Higher-education fundraisers and advocates are concerned that the Varsity Blues college-admissions scandal could spark a wave of efforts to curtail tax breaks for giving to universities, which would have a huge impact on their revenue.
Ron Wyden, the top Democrat on the tax-writing Senate Finance Committee, already plans to introduce a bill that would eliminate the tax deduction for donations to a college where the donor’s child is — or will be — attending.
Brian Flahaven, senior director of advocacy at the Council for Advancement and Support of Education, said his organization was surprised by Wyden’s proposal.
“This is really kind of a drastic action to take or what I would call an overreaction to the issue,” said Flahaven. “It kind of takes on the issue in a very, very broad form.”
Indeed, Wyden said he sees little distinction between the crimes alleged in the Varsity Blues scandal and the legal ways in which the rich have bought access for their children to elite institutions for generations.
“While the prosecutor attempted to distinguish these crimes from payoffs in the form of buildings or stadiums to secure access for the undeserving, it is all part of the same corrupt system,” Wyden wrote in a statement.
Flahaven took issue with that characterization and insisted that the vast majority of higher-education philanthropy is benign. Wyden’s bill, Flahaven said, would discourage the kind of charitable support many higher-education institutions rely on to expand their financial-aid programs and scholarships for students who can’t otherwise afford college.
“It’s addressing it in a way that is actually going to penalize those students by cutting off resources,” said Flahaven. “It is critical that lawmakers in general don’t take action that discourages giving in any way to educational institutions.”
It’s unclear how Wyden’s legislation would be structured. The text of the bill has not been released. Wyden’s office declined to comment further on the matter until the bill is filed. Staff for Iowa Sen. Chuck Grassley, chairman of the Senate Finance Committee, said his office was aware of Wyden’s intentions and was waiting to review the bill.
Impact on Small Donors
Brian Gawor, vice president for research at Ruffalo Noel Levitz, a private fundraising consulting firm that counts more than 3,000 higher-education institutions among its clients, said Wyden’s approach was over-broad and could have unintended consequences.
“I understand how people would be upset by the behaviors that have been uncovered in the controversy,” said Gawor. “But it is really important for us to recognize that this is the exception and not the rule.”
Shaun Keister, vice chancellor of development and alumni relations at the University of California at Davis, also emphasized most donations made by parents of current or prospective students are small-dollar contributions. “The vast majority of parents are giving $25, $50, and $100 gifts to their kid’s school, which add up to large sums of money. But a $50 gift isn’t going to buy influence,” said Keister. “The vast majority of donors in this country are not seven- and eight-figure donors. They’re making small, modest gifts that collectively, dramatically, positively impact the lives of thousands of students.”
Keister said that if Wyden’s bill advances, he hopes it will at least make exemptions for those donors who give modest amounts.
Helping the Needy?
Kathy Hansen, vice president for institutional advancement at the College of St. Benedict, estimates roughly 5 percent of her university’s annual charitable support comes from the parents of students currently enrolled there. While that’s a small slice of the pie, any loss of their support would hurt funding for scholarships for lower-income students, Hansen said.
“While I appreciate the senator’s intent to make higher education more transparent and more accessible to lower- and middle-income students, from what I understand of the proposed legislation, I could see it end up hurting the very students he’s actually trying to protect,” said Hansen. “It’s rather sweeping legislation.”
Hansen said universities need to do a better job communicating the fact that most of their philanthropy comes from alumni or other sources who aren’t trying to use their generosity to guarantee their child a spot on campus.
“We have to get much smarter and more effective at telling this story because clearly we are not reaching a lot of people,” said Hansen.
Focusing on the IRS
Hansen suggested legislators shift their focus from higher-education philanthropy to improving IRS oversight of the nonprofit sector and higher education. She also suggested regulators exert more oversight over the college athletics recruiting process and its role in admissions.
A number of those charged in the Varsity Blues scandal are alleged to have paid bribes to college coaches to falsely claim an applicant was a highly touted recruit for university sports teams. These approaches, said Hansen, are “more of a laser-focused response to the scandal that could make a meaningful difference without harming charitable giving and the students who depend on those charitable gifts for their education.”
Allison Grayson, director of police development and analysis at Independent Sector, also cautioned legislators from reacting too hastily to the Varsity Blues scandal.
“It’s a very tricky question because, on the one hand, we actually think it is critical that Congress fully funds the IRS and that we have regulatory bodies that are able to enforce the law. But in this particular case, government actually fulfilled their role and did enforce the law,” said Grayson.
Perceptions of Quid Pro Quo
The admissions scandal prompted waves of criticism, both straightforward and humorous, that an out-of-control quid-pro-quo relationship exists in the world of big-dollar higher-education philanthropy.
Such perceptions, coupled with an ongoing debate over the role of wealth and equity in society, could undermine the public trust necessary for higher-education philanthropy to remain a worthy charitable investment, said Matthew Hale, an associate professor of political science and public affairs at Seton Hall University.
“I actually think this Varsity Blues scandal resonates with a broad swath of the American public and those people who are looking at this as further evidence that the system is rigged,” said Hale.
Gawor, the fundraising consultant, agreed that rising public cynicism could pose a serious threat to the tax breaks that higher education enjoys.
“It’s dangerous when a controversy like this bubbles up,” he said.
