Colleges and Universities Feel the Squeeze

As the economic downturn is felt across the country, state governments are looking for new sources of revenue – and wealthy colleges and universities are coming under increased scrutiny.

Massachusetts lawmakers recently considered an amendment to the state budget that would impose a 2.5% tax on any college with and endowment of over $1 billion. The proposed assessment could affect nine Massachusetts colleges and universities (Harvard University, Amherst College, Boston University, Massachusetts Institute of Technology, Smith College, Tufts University, Wellesley College, and Williams College.)

On the national level, Congress and the IRS are considering whether colleges and universities are providing a service to the public that is proportional to their wealth. While a tax seems unlikely at this point, many in academia are already explaining why taxing universities is a bad idea and extolling their many benefits to society

In California, state budget shortfalls have led to funding cuts for California State University and University of California systems, leading their boards to increase fees (for the sixth time in seven years) to cover the gap in funding. Considering that the credit crunch is already affecting the ability of prospective students to get loans, these universities are very concerned about their ability to remain competitive. Students, in the meantime, are left wondering if they will be able to afford a college education.

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