If Robin Hood "Works" for K-12, Why Not Higher Ed?

In this holiday season, it is appropriate to observe the words of the greatest Teacher of them all: "Ye blind guides, that strain out the gnat, and swallow the camel!" (Matthew 23:24)

The targets of this charge of hypocrisy were the scribes and Pharisees, but today's target should be those scribes and Pharisees (or their descendants) who inhabit the legislative halls of our civic Temples.

In the Lone Star State, the straining of gnats and the swallowing of camels occurs in the funding of public education. After all of the shuffling of the deck furniture on the Titanic, Texas will still fall billions of dollars short of providing equitable funding for its public schools. Even worse, Texas still languishes at the bottom of the national heap with regard to student performance on standardized tests.

Now, an Wall Street banker calls for a Robin Hood plan to level the playing field for colleges and universities. More straining at gnats will ensue. More furniture will be shoved from one side of the deck to the other aboard our national Titanic.

If this is (fair & balanced) hypocrisy, so be it.

1.
[x Wikipedia]
Robin Hood Plan (TX)

The Robin Hood plan was a media nickname given to legislation enacted by the U.S. state of Texas in 1993 to provide court-mandated equitable school financing for all school districts in the state. Similar to the legend of Robin Hood, who "robbed from the rich and gave to the poor", the law "recaptured" property tax revenue from property-wealthy school districts and distributed those in property-poor districts, in an effort to equalize the financing of all districts throughout Texas.

In 1984, the Mexican American Legal Defense and Educational Fund filed suit against state Commissioner of Education William Kirby on behalf of the Edgewood Independent School District in San Antonio, citing discrimination against students in poor school districts. The plaintiffs charged that the state's methods of funding public schools violated the state constitution, which required the state to provide an efficient public school system.

School finance lawsuits must take place in state court, since the U.S. Supreme Court ruled in 1973 that education is not a fundamental right protected by the U.S. Constitution (San Antonio v. Rodriguez). The case, Edgewood Independent School District v. Kirby, eventually went to the Texas Supreme Court, which unanimously sided with Edgewood.

In 1993, after the Texas Supreme Court threw out two attempts by the Texas Legislature to write a constitutional school-finance system. The Legislature finally passed a funding plan that was accepted by the Court, in 1995.

But 10 years later, the Robin Hood plan was in jeopardy again. In November, 2005, the Texas Supreme Court ruled that, since the vast majority of school districts were having to tax at the maximum maintenance-and-operations (M&O) tax rate of $1.50 per $100 of property valuation just to raise enough money to meet state mandates, the school-finance system was, in effect, a state property tax, which is prohibited by the Texas Constitution. The Texas Legislature, meeting in a special session in April and May, 2006, passed legislation that met the court's requirements that local districts have "meaningful discretion" in setting tax rates. A series of bills changed the school finance system to cut school M&O property taxes by one-third by 2008, but allowed local school boards to increase tax rates from the new, lower levels, although generally only with voter approval. Some of the local property tax revenue lost by the one-third cut will be replaced by state revenue from a new business tax and higher cigarette taxes, although estimates show that the new taxes will fall $25 billion short of paying for the school-finance plan over the next five years.

2.
[x NY Fishwrap]
Gold in the Ivory Tower
By Herbert A. Allen

The separation of the wealthiest from the rest of the country is alarming. But it would be even more alarming if we recognized that income isn’t the only measure of wealth. Health and education are forms of wealth, too, essential to happiness and a strong society. Yet in the discussion of America’s growing wealth gap, they too often go unnoticed.

Disparities in health care and in education are widespread. In the realm of education, however, there’s a particularly corrosive shift that’s taking place, one that has tremendous consequences for the development of America’s best minds: the growing gap between super-wealthy colleges and universities — and the rest of the academic world. There is a widening division that gives top colleges and universities a huge financial advantage over their poorer counterparts.

America’s wealthiest colleges have endowments that are thousands of times greater than those at the least fortunate schools. The chasm is far deeper than that in other realms. After all, overpaid chief executives and investment bankers pay inheritance and income tax, so their wealth diminishes over time. Heavily endowed colleges and universities, however, suffer no such setbacks.

Amherst, Harvard, Princeton, Williams, Yale and other top-tier colleges have per student endowments that approach (and in some cases exceed) $1 million. Because they are accredited educational institutions, the gains on their investments go untaxed, adding billions to their coffers each year.

It’s certainly true that these academic institutions have worked hard to be excellent. They deserve to be rich. They should be congratulated.

But should they be allowed to be so protected by the tax code that they can use their disproportionate wealth to raid poorer colleges and scoop up the best teachers by offering better pay, benefits and tenure-track positions? Should they further separate themselves from less fortunate colleges by taking the best high school students and offering them ever richer deals? (This month, for instance, Harvard announced that it would increase the financial aid it offers to middle-class and upper-middle-class students. Other schools are expected to follow suit.)

What to do? Well, here’s one solution: tax the investment income of the wealthiest colleges (though not their endowments). If the endowments of all academic institutions were evaluated on a per student basis, a standard could be set that could begin to allow revenue sharing.

Our graduated income tax system sets varying tax rates based on income levels. Similarly, we could establish standards for the endowments of colleges and universities.

An example: Harvard or Williams (my alma mater) have endowments that are well over $500,000 per student. Why not take the colleges whose endowments exceed that per student amount and tax their capital gains? The tax revenue could then be put into a designated pool and distributed pro rata to colleges under the base level. The college with the lowest per student endowment would get the highest share.

It’s a form of revenue sharing that would allow the poor schools back into the competition for the best teachers and students. The impact on the rich colleges would be minimal.

The investment income from Harvard’s endowment in the last academic year was reported to be nearly $7 billion — a 23 percent gain from the year before. At even the current low tax rates it wouldn’t hurt Harvard to give up $1 billion or so of its gains in order to make the sharing of our intellectual wealth fairer. Other colleges could make such a donation similarly unscathed.

I know it won’t be easy to convince well-off schools to share their wealth. But they should. They should see this act as part of a down payment on their professed mission: to create a stronger, smarter and ultimately more stable society.

[Herbert A. Allen is the President and Chief Executive Officer of Allen & Company Incorporated (a privately held investment firm), and has been a Director of The Coca-Cola Company since 1982. He is a director of Convera Corporation. Allen & Company is known for hosting the Allen & Company Sun Valley Conference.]

Copyright © 2007 The New York Times Company

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