still hasn’t gone away.

Colleges and universities are run as businesses, but as “non-profit” businesses that receive tremendous economic incentives and value that no tax-paying business can match. This is nothing new and has allowed college endowments, land holdings, and ventures across the country to grow exponentially, unlike a tax-paying business. The tax exemptions for these non-profits dates back to the Tariff Act of 1894 and the Revenue Act of 1909, which granted exemption to “any corporation or association organized and operated exclusively for religious, charitable, or educational purposes.”

This has allowed institutions like Brown University to significantly overpay to acquire properties in Providence, for example, because of the long-term value of not paying property, sales or income taxes. This has enabled expansion on both sides of the river in Providence.

Before World War II, the federal government had a very limited role in supporting research at colleges and universities. Research support came from philanthropic endowments or funding from private companies. There was usually a vested interest involved.

The Manhattan Project to create the atomic bomb showed the importance of federal investment in scientific research and development. Over two dozen universities, numerous companies, and over 125,000 people worked on the project. As the war was ending, President Franklin D. Roosevelt saw the need for continued investment in science and technology to maintain national security, which led to the military-industrial complex (MIC).

At the same time, the head of the Office of Scientific Research and Development advocated for the establishment of a civilian research organization to support scientific advancement. His report, “Science – The Endless Frontier,” was the blueprint for federal support for basic research and education and led to the creation of the National Science Foundation, an independent agency to support research and education in science and engineering to ensure that the United States remained at the forefront of scientific innovation.

Universities took the money. They built the best labs and hired leading professors and scientists, attracting the best and brightest students from around the world.

In 1980, a bipartisan Congress changed the law to transfer patent rights for federally funded research to the universities where they were developed. This allowed universities to profit from licensing the innovations created in their labs, notably in biomedicine, computer science, and engineering. It has proven to be a lucrative law for them, and the pump continues to be primed with the federal government pumping in $60 billion into these programs last year!

We now have a system where many universities are beholden to the whims of politicians in Washington, but the loss of this funding would cripple vital research that future generations will need. Last year, in addition to their tax savings, Brown also received $256 million in research grants from the government. In fairness, Brown does generate a tremendous amount of economic activity locally for these activities, but the city doesn’t actually benefit to the extent that it should except from the payment in lieu of taxes (PILOT) payments that the state sets, which are not as generous as they should be.

The President is looking to challenge this designation, arguing that colleges and universities like Brown and other elite institutions are “indoctrinating” their students with “radical left” ideas, rather than educating them. While this argument is impossible to support with data, there is enough to politicize the issue. Meanwhile, this incredibly vital collaboration between the private and public sectors remains at risk – the loss of which would be catastrophic.

The good news is that it’s highly unlikely that this would happen as the only precedent is the 1983 Supreme Court ruling that the IRS could deny tax-exempt status to Bob Jones University, a private Christian university because it banned interracial dating and marriage on campus, and Goldsboro Christian Schools, which employed racially discriminatory admissions policies.  There are also other schools, notably Hillsdale College, that maintain their independence by not taking any federal grants.

So as Brown scurries to line up its academic ducks to placate the President, we’d suggest they do the same in terms of fair funding the City and encouraging them to live harmoniously with their off-campus neighbors. It’s times like these when you need all the friends you can get.