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Taxing Relationships

November 20, 2009

Ribbon cuttings.

Press releases.

Posed photographs with shovels in hand.

Such are the tools colleges often use to illustrate their close ties to the business community. And as public institutions work ever harder to make the case that they serve as economic engines for their cities, states and regions, college leaders are likely to cozy up to the business world even more.

For the most part, college presidents and business leaders say their partnerships are mutually beneficial. But that doesn’t mean they see eye to eye on everything, and the economic downturn may test those relationships even more. As a few recent incidents in Michigan, Oregon and other states illustrate, there’s occasionally some notable daylight between corporate and college leaders when it comes to tax policy. Colleges and groups lobbying on their behalf have given support to recent tax increases that could dull the pain of budget cuts, while their counterparts in the business world have urged lawmakers to lower the tax burden as they try to rebuild state economies.

Such a schism occurred last month in Michigan, where university leaders worked to distance themselves from a state business lobby calling for tax cuts. Business Leaders for Michigan counts four university presidents among its members, but the college chiefs have made clear they don’t support the group’s full platform. When the presidents learned their names had been included in a letter to lawmakers that called for lowering taxes, they cried foul.

“We felt compelled to make clear that we didn’t support all of what was in the letter,” said Jay Noren, president of Wayne State University and a member of the business group. “What we didn’t concur with was one thing, which was that there be no tax increases.”

Noren said the incident “doesn’t give me any pause” about being on the board, and noted that the group has since vowed that they’ll consult all members before making future public statements. There may be future occasions where Doug Rothwell, chief operating officer of Business Leaders for Michigan, makes independent statements without the full backing of the organization to ensure there’s no confusion about where university presidents stand, Noren said.

“We just accept there is going to be some daylight, and I would make my position known. I would not be angry,” he said. “Mostly there is a lot of common view among the people that I work with on the board. There are going to be differences, and that’s legitimate. It’s the nature of the game. I think it’s constructive, frankly.”

Much was made in the news media of the fact that the Business Leaders for Michigan not only supported tax hikes, but also embraced a budget that slashed scholarship funding. Sabrina Keeley, chief operating officer of the business lobby, said the group found much to dislike in the budget but ultimately got behind it because there were simply no great options for the cash-strapped state.

"There were a number of things in that budget proposal that gave us heartburn, but our position was when you don't have any money, you don't have any money," she said.

Colleges and business groups have plenty of reasons to work together, but it stands to reason that there may be tensions in the current economic environment, said Brian K. Fitzgerald, executive director of the Business-Higher Education Forum. The forum’s membership includes leaders of Fortune 500 companies, postsecondary institutions and foundations.

“When you get into the question about taxes and revenue streams, I think it’s not at all surprising that the business community and the higher education community might be on different sides of the equation,” Fitzgerald said.

Those differences, however, are small compared to what colleges and businesses have in common, he said. Community colleges have particularly close ties with area industries, developing programs that cater to work force needs, Fitzgerald said. Research institutions also engage in technology transfer and other activities that stimulate business in their states, he said.

“To simply take a look at the relationship between businesses and higher education over local tax issues I think ignores the far more important symbiotic relationship that exists, especially among research universities around innovation and incubation of new businesses,” Fitzgerald said.

Public Rifts Are Rare

While they may have differences, colleges and businesses typically play nice -- at least in public. That’s what made John Wiley’s 2008 manifesto so shocking. In his final days as chancellor of the University of Wisconsin at Madison, Wiley wrote an essay for Madison Magazine, blasting the state’s largest business lobby for undermining the university’s legislative efforts. Frustrated with Wisconsin Manufacturers & Commerce’s political positions, Wiley called the group “the single biggest driver of our politically toxic environment and, thus, the single biggest obstacle to the recovery of the Wisconsin economy."

Wiley has since returned to the faculty, but maintains that the business lobby -- guided by a conservative ideology -- has stifled the university’s progress.

“The positions they take, the candidates they support, the proposed legislation they support are almost all antithetical to public higher education,” Wiley said. “It’s an anti-government mindset that opposes every tax increase, every regulation of any kind. It’s a completely ideologically based ‘free enterprise solves everything’ answer. There’s no nuance to it.”

Despite his criticism of WMC, Wiley said “If I had stayed chancellor for longer, I would have continued to work with them.”

“If businesses and universities can work together despite ideological differences, everyone wins,” he said. “You can be allies with people that you disagree with.”

Jim Haney, president of WMC, calls Wiley’s criticism the ranting of “kind of an angry old guy.”

“It’s absolutely crazy to think that a business association would do anything to undermine educational institutions,” Haney said. “They are our lifeblood. If they are not doing well, we’re not going to do well.”

Haney said relations have improved with Wiley's successor, Biddy Martin. That said, Haney concedes that the state's business community often has the perception that universities "keep spending all this money and then they raise tuition on my kids."

"I think too often [universities] come at this from kind of a zero sum game," he said. "We need more, everybody says we need more and we've got to get it from somebody else. [Business leaders are] arguing the other thing you can do is grow the pie. One way you can grow the pie is not to make Wisconsin a tax hell."

Haney notes that WMC’s platform, outlined in a report titled "Moving Wisconsin Forward," supports “appropriate” funding for the university to achieve its mission, as well as greater flexibility for the university and the Wisconsin Technical College System to set enrollment and tuition levels.

It is not uncommon, however, for business lobbies to support higher education in writing while actively opposing tax policies that could benefit colleges and universities. Such is the case in Oregon, where a host of businesses have actively lobbied against tax increases designed in part to help keep colleges and universities from taking further budget cuts. Measures 66 and 67, which will go before voters Jan. 26, are designed in part to preserve an estimated $69.4 million in tax revenues for the Oregon University System, community colleges and state-funded scholarships, according to Vote Yes for Oregon, a group promoting the measures.

“It is unfortunate to see prominent members of the business community on the other side of [the measures],” said Scott Moore, a Vote Yes for Oregon spokesman.

Moore specifically cited the opposition of the Oregon Business Council, which has repeatedly championed higher education while opposing the tax measures coming before voters.

“Their current position contradicts what their stated goals have been for years,” he said.

The council-endorsed Oregon Business Plan cites improving higher education as a crucial piece of Oregon’s overall economic future. But Duncan Wyse, president of the council, said he sees no inconsistency in opposing the tax measures while trumpeting the need to fund colleges and universities. Wyse says the taxes will repel businesses and ultimately hurt the economy, thereby harming higher education in the long run.

“Obviously the best source of revenue for the public sector is a strong economy,” he said.

The measures would generate an estimated $733 million by taxing high-income earners and corporations.

Wyse said the Business Council actually supported a legislative proposal that would set a budget floor for education, and use temporary taxes if necessary to maintain it. The Legislature opted instead for a permanent tax, which the council would not support.

“There will be a February [legislative] session and we’re not saying we shouldn’t do something about [funding higher education],” Wyse said. “This isn’t the end of the story. We’ve got to go in and responsibly address this issue.”

While a couple of campus groups have publicly signed on in support of Vote Yes for Oregon’s pro-tax position, college and university presidents have been less vocal. Mary Cullinan, president of Southern Oregon University, said she thought it would be inappropriate to take a public position on the referendums.

“My position is that my politics are Southern Oregon University, and I have to do what I see best to keep us financially stable and academically forward looking,” she said. “The legislators of Oregon understand that the president’s politics personally are obliterated by the fact that the most important thing is the university. We’re not really put on the spot to say ‘Who are you voting for? What do you support?’ We’re a state agency, so we can’t lobby for one thing or another. We’re not going to take a stand on these measures.”

As for the business community’s widespread opposition to taxes that could support Southern Oregon, Cullinan was diplomatic.

“I’m delighted that we do have a business community and a Legislature that care very much about this institution, and that makes a huge difference,” she said. “We’re working toward the same goals, even if we don’t always support the same approaches in reaching those goals.”

 

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