In 2020, Smith College President Kathleen McCartney had “extraordinary news” to share with the Smith College community — the institution had received a $50 million gift from an anonymous alumna, with $40 million designated for student financial aid and $10 million for “re-envision[ing] [Smith’s] career development programs.” The donation, albeit small compared to the $49.5 billion in total philanthropic support colleges and universities received in 2020, was the largest-ever individual donation in Smith’s history. By 2023, over a dozen U.S. institutions had received donations exceeding $100 million each, with total contributions surpassing $58 billion by the end of the fiscal year. Despite growing concern over the value of higher education and lack of public support for colleges and universities, it was a record-breaking year for fundraising.
Such contributions have allowed colleges and universities to provide generous and loan-free financial support for students from diverse backgrounds, opt for need-blind admissions and support research. They have allowed Smith to build a $32 million building to house student leadership and career development centers and President Kathleen McCartney to receive a competitive salary of over half a million dollars from 2017 to 2023, when her total compensation was $737,855. They have allowed Smith to become Northampton’s largest property owner. These are all noble pursuits; however, these contributions have done everything but be taxed. In 2022, Smith had a revenue of $711,163,748 and is generally exempt from federal and state taxes. The college’s total assets as of June 30, 2023 were $3.6 billion. An obscene amount that, among other things, should be redirected towards public education.
In 2023, Northampton Public Schools faced a budget gap of approximately $2.75 million, endangering over 20 positions. District-level funding for some services would be reduced for over 2,500 children. Earlier this year, the UMass Board of Trustees voted to confirm a 2.5% tuition and fee hike for all in-state undergraduate students for the 2024-2025 academic year, following a previous 2.5% increase for the 2023–2024 academic year. UMass has an endowment of only $1.2 billion for over 24,000 undergraduate students, while neighboring private institutions such as Smith and Amherst College have almost four times the endowment and student populations of about two thousand undergraduates each.
“The conditions under which my students have to learn and my colleagues and I have to teach at UMass are consistently poor,” said Professor Asheesh Siddique from the Department of History at UMass–Amherst. “What enables institutions like Smith, Amherst and even Mount Holyoke to bring an elite experience to their students, is their exemption from these systems of taxation that indirectly penalize a place like UMass. We get less and less money from the state, which means that we have to increasingly rely on increasing tuition, and I teach students from working class families — students that work late night shifts to pay their tuition, and UMass tuition keeps going up and up and up.”
Most Colleges and Universities, if not nearly all, are classified as charitable nonprofits by the Internal Revenue Service (IRS). In 1969, the newly enacted Tax Reform Act established Section 501(c)(3) to support public goods like education and philanthropy. Higher education institutions enjoy tax-exempt status because education is deemed a public benefit for society at large. According to an IRS article titled “History of the Tax Exempt Sector: An SOI perspective,” charitable organizations historically stepped in to address gaps in social welfare programs where government efforts fell short.
The practice of allowing billionaires to donate immense sums to education is rooted in the belief that education serves the public good. It is seen as positive that these institutions amass billion-dollar endowments, especially if they use these funds to provide generous financial aid to students who would otherwise lack access to elite education. After all, education is often touted as the gateway to upward social mobility.
The reality is starkly different — attending a billionaire-funded Ivy League institution is not a right, and no educational institution requires the endowment equivalent to a small country’s GDP to offer financial assistance to deserving students. Despite awarding more undergraduate STEM degrees than any other college or university in the Commonwealth, UMass–Amherst faced troubling statistics in 2015: 23 percent of undergraduate students skipped meals due to financial constraints, and 22 percent worried about running out of food before they could afford more. If genuine concern existed for social mobility and education as a public good, resources would flow towards public institutions rather than private ones catering to a select few. If there are $100 million to give away, and it could go to either a private institution or a public university; no matter how many full-rides scholarships the former could offer, public education will forever remain indispensable.
In 2015, Northampton Mayor David J. Narkewicz attempted to do just that. He had a proposal: asking ten of the city’s largest nonprofit, tax exempt property owners to voluntarily participate in a PILOT (Payment In Lieu of Taxes) program, beginning in 2016. According to Narkewicz, 22.37% of the total property in Northampton is tax exempt and Smith owns $421 million worth of it. The city requested the college to pay approximately $1.65 million annually. Smith refused. In a letter to the Daily Hampshire Gazette, President McCartney responded to the city’s request by arguing that “there is a good reason for independent colleges to be tax exempt.” The letter cited, among other things, the college’s public engagement initiatives in Northampton.
Universities frequently project an image of promoting equality, but in reality, their survival relies on maintaining social inequality. Despite their assertions of social justice and community engagement, their actions are often contradictory. Despite Smiths investment in initiatives like the Jandon Center and offering endowed scholarships, financial shortfalls persist in Northampton’s public schools, leaks mar UMass Amherst facilities and homelessness persists in downtown Northampton — a city supposedly in a “symbiotic relationship” with Smith, according to VP of Finance David Deswert.
In 2017, President Kathleen McCartney sent a letter to the community “alerting” of the proposed Tax Cuts and Jobs Act (H.R.1). Recently introduced to the House of Representatives, the bill aimed to amend the Internal Revenue Code (IRC) to reduce tax rates and modify policies, credits, and deductions for individuals and businesses, thereby potentially taxing Smith on its endowment. President McCartney warned that “If enacted, this bill has the potential to undermine college affordability and jeopardize the future of private and public colleges” and urged the campus community to “raise [their] voice and [fight] to preserve the values of access and excellence on which Smith College was founded.” This is the same president who received a continuous increase in total compensation during her entire time at Smith and decided a $30 million building was the best use of our time and resources. Smith has enough money to last a lifetime. According to last year’s faculty budget presentation, the college was said to be in a ‘strong financial position’ and has had a budget surplus for the last two years. Increasing the tenure cap, expanding the workforce, operating additional dining facilities, divesting or paying property taxes would not threaten Smith College’s stability. Even worse, despite its tax-exempt status, Smith College’s students do not reap the rewards of this fiscal advantage. If we’re channeling funds elsewhere, perhaps they should benefit parties other than the Board of Trustees. The institution’s leadership, particularly those specializing in strategic planning, seem fixated on amassing the largest possible endowment to ensure perpetual wealth. But why should Smith College or any institution endure indefinitely? Perhaps it is time for us to consider redirecting resources towards initiatives that genuinely serve the present needs of our students and the community that sustains our existence.
