As Wealthy Donors Fuel Campus Growth, What About Low-Wage Workers and Local Residents?

Do donors have a responsibility to see that low-wage workers reap some of the rewards of a higher ed fundraising boom in which American colleges and universities raised a record $46.7 billion in 2018? Should they be worried about the negative impact that new capital projects and university expansion can have on local communities?

For Terry S. Galanis, the answer to at least the first question is a resounding “yes.”

Galanis gave Alfred University, a small private near Buffalo, $1 million with the stipulation that it “do something nice” for employees. President Mark Zupan subsequently announced that the funds will be used in part to give a bonus to every employee except a small group of unionized employees whose contract would bar such a bonus.

All others will receive either $800 for employees who earn less than $50,000, or $500 for those earning $50,000 and more. The bonus “represents a small but meaningful step to better convey our appreciation to our staff and faculty for all they do for our university,” said an email from Zupan to Alfred employees.

I suppose it would make great copy if Galanis was a tech billionaire or hedge fund titan with a fervent interest in combating inequality or advancing social justice. The truth is a bit more mundane, but no less powerful. Galanis achieved success in the private sector taking care of his employees. He wants his alma mater to do the same.

Galanis is the founder of the Lancaster, NY-based manufacturing equipment provider Sealing Devices. Inc. He’s 101 years old. His son, Terry S. Galanis Jr., took over as president and chief executive officer in 1984. The company has grown into a multi-million-dollar business with nearly 300 employees.

The family has a long history of supporting Alfred University, sponsoring the Galanis Business Award for the College of Business, funding the junior varsity football coaching position, and creating the Galanis Family Arena. Prior to the gift’s announcement, Alfred’s board of trustees voted to bestow honorary degrees on Galanis, who will be awarded a Doctor of Engineering degree, and on his son.

Ripple Effects

Why does a small gift from a regional donor to a tiny private school near Buffalo matter in the grand scheme of things? For an answer, let’s turn our attention 450 miles south to central Virginia.

Earlier this year, Jaffray Woodriff gave the University of Virginia $120 million to establish a School of Data Science. UVA history professor John Edwin Mason noted that while the new school “is not a bad thing in and of itself,” its creation could push students into an already expensive Charlottesville housing market and further drive up the cost of living for the school’s working-class and predominantly African-American employees.

As of March 2019, the average rent for an apartment in the city was $1,545 which is a 14.95 percent increase from last year.

If we zoom out from the Woodriff gift, we learn that in 2016, the Washington Post reported that UVA stockpiled a $2.2 billion reserve fund, outside of its endowment, to generate discretionary revenue for selected projects, while simultaneously raising tuition. Last June, it announced a $5 billion fundraising campaign. A few months later, it announced its endowment grew by $1 billion during the previous fiscal year, to $8.6 billion.

UVA pays workers a minimum wage of $12.38, while Aramark, the provider for university dining services, pays its employees $10.65. Earlier this year, a survey of UVA workers found that the university “does not provide adequate wages or facilitate adequate child care or transportation for many of its workers, forcing many employees to pay for their own parking and leave their children in tough situations,” according to the campus newspaper. In the wake of those findings, UVA’s president announced that it would raise the school’s minimum wage to $15 an hour by 2020—a long overdue victory for the Living Wage Campaign at UVA, which was launched in 1998.

Donors on the Defensive

Criticisms of the Woodriff gift provide a twist on a common critique of big-ticket capital items.

Capital projects often drive up costs and tuition, thereby exacerbating the student loan crisis. But they can also lead to new jobs and revitalize a community. A telling example here is David Booth’s $50 million gift to kickstart a $350 million plan to, among other things, overhaul the University of Kansas’ football stadium. Booth was a bit defensive about a mega-gift earmarked for an athletic program—“I get the arguments… I don’t agree with them,” he said—but at the very least, the gift should generate new construction jobs and, if all goes according to plan, compel other alumni to donate to the school.

Things get dicier when capital gifts help accelerate gentrification and squeeze a university’s low-income neighborhoods or its working-class labor force. A great example is the way that wealthy donors have fueled a building boom by Columbia University that has pushed many long-time residents out of West Harlem. Such displacement is a very real byproduct of the fundraising boom in higher ed. But this concern is also getting more attention in other corners of the philanthrosphere as funders invest in public parks, museums, and other “public goods” that can turn out to not be so great for nearby residents. (The High Line being another example from New York City.)

As we’ve reported, some foundations like Knight are exploring how to ensure equitable outcomes when investing in civic improvements—work that’s relevant to higher ed as wealthy universities expand and put pressure on surrounding communities. Also relevant here are efforts by some billionaire donors to atone for the fact that tech businesses have driven up housing costs and exacerbated urban inequality in their home cities.

The most obvious example here is the Bay Area, where Marc Benioff and other tech philanthropists are engaged on issues of housing affordability. Then there is Seattle, where the late Paul Allen, Jeff Bezos, and the Bill and Melinda Gates Foundations have tried to tackle the city’s formidable problems, especially with investments to reduce homelessness. It’s been a challenging endeavor both practically—Seattle’s homeless epidemic hasn’t substantially improved—and on the PR front. According to leaked documents published by City Journal, a group of prominent nonprofits, including the Gates Foundation and the Ballmer Group, recently hired a PR firm to put a happy face on the rapidly deteriorating conditions in the city. Writer James Lindsay called the campaign, #SeattleForAll, a case study in “idea laundering”—creating misinformation and legitimizing it as objective truth through repetition in sympathetic media.

Meanwhile, money from tech leaders has continued to push forward projects and investments that will make Seattle an ever bigger magnet for well-paid techies. Across the street from the Paul G. Allen Center for Computer Science & Engineering at the University of Washington stands the new Bill & Melinda Gates Center for Computer Science and & Engineering. With a price tag of $110 million, roughly $70 million in funding came from donors such as the Zillow Group, Microsoft, the Bill & Melinda Gates Foundation, Amazon, and more than 300 Allen School alumni.

Escalating Housing Costs

The housing crisis is particularly acute in cities housing the nation’s most elite universities. A recent analysis by Zillow found that 80 percent of the top 35 national universities named on U.S News & World Report’s Best Colleges of 2017 are located in expensive rental markets. Topping the list in terms of median off-campus housing prices are Stanford University, University of California, Berkeley, and Princeton University.

Hourly pay for a food service worker at the latter university is between $14-19 an hour—not enough to afford housing near Princeton’s campus. Meanwhile, Princeton recently netted a $65 million gift from the Perelman Family Foundation to establish a new residential college to house an unspecified number of economically diverse students.

Can Princeton, with an endowment of $26 billion, afford to pay cafeteria workers more than $14-19 an hour? Administrators at its rival Harvard would say yes.

Sixteen years ago, Harvard’s president Lawrence Summers ended the practice out outsourcing dining, security, and other services to save labor costs. In addition, unions covering Harvard’s in-house janitors, cooks, and guards were empowered to bargain for higher pay and better benefits without fear of encouraging more outsourcing. Now, the hourly wage for Harvard service workers hovers around $25 an hour. A janitor’s starting wage of $22.69 exceeds that of 75 percent of janitors in the area.

The policy isn’t a panacea. For instance, as opponents of a $15 an hour minimum wage often note, setting too high a pay floor could force universities to hire fewer people. And, as the Times’ Eduardo Porter observed, “it’s an open question whether larger organizations, or those without multi-billion-dollar endowments," can follow Harvard’s lead and swear off outsourcing.

But many universities—Ivies, privates, and many public universities—do have multi-billion-dollar endowments and are raising billions by the boatload. They can afford it.

According to Porter, a committee at Harvard looked at how much the university would save if its new policy was not in place and the school instead relied on outsourcing. It came up with a rough estimate of $2.4 million to $3.7 million in savings a year. “This is pocket change for an institution like Harvard,” whose operating expenses in 2017 “approached $5 billion,” Porter wrote.

The housing situation is a bit more manageable in smaller cities. According to Zillow, Washington University in St. Louis, Wake Forest University, and the University of Notre Dame—which, as it turns out, received a mega-gift for a new residential college back in March—have the lowest off-campus housing costs of all schools in the top 35 ranking, each coming at a median of under $1,000 per month for rental costs.

That said, the laws of market economics suggest that some of these relatively affordable college towns may not stay affordable for long. According to Sydney Bennet of Apartment List, “Historically expensive cities and regions are seeing rents remain stable or actually decrease. At the same time, historically inexpensive areas are seeing rising rents, especially those located within two hours of expensive locations,” she said.

Communities like Charlottesville, situated a few hours away from major cities, are seeing rent costs increase “as people decide to live farther away if they have a job that doesn’t require daily commuting.”

Too Much to Ask?

All of which brings me back to the donor behind the UVA gift, Jaffray Woodriff. When asked about the possibility that the gift may drive up Charlottesville housing prices further, William Foshay, executive director of the Quantitative Foundation, said Woodriff “is a domain expert of data science, and he pursues philanthropy in the area he knows the most about.”

I consider this to be a perfectly reasonable and accurate response.

After all, higher ed donors often make gifts that align with a university’s short- and long-term priorities. Given the fact that UVA, according to its critics, has been unwilling to provide cafeteria workers with a living wage for over 20 years, one can clearly infer where the school’s priorities lie. I suspect that few loyal alumni want to publicly call attention this uncomfortable reality.

Nor is Woodriff an urban planner. He runs a hedge fund. Asking alumni to factor in the cost-of-living impact of a gift on a university’s low-wage workers is a big ask, especially given the complexity of the challenge. Is it fair to blame alumni for driving up housing costs if the respective cities fail to construct new housing or provide affordable public transportation for workers? This kind of scrutiny hardly incentivizes donors to reach for their checkbooks.

Nor do all capital projects necessarily exacerbate the housing crisis. Nashville—home of Vanderbilt University, which recently embarked on a $600 million building spree—has seen rent decrease thanks to new construction elsewhere in the city. Similarly, Purdue University recently broke ground on a 30-year, $1 billion plan to create what it called a “work-live-play” district to meet “pent-up housing demand for students and non-students alike.”

Not all capital projects drive up tuition, either. Back February, Mitch Daniels, the president of the very same Purdue University that’s embarking on a $1 billion building spree, announced that tuition prices will not change for the 2020-2021 school year. It marked the eighth-straight year tuition prices at the public—yes, public—university have remained constant.

Even more appropriately, Daniels also announced a bonus of $500 to workers who were employed as of Dec. 31 and make less than $75,000 annually. Purdue says 83 percent of all non-faculty associates will receive this bonus. “Our staff members’ suggestions, flexibility and productivity have helped make our affordability policies possible,” Daniels said. “We think it’s time for a modest gesture of appreciation for all they do.”

As of July of last year, the school was on target to easily eclipse the $2.019 billion goal of its Ever True campaign, which is set to conclude on June 30, 2019. And why wouldn’t Purdue blow past it’s goal? What better way to engage alumni than to remind them that their beloved alma mater froze tuition and gave bonuses to low-wage workers?

A Low-Wage Future

It’s not surprising that larger questions of equity are emerging around campus mega-gifts. Well-funded top universities have become yet one more symbol of a long wealth boom that’s failed to reach the vast majority of Americans. And the fact that even at these nonprofits citadels of learning, the winnings don’t get spread around is pretty damning.

So what is the role of the alumnus donor in all of this?

For starters, the Harvard case study suggests universities are susceptible to outside pressure; only in this instance, the school’s students demanded change. As the Times’ Porter writes, in April 2001, several dozen students from the Harvard Living Wage Campaign took over Massachusetts Hall, which housed the offices of the university’s top administrators, demanding a better deal for campus workers.

And while alumni are an inherently conservative bunch—don’t expect the Jaffray Woodriffs of the world to storm the barricades anytime soon—research suggests that the next generation of millennial donors are far more concerned with issues like equity and a living wage than their parents’ generation.

As we noted in a piece looking at the Surdna Foundation’s work to support the next generation of progressive philanthropists, these heirs are more likely to be skeptical of the economic status quo and more willing to use their newfound wealth to challenge existing systems. They aren’t ignorant to the fact that while their alma maters erect glittering new facilities, the workers who mop the floors and clean the bathrooms are struggling. In the future, I suspect they’d be amenable to support fundraising campaigns that explicitly promise to provide a living wage to these workers.

Until then, Terry Galanis’ gift remains particularly instructive, if not portentous. Having spent his life in the perennially economically stagnant upstate New York region—the median income in the town of Alfred is $31,635—Galanis understands that his alma mater’s low-wage workers needed a boost. So he simply cut a check. It was as easy as that.

Alfred University president Zupan, in addressing its employees, said the awards are given “in appreciation of all that you do. Alfred University is committed to taking better care of our people and thanks Mr. Galanis for enabling us to take this step toward doing so.”