Opinion: Taxing private colleges shoots Connecticut in the foot
As Gov. Malloy and the Connecticut Legislature debate cost overruns and budget deficits, they are looking, understandably, at every possible way to trim fat from the state budget. Programs and policies well-worn and long protected by compromise, convenience or political favor are under scrutiny, as they should be. But it would be a mistake - and worse, dangerously counterproductive to our State’s long-term interests - if financial aid and much-needed support to our private colleges and universities were to be further cut, or if new taxes, tariffs or fees are imposed on our critical educational infrastructure.
Financial aid, which helps underwrite the cost of education for deserving and under-served Connecticut students, has long been threatened and is reduced every year. Scholarship funds, grants, tax credits and other financial tools also have been on the cutting block. Some say, “Our state colleges and public universities will take up the slack; that’s where we should focus our investments.” My colleagues and I disagree. While all our universities and colleges deserve funding and support, the assumption that private schools can absorb more and more cuts is short-sighted and ill-advised.
Consider the financial reality, as well as the value private colleges and universities offer to our state. Nearly half of the bachelor’s degrees earned in Connecticut are awarded at non-profit higher-education institutions. Yet the only state support these 15 institutions receive is less than $6 million in state need-based financial aid. This is under 2 percent of the total state budget for higher education and does not take into account capital spending and fringe benefits spent on the public institutions.
A large percentage of the young adults being educated in Connecticut’s private colleges and universities are from within our state. At Sacred Heart University (SHU), for example, our undergraduate student body composition is approximately 30 percent Connecticut residents, and almost all of our graduate students reside locally.
There are several important considerations to take into account here. First, Connecticut is in desperate need of attracting and retaining students, alumni and the employers who seek our graduates. When companies like General Electric exit Connecticut to find alternative locations more conducive to state investment and an active, qualified pipeline of emerging workers, it should be a huge red flag for our state leaders. Employers also want to collaborate with faculty and tap university resources. Companies benefit from our programming, especially in areas like engineering, business development, health and bio sciences, cyber security and the environment.
Second, private colleges and universities pump millions of dollars into local economies and state coffers. Total direct spending by private universities, by university students, by our employees and visitors is estimated in excess of $13 billion annually. Additionally, induced spending - which is the additional value of employment and expenditures of local industries and organizations that result because of direct spending - is estimated at over $8 billion. More locally, Sacred Heart University and its students spend well over $450 million annually in the state. In addition, the University spends directly from its operating budget over $2 million in the town of Fairfield alone. The University encourages its students to buy locally by shuttling them daily to downtown Fairfield where they spend money, but maybe we need to rethink the way we spend our resources. SHU also creates more than 5,500 jobs in the region, while Connecticut’s private colleges and universities account for more than 170,000 jobs throughout the state.
Beyond infusing millions into our regional and state economies, non-profit institutions earned their tax-exempt status because they are public entities providing a public good. Yes, we educate young people to meet the needs of our state’s employers with virtually no state support, and create thousands of jobs. But we also open our doors to people who want to visit our campuses to enjoy lectures, concerts and theater presentations, to participate in political debate and to benefit from our museums, art galleries and athletic events. Our students and faculty invest thousands of hours annually performing community service at local non-profit organizations, working with churches, inner-city schools, local government, after-school care programs and hospitals, and supporting dozens of other worthwhile ventures.
Additionally, local municipalities receive millions of dollars annually to compensate them for tax revenue they do not collect from non-profit entities such as colleges, universities and hospitals. These dollars come from Connecticut’s PILOT program (Payment in Lieu of Taxes) and are based on tax revenue formulas established by the Connecticut Legislature and collected statewide.
Most private colleges and universities collect their own garbage, maintain or pay for campus public safety officers, work closely with municipal police and fire departments, open their doors for after-school care, clinics and camps and allow many organizations to use their facilities for special events and programs. These institutions truly are a unique and valuable asset.
So, when you hear legislators, your neighbors or friends suggesting that colleges, universities and, for that matter, hospitals should be taxed or lose their non-profit benefits, think carefully about the short- and long-term value and benefits they provide to everyone in Connecticut. And do not be fooled by smoke screens like the bill introduced recently in Hartford (HB-6933),
proposing to allow municipalities to charge a user fee on a local college or university based on the number of full-time students residing at that college or university’s property within the municipality.
No matter how it is phrased or obfuscated, bills like this are simply another effort to tax private colleges and universities. There is no question that Connecticut faces difficult financial challenges, and compromises and sacrifices will be made. But attempts to address the State’s budget woes by pinning a target on the backs of the very institutions that will keep Connecticut’s economy viable, stable and growing is disingenuous and self-defeating.
John J. Petillo is President of Sacred Heart University.