Tuition-free Berea College lost out in the Republican tax bill approved Wednesday, but top Republicans and members of Kentucky’s congressional delegation pledged to find a way around a new excise tax on big college endowments.
A provision that would have exempted Berea College from a 1.4 percent tax on earnings of its billion-dollar endowment — used to waive tuition for students who can’t afford college — was dropped from the Senate version of the tax package after it was initially approved in the House version of the bill. The House revoted to approve the tax measure Wednesday without help for Berea College.
Congressman Andy Barr, R-Lexington, who had gotten the Berea exemption in an earlier House version, appeared on the House floor late Wednesday morning to ask House Ways and Means Committee Chairman Kevin Brady, R-Texas, to “work with me to permanently exempt work-study colleges from the excise tax on endowment income in a timely manner, in the tax extenders, or another appropriate legislative vehicle as soon as possible.”
Brady agreed to find a permanent solution quickly.
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“This eases my mind greatly,” Berea College President Lyle Roelofs said Wednesday afternoon. “I’ve very much enjoyed Andy’s support as well as (Sen.) Mitch McConnell’s (in getting Berea exempted from the tax). I’m hopeful their efforts will continue.”
Roelofs said the excise tax could take as much as a seven-figure hit to Berea’s $1 billion endowment, and that could mean fewer students. Although they don’t pay tuition, students work a limited number of hours to contribute to the college.
“One of the ways we can deal with shortages is to reduce enrollment,” he said. “We hope not to do that, but it would be a challenge to deal with that kind of cost.”
Barr and McConnell, the Senate majority leader, blamed Democrats on Wednesday for the loss of the exemption for Berea College.
“I’m frankly mystified that the Democrats stripped this provision from the bill,” McConnell said Wednesday. “They didn’t have to, but they did. Democrats’ fanatical opposition to the tax bill reached such hysterical heights that Bernie Sanders proudly led the charge to deliberately harm Berea College, which offers free tuition to less fortunate families.
“When it came to crunch time, every Democrat in the Senate voted with liberal ideologues rather than stand with working people and their children. As a result of the Democrats’ actions, I’m working with my colleagues in the Kentucky delegation to protect Berea and its students.”
But the state’s lone Democrat in Congress, Rep. John Yarmuth of Louisville, wasn’t having it.
“This is what happens when you rush bad policy through Congress strictly as a political favor for your big donors,” Yarmuth said.
Two other tuition-free schools in the country might also face the endowment taxes, Politico reported. The bill imposes the tax on private colleges with hefty endowments and at least 500 students. They include Harvard, Yale and Princeton.
“When you combine a hasty process with a bad idea, you get unfortunate results,” Terry W. Hartle, senior vice president of the American Council on Education, told Politico. The group, which represents colleges and universities in Washington, has lobbied heavily against the tax on all university endowments. Higher education groups were more successful in fighting a tax on tuition waivers for graduate students.
Berea was founded in 1855 as a co-educational and racially integrated school, and it’s one of just a few tuition-free schools left in the country. It is dedicated to educating low-income Appalachian students. Between 80 percent and 90 percent of Berea’s students are on federal Pell grants, which defines them as coming from low-income families. It was recently ranked number one in the country for how well it educates low-income and first-generation students.