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Republicans’ College Endowment Tax Will Impact Research Funding and Financial Aid

Endowment revenue provides critical research funding and financial aid.

The GOP-led proposals to levy an excise tax on the investment income of some private colleges and universities would affect dozens of schools represented by a Republican lawmaker.

In a previous article, we wrote about how the proposed 1.4 percent excise tax on the endowment of private colleges and universities in particular would impact institutions with employees whose campaign contributions are predominantly Democratic Party-leaning.

The provisions were included in the tax reform proposals by the House Ways and Means and Senate Finance committees, whose combined members include 13 Republican senators and three representatives from states or congressional districts with schools likely affected, according to an analysis by the Center for Responsive Politics.

Of the estimated 68 schools that would be impacted by the House excise tax, 35 are located in districts or states represented by Republican lawmakers, each of whom voted for the broader tax reform bill.

Three House Republicans — Claudia Tenney of New York, Pat Meehan of Pennsylvania and Todd Rokita of Indiana — were elected in districts with two private schools in jeopardy of paying the endowment tax, which higher education officials oppose for its effect on program services, tuition costs and financial aid for students.

Tenny, Meehan and Rokita each voted in favor of the House tax plan.

The 68-school estimate is based on an analysis of 2014-2015 enrollment and endowment data compiled by the National Center for Education Statistics (NCES) and provided to CRP.

Eight of the 39 members on the House Ways and Means committee — where the House bill originated — represent a district with at least one school facing the endowment provision. Of the eight members, three are Republican. Thirteen members of the Senate Finance Committee represent 21 schools on the list.

Grinnell College, an Iowa liberal arts school of about 1,700 students, is one of the 68 schools facing the new tax burden. The college is represented in Washington by three Republicans, two senators and Rep. Rod Blum.

The endowment tax would be particularly painful for smaller schools such as Grinnell, which has fewer revenue streams compared to larger schools, said Raynard S. Kington, school president.

Endowment revenue provides critical research funding and assists the school’s historically large contributions to student financial aid, Kington said.

“Over 85 percent of our students receive some form of financial aid. So if you look at the demographics of our students compared to our peers, we have a lower percentage of students paying the full ride,” he said. “This means that other schools have millions of dollars in revenue that we don’t have.”

Grinnell wouldn’t be the only small liberal arts institution impacted by the GOP proposals. Of the 68 schools on the list, half are liberal arts colleges. They range from Pomona College, which had a 2014 endowment of about $1.27 million per student, to Trinity College in Hartford, Connecticut, which had an endowment of about $255,000 per student.

Rep. Blum voted yes on the House bill in November.

Kington said he was told by Blum’s office the congressman intended to sign a “Dear Colleague” letter addressed to Senate Majority Leader Mitch McConnell (R-Ky.) objecting to the excise tax.

Whether Blum actually signed the letter or McConnell received it is unclear. Blum’s office did not respond to multiple emails and phone calls seeking to confirm the letter’s whereabouts.

While he cited on his website education as an important policy issue, Blum received scarce campaign contributions from employees of the education industry in the 2016 cycle. Most of the contributions to his campaign came from the finance and agribusiness industries.

Other House Republicans from districts will schools potentially affected include Meehan (Bryn Mawr College and Haverford College) and Indiana’s Jackie Walorski, whose district includes the University of Notre Dame. Each voted for the House tax bill as well.

Neither Meehan or Walorski has received overwhelming support from their local colleges and universities. For instance, while Walorski’s campaign received $4,416 from individuals affiliated with Notre Dame in the 2016 election cycle, her Democratic opponent, Lynn Coleman, received around $12,475.

Despite the proposed endowment tax, higher education advocates say that representatives from both sides of the aisle appear receptive of their concerns.

Joseph Verardo, the vice president of the National Association of Graduate-Professional Students, said public outcry may have influenced the Senate’s decision to remove some other controversial higher education-related provisions in the House bill.

“Along with many other groups, we have worked together to ensure that senators are aware of the impact of these provisions,” Verardo said. “There has also been a large volume of calls made by students and others concerned about the impact this will have on higher education.”

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