Is UCLA A Charity?

Long time readers of my blog know that I strongly disagree with those who argue that Universities need more government funding – especially elite Universities like UCLA. I’ve blogged on this in depth before, see here.

Robert Reich, former president Bill Clintons labor secretary, makes similar arguments in the Los Angeles Times:

Is Harvard a charity?
Most donations go to institutions that serve the rich; they shouldn’t be fully tax-deductible.

By Robert B. Reich
October 1, 2007

This year’s charitable donations are expected to total more than $200 billion, a record. But a big portion of this impressive sum — especially from the wealthy, who have the most to donate — is going to culture palaces: to the operas, art museums, symphonies and theaters where the wealthy spend much of their leisure time. It’s also being donated to the universities they attended and expect their children to attend, perhaps with the added inducement of knowing that these schools often practice a kind of affirmative action for “legacies.”

I’m all in favor of supporting the arts and our universities, but let’s face it: These aren’t really charitable contributions. They’re often investments in the lifestyles the wealthy already enjoy and want their children to have too. They’re also investments in prestige — especially if they result in the family name being engraved on the new wing of an art museum or symphony hall.

It’s their business how they donate their money, of course. But not entirely. Charitable donations to just about any not-for-profit are deductible from income taxes. This year, for instance, the U.S. Treasury will be receiving about $40 billion less than it would if the tax code didn’t allow for charitable deductions. (That’s about the same amount the government now spends on Temporary Assistance for Needy Families, which is what remains of welfare.) Like all tax deductions, this gap has to be filled by other tax revenues or by spending cuts, or else it just adds to the deficit.

I see why a contribution to, say, the Salvation Army should be eligible for a charitable deduction. It helps the poor. But why, exactly, should a contribution to the already extraordinarily wealthy Guggenheim Museum or to Harvard University (which already has an endowment of more than $30 billion)?

Awhile ago, New York’s Lincoln Center had a gala supported by the charitable contributions of hedge-fund industry leaders, some of whom take home $1 billion a year. I may be missing something, but this doesn’t strike me as charity. Poor New Yorkers rarely attend concerts at Lincoln Center.

It turns out that only an estimated 10% of all charitable deductions are directed at the poor. So here’s a modest proposal. At a time when the number of needy continues to rise, when government doesn’t have the money to do what’s necessary for them and when America’s very rich are richer than ever, we should revise the tax code: Focus the charitable deduction on real charities.

If the donation goes to an institution or agency set up to help the poor, the donor gets a full deduction. If the donation goes somewhere else — to an art palace, a university, a symphony or any other nonprofit — the donor gets to deduct only half of the contribution.

Robert B. Reich, author of “Supercapitalism: The Transformation of Business, Democracy, and Everyday Life,” was secretary of Labor under President Clinton.

The full article can be found here. However, though he makes good points, there are still some reservations I have with his solution. The economist blog also mentions very important objections to his proposal, see here.

So what is my solution? I propose we take the middle ground. If your goal is a higher percentage of minorities and disadvantaged youths attending college, then why not directly subsidize them?

As I said in a previous post on this, if I were governor (and kudos to the Governator for proposing this), the way I would structure the system is in one hand increase tuition for all students by capping state subsidies, thereby decreasing the tax burden of all state citizens, and in the other hand use a fraction of that money to help low income families, whether they be middle or lower class. This has the added benefit of directly subsidizing the poor instead of through the -often very inefficient – middle man of Universities. So under my plan the poor and middle class students at these Universities would most likely wind up with even more assistance than is currently done under the current method.

If subsidies are your goal, direct subsidies are almost always the more efficient method. So if you want to subsidies poor students who can’t afford education, directly subsidies them, not some institution that primarily caters to the rich and already well connected.

Update: More here and here.

59 Responses to “Is UCLA A Charity?”


  • A lot of people who give to institutions of higher education know very well that their money is not going for scholarships or other aspects that would make education for low income students more affordable. For instance, I just donated to the UCLA Fund. My money is going to help the band travel and pay for new uniforms. I’m doing it because alumni helped fun me when I was in the band. I think later I’ll donate to the scholarship fund for the alumni association since I was a beneficiary of one of those scholarships

    Anyway, to keep this short (not that you know anything about short comments), when higher education researchers examine high tuition/high aid models they discover that the high aid doesn’t really come through. Also, a lot of low income students who are eligible for higher education don’t apply when they see the price tag because they and their families don’t know much about how financial aid works. Finally, increasing fees does hurt low income students. Just ask those who can’t get financial aid ’cause they’re undocumented.

    California made a commitment a long time ago not to charge tuition. Even now, the only people who pay tuition at a place like UCLA or UCSD are the non-resident students (out of state, international). Us resident students pay “fees”. Eh, same difference.

    Oh, one more thing. I got a lot of financial aid as an undergraduate. My fees were subsidized completely by Cal Grants and I got other federal grants, private scholarships. I also worked (I think work is good, as long as its not too much) and took some loans. Students from similar backgrounds as me are doing the same now, but they’re also taking out more loans and graduating with more debt for the same education. That sucks.

    Wow. That wasn’t short at all. Now I know how your comments get so damn long.

  • Exactly – its alot easier (and hence shorter) to make a claim than to answer one. And since I tend to be on the answering side of comments more than on the claiming side, my comments tend to be longer. Glad you feel my pain. 😉

    Btw, you have yet to rebut my claim that directly funding low income students (and undocumented immigrants, if you like) is more efficient than funding Universities in the hopes that tuition will drop. That is really the heart of my claim…but if you want to champion lower tuition rates for UC’s, of which 95%+ of the students are not low income – and a large percentage are in fact upper income – and call that a low income policy, that is your choice. But I respectfully disagree. 🙂

  • Dude, that’s so not true. UCLA has a high number of students who receive Pell Grants which typically indicates low income students. In 2004-2005 37.2% of students received the Pell Grant (Chronicle of Higher Education).

    I didn’t call anything a low income policy. Don’t put words in my mouth. I’m just offering more sides of the debate based on my knowledge of higher education, policy and funding. I didn’t rebut your claim, because based on the evidence I’ve seen, I don’t know what’s more efficient.

    I don’t advocate increased funding for the UC in the hope that tuition/fees will remain level or even decrease. In fact, UC has been simultaneously getting increasing funding from the state (not that it’s much, and waaaay less than it was in the past) and increasing the cost of attendance through fee increases. The Governor and heads of CSU and UC struck out this deal in 2004. In that deal they decided that up to 33% of the fee increases could be “returned to aid” for students who need financial assistance. In one year, they kept the RTA at 25%.

  • Orale HP,

    This is a fantastic subject to write about. I think directly subsidizing college students is far more efficient than donating to universities, who usually spend funds on faculty needs rather than student needs. Another good reason to fund college students directly is because government-based financial aid does not always work.

    In my home state of New York, dumbass Geroge Pataki cut down the amount of state aid a student can recieve. As a result I have been going to college with only federal aid for the last three years, and have had to pay for 10 percent of my tuition (via a Sallie Mae tuition payment plan, which has its own administrative fees) as well as books and transportation. I have not purchased any school books for the last three semesters, having to make friends with classmates just so I can share their textbooks or using reserve copies (if available) at my college’s library.

    What state a college student lives in dictates the terms of their eligiblity for state-based financial aid, because federal aid often does not pay enough money.

    Another flaw with government-based financial aid is also the political aspects of eligibility. I’ve been going to college since 1996 (dropped out twice, went part time a few semesters) and until 2000, only a felony conviction would bar you from receiving federal financial aid. However, George W. Bush changed all that by forcing the U.S. Dept. of Education to bar any students from federal aid if they have had ANY DRUG-RELATED CONVICTION. Bear in mind, brother, that a conviction can be anything from a summons for possession or community service and not necessarily jail time.

    This is a messed up condition, considering that many poor young people have often grew up in neighborhoods where drug use, dealing and trafficking was commonplace and many young people have often turned to the drug trade as a source of income when there are no jobs available, especially when local Deminnazis fight hard to keep big employers like Wal-Mart out of cities like New York.

    The messed up part is when young people get caught with a simple possession charge, serve their time and try to go legit by going to college and pursuing a means of income that doesn’t involve looking over their shoulder and then they find out they can’t get any federal aid to help pay for college. And if you’re poor, no federal aid means no college, which means the only thing left for them is a low-wage job in a world where a college degree increasingly determines how far employers will allow you to advance within a company, and of course selling drugs, which will eventually land you more jail time.

    Anything to keep the brown and black men down, I suppose, since the drug game is a male-dominated industry. My college is located in a predominantly African-American neighborhood, and female students outnumber male students four to one. And most of the male students are, like me, not African-American.

    My university, the City University of New York, has recognized this same sad phenomenon at their other black campuses and are trying to figure out how to get more black men in college. They set up the Black Male Initiative (http://www1.cuny.edu/academics/oaa/initiatives/bmi.html) to try and attract black men. This program reflect racist perceptions to me because it suggests that black men are either too lazy to go to college, are not interested in learning or are too dumb to understand how a college degree will help them.

    I know a lot of brothers, black and Latino who would like to go to college, but lack the funds to do so and have drug-related convictions. The Black Male Intiative should focus instead in removing that stipulation from the federal financial aid eligibility rules or at least directly subsidizing black men who cannot afford college.

    BTW, I don’t give a shit how long or short your posts or comments are. Just keep on keeping it real, and you’ll be all right!

    INTOO

    I’ve had a dream for the last few years that I would

  • Hey, your dream description got cut off! Now I’m curious…what was the dream about?

    I agree with alot of what you say…especially the drug clause in financial aid, just stupid. As usual, thanks for chiming in brother.

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