In yesterday’s press conference, President Donald Trump said that Harvard University “is going to pay back the money and they shouldn’t be taking it.” Harvard however says that it intends to keep the money. That will set off an interesting legal fight, which could ultimately cost much of the grant’s worth in legal fees. Update: Harvard is now reportedly not going to seek or accept stimulus money.
The $8.6 million grant has received criticism given Harvard’s $41 billion in endowment. However, Harvard announced that it plans “to direct 100% of the funds to financial assistance to students, and will not be using any of the funds to cover institutional costs.”
Harvard correctly points out that this was not really money for small businesses as reported by many reporters. It is money given as part of the educational relief program which was passed as part of the $2.3 trillion stimulus at the end of March. The huge fund for small businesses was also included.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, including a provision included $12.5 billion for roughly 5,000 institutions of higher education. The quickly crafted formula was supposed to favor schools with large numbers of students on federal Pell grants, which go to students from low- and moderate-income families. Pursuant to a a letter from the Secretary of Education, schools have wide discretion in how they distribute the funds.
This aid reflects something that many people do not appreciate. As I have written in the past, universities and colleges are major parts of our economy not just in offering expanding opportunities for students but supporting millions of jobs both directly as employees and indirectly as contractors and suppliers. If we are to stay competitive economically (and solve future pandemics), universities are critical part of such recovery.
The problem that this controversy reveals is that the massive spending in the last two weeks was done virtually on the fly. Trillions are being spent as both parties demand speed rather than care. As a result, there is considerable question on the qualifications and restrictions on such money. There is even greater question how this crippled economy can hope to carry such crushing debt without leaving millions with no future or prospects.
Finally, there will continue to be a controversy over large corporations and institutions receiving stimulus money. However, most universities are non-for-profits and these endowments are largely the result of donations from alumni. For that reason, the comparison is a poor one. That does not mean that all universities and colleges are equal. The question is whether need should be the most important element in determining aid and the size of that aid.
Yet, looking at just need may favor institutions that serve fewer students or play a smaller role in a community. It could also favor for-profit institutions, a structure that some of us have long criticized as inimical to educational programs. In other words, it is more complex than Harvard having a large endowment and a small stimulus check. Harvard does have many students on Pell grants and the money will go to those students. That is what the Department favored as the suggested distribution.
My point is only that the real debate should be on the level of our spending and the danger of poor tracking and conditioning rules. The debate over large corporations getting aid is also worthy of debate but I would not include large non-for-profit educational institutions as part of the danger of windfall payments. I understand if I appear biased as an academic but there are real differences between Costco and Cornell. One is for profit and one is non-for-profit. Cornell is supporting research and students. That fact that Cornell is large means that it has a larger burden in these areas.
Thus, it is always popular to run headlines like “America’s Richest University Grabs Nearly $9 Million In Taxpayer Aid,” on Huffington Post but the problem is not Harvard receiving money due to its Pell grant recipients. The problem is the fact that trillions are being paid out with the most sketchy controls and conditions.