Tags: Obama | colleges | Pell | Grants

Stoll: Obama’s College Tour — The Huge Cost to Taxpayers

Monday, 23 Apr 2012 05:26 PM

By Ira Stoll

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Just as high school juniors and their parents are touring college campuses to decide where to apply, President Obama is embarking on a college tour of his own.

Taxpayers, alas, may experience the same trepidation that the parents of the high school juniors do: this is going to cost us.

President Obama receives a team jersey from the University of North Carolina men's basketball team in 2009. The president will be visiting the university this week.
(Getty Images)
Mr. Obama’s stated purpose is to get Congress to come up with $6 billion to prevent the interest rates on federal Stafford student loans from increasing to 6.8 percent from 3.4 percent.

But a closer look at the campuses Mr. Obama has chosen to visit this week — the University of North Carolina-Chapel Hill, the University of Colorado-Boulder, and the University of Iowa — has the potential to highlight just how much taxpayer money is already being poured into the higher-education industrial complex, and how those funds are being spent.

It may not be quite the message Mr. Obama would like to focus on.

Take the University of North Carolina-Chapel Hill, where Mr. Obama will speak Tuesday, and where students reportedly camped out on line outside in the rain overnight for tickets to the president’s talk.

U.N.C. Chapel Hill says it received $574.5 million in federal research funding in 2011, up from $353 million in federal research funding in 2007, the most recent year for which a full compilation is available.

That includes funds from the federal departments of agriculture, energy, and defense, and from the National Aeronautics and Space Administration. In addition to that research funding, it gets another $14 million a year in Pell Grant funding toward tuition for needy students, according to the Pell Grant numbers for 2009-2010.

It got another $534.7 million from the state of North Carolina, for total government-sourced revenues of more than $1.1 billion. And that’s not even counting the subsidies the university gets by being able to invest its endowment essentially tax-free, by being able to offer charitable tax deductions to its donors, by being able to raise capital with tax-exempt bonds, or by receiving Medicare and Medicaid payments at university-affiliated hospitals and medical offices.

All told, more government money is spent on the University of North Carolina-Chapel Hill than on the White House and all the officials in the executive office of the president of the United States. At $420,000 a year,

UNC chancellor Holden Thorp makes more than President Obama, whose salary is $400,000. And Mr. Thorp also had his university-provided residence get a $165,627 upgrade. The U.N.C. basketball coach makes $1.6 million a year.

At the University of Colorado-Boulder, where Mr. Obama is also scheduled to appear Tuesday night, it is a similar story. The University of Colorado’s annual financial report discloses $46 million in federal Pell Grant revenue in 2011, along with $145 million in aid from the state government of Colorado, and $653 million in federal grants and contracts.

The University of Iowa, where Mr. Obama will visit Wednesday, in 2011 got $245 million from Iowa taxpayers, $16 million from the Federal Emergency Management Agency to pay for expenses related to a 2008 flood, and $394 million in federal research funding, according to its annual report.

The University of Iowa’s president, Sally Mason, reportedly is paid $483,600 annually plus $150,000 per year in deferred pay — more than President Obama. The Iowa football coach, Kirk Ferentz, earns $3.675 million a year on an escalating contract that runs through 2020.

Mr. Obama wants to argue that in addition to the Pell Grants and the research funding and the charitable tax exemption for contributions and the tax exemption for education-related municipal bond offerings, taxpayers should also foot the bill for subsidized student loan interest.

The effect is to obscure the price signal sent by the tuitions. If it were private lenders rather than President Obama setting interest rates, one might begin to see competition in rates.

Students entering fields likely to yield jobs might get loans at lower rates, while those entering fields with worse job prospects might be charged higher rates.

Students with better grades might earn lower interest rates. Lenders might charge different rates to students at different schools, depending on the track records the students at the various schools have at repaying the loans.

If the money were being offered at market rates rather than subsidized rates, there might be more pressure from the students to bring down the tuitions, and thus the salaries for the presidents and football and basketball coaches.

None of this is to say that all federal or state funding for higher education should be ended tomorrow. Some of the research money is surely better spent in institutions where federal and state money is combined with private tuition dollars and alumni donations than it would be in federal labs that are entirely government run.

Plenty of important and valuable learning happens on these campuses, and interactions on them can spawn companies like Google. But in an America where the private sector is downsizing, economizing, outsourcing, and using technology to run more efficiently, President Obama’s tour of three state-run college campuses may just backfire.

The students and professors may be cheering on campus, but there are plenty of people in the private sector who are getting tired of paying for them.

Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.

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