Higher-ed chiefs de­cry GOP tax plan

They say Minn. stu­dents, schools would take a hit.

Star Tribune - - FRONT PAGE - By MAYA RAO maya.rao@star­tri­bune.com

WASH­ING­TON – Min­nesota’s most prom­i­nent colleges and uni­ver­si­ties are rais­ing alarms about the tax over­haul that Repub­li­cans are push­ing through Congress, say­ing it would make it harder to of­fer fi­nan­cial as­sis­tance to low­in­come stu­dents, fund re­search and pay for aca­demic build­ings.

A pro­vi­sion in the plan, which the House is ex­pected to vote on Thurs­day, would strike a tax de­duc­tion for stu­dent loan in­ter­est that could have an out­sized im­pact on Min­nesota. The state ranks fifth in the na­tion for the size of res­i­dents’ stu­dent loan debt; 69 per­cent of Min­nesotans with at least a bach­e­lor’s de­gree have col­lege debt, at a me­dian level of $25,989. (The Se­nate ver­sion of the pro­posal pre­serves the de­duc­tion.)

“That’s the big­gest piece here that you kind of go, ‘Whoa,’” said Larry Po­gemiller, com­mis­sioner of the state’s Of­fice

of Higher Ed­u­ca­tion. “These peo­ple are strug­gling al­ready — why would you make their life more mis­er­able?”

Repub­li­can law­mak­ers are rac­ing to pass $1.5 tril­lion in tax cuts as part of a ma­jor over­haul they say will spur eco­nomic growth, lift house­hold in­comes, and sim­plify the tax code. And they be­lieve that Amer­i­cans will come out ahead in the end, as busi­nesses in­vest in more jobs and the dou­bling of the stan­dard tax de­duc­tion off­sets the elim­i­na­tion of many smaller tax breaks.

Yet colleges and uni­ver­si­ties say that Amer­ica can’t grow its econ­omy with­out a well-ed­u­cated work­force, and that the pro­posal be­ing de­bated in Congress makes higher ed­u­ca­tion even less af­ford­able and ac­ces­si­ble.

Min­nesota Pri­vate Col­lege Coun­cil Pres­i­dent Paul Cerkvenik said the mea­sures “just seem counter to what we want to try to do in higher ed­u­ca­tion, which is to try and keep costs down.” The or­ga­ni­za­tion rep­re­sents 17 colleges that teach 40,000 un­der­grad­u­ate and 17,000 grad­u­ate stu­dents.

The House GOP plan pro­poses to elim­i­nate pri­vate ac­tiv­ity bonds, which the Min­nesota Higher Ed­u­ca­tion Fa­cil­i­ties Au­thor­ity re­lies on to help fi­nance aca­demic build­ings, dorms and other cam­pus in­fra­struc­ture projects. Such bonds are cur­rently tax-ex­empt and of­ten cover 80 per­cent of a project’s cost. The agency said bonds it is­sued in the last year have saved over $21 mil­lion in in­ter­est costs for schools. Those bonds helped fi­nance ma­jor build­ing projects at Augs­burg, Car­leton and Gus­tavus Adol­phus in re­cent years. The au­thor­ity re­cently closed on a bond is­sue to fi­nance a theater at Ma­calester and re­fi­nance out­stand­ing bonds, and it es­ti­mates that the tax break will save the St. Paul col­lege $3.9 mil­lion.

As Congress wran­gles over the de­tails, the agency’s ex­ec­u­tive di­rec­tor, Barry Fick, said he’s work­ing to ac­cel­er­ate pri­vate ac­tiv­ity bond is­sues for two colleges that had been planned for 2018 and 2019.

“That’s ba­si­cally to get it done so we don’t have to worry about hav­ing tax­able debt,” Fick said.

Since its in­cep­tion in the 1970s, the au­thor­ity has is­sued over $2.7 bil­lion in bonds for Min­nesota’s pri­vate colleges and uni­ver­si­ties.

The House bill “seems to com­bine a sort of ran­dom­ness in the ar­eas in which it looks for rev­enue and also what ap­pears to be a gen­uine an­i­mus against higher ed­u­ca­tion,” said Brian Rosen­berg, pres­i­dent of Ma­calester Col­lege.

He raised con­cerns about the ad­di­tion of a 1.4 per­cent ex­cise tax to in­come on col­lege en­dow­ments greater than $250,000 per full-time stu­dent. That fund helps sup­port fi­nan­cial aid for stu­dents, ac­cord­ing to Rosen­berg, who be­lieves there’s noth­ing to stop the gov­ern­ment from even­tu­ally in­creas­ing such a tax af­ter it gets passed.

“I think it’s tak­ing money away from stu­dents and it’s a very, very bad prece­dent,” Rosen­berg said.

Car­leton Col­lege Pres­i­dent Steve Poskanzer ques­tioned why law­mak­ers would tax the en­dow­ments of pri­vate colleges more than those of pub­lic uni­ver­si­ties. He es­ti­mated that the pro­posed new tax could cost Car­leton up to a half-mil­lion dol­lars a year, es­ti­mat­ing that would be 10 fewer stu­dents that Car­leton could of­fer fi­nan­cial aid to an­nu­ally. “Maybe [law­mak­ers] thought it would be po­lit­i­cally at­trac­tive to go af­ter pri­vate colleges as op­posed to pub­lic colleges, but there’s no rea­son to treat pri­vate, non­profit ed­u­ca­tion dif­fer­ently,” Poskanzer said.

Uni­ver­si­ties fear the plan will tax the tu­ition as­sis­tance that en­ables many grad­u­ate stu­dents to af­ford ad­vanced de­grees and con­duct im­por­tant aca­demic re­search. The As­so­ci­a­tion of Amer­i­can Uni­ver­si­ties has voiced con­cern that elim­i­nat­ing those tax breaks would have se­ri­ous con­se­quences on re­search into life­sav­ing medicines and tech­nolo­gies that could bol­ster na­tional de­fense and eco­nomic com­pet­i­tive­ness.

That would have sweep­ing im­pli­ca­tions for the Univer­sity of Min­nesota, the state’s top re­search in­sti­tu­tion.

“Grad stu­dents play a cen­tral role at a re­search univer­sity — they’re part of the rea­son why we ex­ist,” said Scott Lanyon, vice provost and dean of grad­u­ate ed­u­ca­tion at the U.

He said grad­u­ate stu­dents are en­rolled in 200 de­part­ments and pay tu­ition of $16,700 a year. And es­pe­cially with ris­ing lev­els of debt for un­der­grad­u­ate ed­u­ca­tion, Lanyon noted, this might cause peo­ple to sec­ond-guess whether they want to at­tend grad­u­ate school. That’s es­pe­cially true for stu­dents who are from un­der­rep­re­sented and poorer back­grounds, he noted.

“That’s much more of a bar­rier to peo­ple who might have wanted to pur­sue a grad­u­ate de­gree — the bar just got higher,” Lanyon said.

At the Col­lege of St. Bene­dict, Pres­i­dent Mary Hin­ton is de­ter­mined to get the mes­sage to the pub­lic.

“At St. Bene­dict, we’re see­ing an eco­nomic bi­fur­ca­tion un­like any we’ve seen in the past, where our high­est in­come fam­i­lies have in­comes over $200,000 and where our low­est eco­nomic quin­tile has in­comes of around $25,000 a year,” Hin­ton said. “How do we make cer­tain that both of these groups have ac­cess to a high-qual­ity ed­u­ca­tion?”

She added: “It’s an im­por­tant mo­ment in higher ed­u­ca­tion for us to use our col­lec­tive voice and help our Congress peo­ple and the pub­lic to un­der­stand that we want to work with and for fam­i­lies to make a col­lege ed­u­ca­tion pos­si­ble.”

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