Category Archives: Education (higher ed)

Business and Computer Science Majors are the Biggest Bargains in Higher Ed

Graphic credit: “Costs of and Net Return to College Major”

It is widely known that certain college majors offer better career prospects than others. Engineering and business majors earn more money on average than, say, art and English majors. Less well known is the fact that certain majors are more expensive to teach. As seen in the chart above, engineering graduates cost twice as much to educate as library graduates.

The data comes from a new study, “The Costs and Net Returns to College Major,” by Joseph G. Altonji and Seth D. Zimmerman, published by the National Bureau of Economic Research. They drew their cost data from the Florida State University System.

The insight that different majors have different costs has important implications for how state systems of higher education allocate their resources. In Virginia, there has been a big push since the “Top Jobs” legislation of 2011 to increase the number of STEM (science, technology, engineering and math) graduates at Virginia colleges and universities. The shift to higher-cost STEM majors, while arguably justified from an economic perspective, contributes to the rising cost of higher education.

Another way to slice and dice the data is to look on the return on investment for different majors based upon the cost of providing the education and the present value of graduates’ earnings. As seen in the chart below, business majors, who cost relatively little to educate but enjoy high lifetime earnings, represent an extraordinary bargain. By contrast, architects, who are expensive to educate but earn relatively little, are a Return on Investment disaster. Much to my surprise, even engineers don’t look like such a bargain.

Career earnings may not be the best way to measure the social value of a particular major. It is possible that architects contribute far more to social well being than their pay stubs would indicate. (It’s hard to imagine that genders-studies majors have anything worthwhile to contribute to the world, but, hey, that’s me.) But the present value of earnings is a pretty good proxy for a graduate’s economic value.

As lawmakers ponder how to allocate scarce higher-ed dollars, they would be well advised to take into account how much bang for the buck colleges are getting for their investment in different disciplines. Perhaps Virginia colleges need to promote enrollment in business schools and less in architecture. I never imagined myself saying this, but maybe we should be encouraging more kids to enroll in psychology and fewer in engineering!

GMU Should Cough up Terms of Charles Koch Donations

Charles Koch. Yeah, he's a bogey man for the left. Even so, the public has a legitimate interest in knowing what strings he ties to his donations to GMU.

Charles Koch. Yeah, he’s loathed by left. Even so, the public has a legitimate interest in knowing what strings he ties to his donations to GMU. Image credit: Huffington Post.

Unlike my friends of a leftish persuasion, I don’t have a problem with Charles and David Koch. I largely agree with their libertarian political philosophy. In a nation awash in foundations that underwrite liberal and progressive causes on college campuses, I am happy to see at least one organization backing free-market/limited government principles. In particular, I’m a big fan of the Koch-supported Mercatus Center at George Mason University, whose scholars I quote frequently in this blog. Without the Koch brothers, academia would be even less diverse intellectually than it already is.

But my personal affinity for the Koch brothers does not alter my opinion that any dealings they have with public Virginia universities should be fully transparent. Therefore, I am inclined to endorse a lawsuit filed by Transparent GMU, a student group with legal backing from the liberal-left Appalachian Mountain Advocates, against GMU. The purpose of the lawsuit is to compel GMU, under the Freedom of Information Act, to release records about donor agreements between the Kochs and the university.

The Charles Koch Foundation has donated $48 million to GMU between 2011 and 2014. Charles Koch himself serves on the board of the Mercatus Center. It is a legitimate matter of public inquiry to know what strings might be attached to Koch’s donations. Of course, the same holds true not just with Koch but any and all mega-donors to the university, including industrialists pursuing business interests and philanthropists backing liberal and progressive causes.

GMU officials argue otherwise, according to Fourth Estate, GMU’s student-run news outlet.

“Philanthropy is a critical aspect of George Mason’s success, especially in a time when public universities are receiving fewer funds from the Commonwealth,” GMU spokesman Michael Sandler told the publication by email. “We are grateful to the thousands of donors who give to Mason for a variety of reasons. Some of these donors wish to make their gifts public. Some wish to remain anonymous, which is their right and something the university and the Foundation have a responsibility to respect.”

Privacy is a serious matter worthy of debate. But that wasn’t the logic given in GMU’s response to Transparent GMU’s FOIA request.

In a Jan. 9, 2017, FOIA filing, Transparent GMU sought any records, including grants, cooperative agreements, gift agreements, contracts or memoranda of understanding, related to to contributions that Koch-related entities made to the university. On Jan. 12, Elizabeth Woodley, FOIA compliance officer, replied that GMU was not in possession of such records.

Transparent GMU then asked if the George Mason University Foundation would provide the records. GMU refused to turn over any foundation records on the grounds that it was a separate, private, 401(c)3 charitable organization not subject to FOIA. Citing a fee it enacts on gifts its accepts on GMU’s behalf and its close working relationship with the GMU administration, the lawsuit argues that the foundation is a “component unit” of the university.

The lawsuit is much bigger than GMU and the Koch brothers. Conservatives and libertarians might be inclined for reasons of partisanship to side with GMU in this instance in order to shield Charles Koch and the Mercatus Center from scrutiny. That would be short-sighted, in my view. If there are terms and conditions, then Koch and Mercatus should be willing to defend them.

The internal workings of public research are a black box. GMU alone has dozens of centers and institutes. Last year, I blogged extensively about inadequate oversight of GMU’s Institute for Global Environment and Society, some of whose principals engaged in double dipping. More recently, I have tried to probe the link between the pursuit of research dollars and higher tuition at public Virginia universities generally. We need to crack open university finances. We need to understand the forces at work influencing the affordability and academic integrity of higher ed. Conservatives and libertarians have much more to gain than lose from a court ruling subjecting donor agreements to the reach of FOIA.

Government’s War on the Poor: Parent Plus Edition

Rebecca McEvoy, Parent Plus borrower and likely victim of unintended consequences.

Rebecca McEvoy, Parent Plus borrower and likely victim of unintended consequences. Photo credit: Wall Street Journal.

Rebecca McEvoy, a retired school teacher coping with multiple sclerosis, borrowed $84,000 under the federal Parent Plus program to help her oldest son through art and design school. When he graduated, the government expunged the debt under a law that forgives balances for borrowers deemed permanently disabled. Three years later, she and her husband Dave, also a retired teacher, turned to Parent Plus again. The couple expects to borrow another $50,000 to cover costs for a second son, as Josh Mitchell with the Wall Street Journal tells the story.

The McEvoys’ finances likely would have raised red flags with private lenders, Mitchell dryly notes. They live off modest pensions, and existing debts eat up much of their income. Odds are, they won’t be able to meet their payment obligations for the second round of student debt any more than they could the first.

As of September 2015, more than 330,000 people, or 11% of borrowers, had gone at least a year without making a payment on a Parent Plus loan. The student loan debt crisis is engulfing not only students but many parents. An estimated 41,000 Parent Plus borrowers had their checks garnished in FY 2015.

“This credit is being extended on terms that specifically, willfully ignore their ability to repay,” said Toby Merrill with the Harvard Law School’s Legal Services Center. “You can’t avoid that we’re targeting high-cost, high-dollar-amount loans to people who we know can’t afford to repay them.”

Parent Plus defaults began rising during the Great Recession. By 2011, Obama administration officials recognized that they had a problem and put tighter restrictions into place. Writes the WSJ:

But after schools argued stiffer underwriting would prevent many students from covering tuition, thus reducing college access for minorities and poor students, the administration rolled back the new rules. Research shows that restricting access to loans based on credit scores leads to lower college enrollment.

The Government Accounting Organization (GAO) estimates that taxpayers ultimately will forgive $108 billion on student loans made through the current fiscal year, says the WSJ. Colleges are the only winners here. Federal loans allow them to jack up tuition, but they suffer no adverse consequences when students or parents cannot repay the debt.

Bacon’s bottom line: Thus has the student loan program, created with the best of intentions, been corrupted: simultaneously saddling taxpayers with the cost of a massively expensive entitlement and burdening students and parents alike with billions of dollars in loans they can never repay. That’s quite a two-fer. Two… Two… Two massively destructive unintended consequences in one!

It hasn’t always been this way. Once upon a time, student loans weren’t dogged by subprime mortgage-scale bad debt. The problem arose when Uncle Sam began treating student loans as an entitlement for anyone who wanted to attend college. Refusing loans to students with no credit rating and/or parents with poor credit ratings constituted “discrimination” against the poor and minorities. Once you play the discrimination card, the debate is over.

The unintended consequence, of course, is that when poor and minority students and parents load up with debt they cannot repay, they suffer disproportionately — even when billions of dollars in bad debt are written off. Except in rare instances like Ms. McEvoy’s, student loan debt cannot be dispelled. Uncle Sam extracts its pound of flesh by garnishing wages and social security. Families living on the edge of poverty are pushed into poverty; families living in poverty are pushed into destitution.

All for what? A significant number of poor students make it through college, obtain degrees, and get good jobs that allow them to service their debt. But millions don’t. Federal law limits undergraduate federal loans to $27,000 over four years. Even when parents step in by borrowing under the Parents Plus plan, many poor students lack the resources to graduate. (The problem may be compounded by a lack of academic preparation — student loan programs apparently don’t take that into account either.) Meanwhile, millions of well-paying, semi-skilled jobs go unfilled. Washington could not have better designed a system to crush the poor if it tried.

UVa Hikes In-State Tuition by 2.2%

The University of Virginia Board of Visitors has approved a 2.2% tuition hike for in-state students and a 3.5% increase for out-of-state graduates — the second year of modest increases after years of aggressive increases.

Administrators said the increases are necessary to address $24 million in new costs next school year along with a $7 million cut in state appropriations, reports the Daily Progress.

UVa came under intense political pressure during the 2017 General Assembly session when legislators proposed a series of bills that would constrain the ability of public Virginia universities to raise tuition. None of the bills passed, but they put the higher-ed establishment on notice that citizens were running out of patience with the runaway cost of attendance at Virginia colleges.

It will be interesting to see if the UVa decision portends a moderation in tuition increases at other public institutions.

How Higher Ed Taxes the Poor and Gives to the Rich

Why do the richest colleges and universities providing education to the smartest and most affluent students get the biggest tax breaks? More and more people — both on the left and right ends of the ideological spectrum — are asking that question.

Controversy is sure to grow with the release  of a study, “The Ivory Tower Tax Haven: The state, financialization, and the growth of wealthy college endowments,” by Charlie Eaton with the Haas Institute for a Fair and Inclusive Society at UC Berkeley. Eaton argues that private colleges with substantial endowment wealth have become “ivory tower tax havens,” creating “islands of privilege” that perpetuate social and economic stratification.

Since the 1970s, elite universities have benefited from three big tax benefits: (1) tax deductions for donors giving to endowments, worth about $1.2 billion in 2012, (2) the non-profit exemption of endowment investment returns, worth about $12.9 billion; and (3) municipal bond tax exemption for higher education, worth about $5.5 billion. The total benefit in 2012: about $19.6 billion.

Per-student spending from endowments, 1976 to 2012, broken down by endowment wealth per student. Graphic credit: “The Ivory Tower Tax Haven.”

The result has been a growing disparity in resources and expenditures per student. For U.S. undergraduate-enrolling institutions in the 99th percentile for endowment wealth per student,” writes Eaton, “annual spending per student from endowments increased by 751% to a mind-boggling $92,736 between 1977 and 2012. … Public universities and less wealthy private schools saw no comparable increase in resources from endowments or other areas of support.”

Who benefits from this increase in spending? Rich kids mostly. Elite schools with the biggest endowments enroll the wealthiest kids. Recent research shows that 38 of the most elite schools in the U.S. enroll more students from the top 1% of the income spectrum than from the bottom 60% combined.

Prior to the 1970s, the logic behind tax exemptions for higher education was “to protect intergenerational equity by providing comparable levels of effort towards the university’s mission from one generation to the next,” writes Eaton. Over the years, colleges and universities have used the tax breaks instead to maximize the size of endowments and increase instructional spending per student, thus enhancing institutional prestige.

One commonly pursued strategy is to retain and reinvest income from endowments rather than spend it. Since 1990, the average investment return for what Eaton classifies as “wealthy endowments” has been 10%, but spending amounted to only 5%, leaving the balance to be applied to asset growth.

Another strategy has been to engage in indirect tax arbitrage, in which universities direct donations to endowments rather than operational spending or non-financial capital investments. Universities can make more money by investing their endowment wealth than they lay out in payments on tax-free municipal bonds.

Rather than using the income to increase enrollment, elite private universities have preferred to increase instructional spending per student. “Flat enrollment makes sense,” writes Eaton, “because low admission rates to undergraduate programs tend to improve schools’ position in college and university rankings.”

Eaton lists 24 private institutions with large endowments. Most are located in the Northeastern states, but two are located in Virginia. Washington & Lee University, with a $2.2 billion endowment, had endowment spending per student of $27,000 in 2012. The University of Richmond, with a $1.9 billion endowment, had $24,000 in spending.

Bacon’s bottom line: Eaton’s work shows how universities behave rationally from the perspective of prestige-maximizing, not profit-maximizing, institutions. Ten percent of the U.S. News & World-Report “Best Colleges” ranking algorithm comes from average per-student “instruction, research, student services and related educational expenditures.” Another 12.5% is determined by student selectivity. Thus, higher-ed institutions have an incentive to build their endowments, lavish large sums on student instruction and services, and keep enrollments small and selective. Which is exactly what most have done.

As regular readers know, I do not favor punishing the rich through increasing tax rates. The rich already pay a hugely disproportionate share of income taxes, and high tax rates distort economic behavior to the detriment of all. But neither do I favor heaping additional privileges upon the wealthy. Anyone who wants to create a more egalitarian society, as I do, would do better to focus on the $20 billion a year in annual subsidies for wealthy colleges.

Real change must come from Congress because the special tax treatment originates mainly from the federal tax code. But from a Virginia public-policy perspective, perhaps it is worth examining the repeal of state breaks for contributions to higher-ed endowments, income generated by endowments, and university municipal bonds. Do we, as polity, really deem it a priority to subsidize the education of the wealthiest among us?

Tom Perriello: Let’s Make Community College Free!

Tom Perriello for Governor: More free stuff!

Tom Perriello for Governor: More free stuff!

Tom Perriello, Democratic Party candidate for governor, is right about one thing: The cost of attending college is far more expensive today than it was when his father, a son of Italian immigrants, got a scholarship to the University of Virginia and graduated debt free. And he’s right that many young people today are graduating with staggering amounts of debt that make it harder for them to buy a house or start a business. The runaway cost of college education is creating a social crisis.

But one of his proposed solutions — providing two years of free vocational training, apprenticeships and free community college — is fiscally reckless.

Meeting with students at the University of Mary Washington as part of a 16-campus tour, Perriello touted his plans for free community-college tuition and also the refinancing of existing student debt to reduce monthly payments, reports the Free Lance-Star.

The refinancing-student-debt idea may have legs. The idea has been floated to create a student loan financing authority that would sell tax-free municipal bonds to raise money to refinance student debt. There are some tricky issues here — how exposed would such an authority be to student defaults? — but the idea is not fiscally absurd on its face.

But paying two free years of community college would be a budget buster. According to the Virginia Community College System’s 2016 unaudited financial report, student tuition and fees generated $361 million to operating revenues. Perriello offers zero details on his website on how he would pay for such a sum. Here’s what he says:

To make post-secondary education more affordable and improve the career prospects for all young Virginians, I will make vocational training, apprenticeships or community college available debt-free for a minimum of two years. I will work with our universities to ensure that we do not continue to pile up the burden of tuition on the backs of students and their families.

Oh, he’ll “work with our universities” to control tuition. Great. While he’s at it, maybe he can work with Israel and Palestine to bring about Middle Peace.


There’s another problem with offering free tuition. If your criterion is helping students acquire certifications and degrees that get them jobs in the workplace, a lot of the money is wasted. The chart above, taken from the State Council of Higher Education for Virginia website, shows the percentage of students who complete their two-year degrees within four years. The rate varies between 30% and 60% by region of the state.

As a matter of principle, students should put some skin in the game to demonstrate that they’re serious. The world is full of goof-offs and dilettantes who enroll in college because they can’t think of anything better to do, and it’s loaded with people who can’t complete their degrees due to disordered personal lives or lack of academic aptitude. Free tuition encourages non-serious people to enroll, not only wasting the state’s money but time they could put to better use elsewhere.

One last point: By making tuition free, the state would destroy any market discipline. If the state were stroking the checks, community colleges would have no reason to limit costs. As night follows day, to keep costs from running out of control, the state would have to impose cost controls. Does anyone want Richmond calling the shots on every decision?

Tom Perriello’s promise of free tuition may play well on college campuses, but it has more holes than a wiffle ball.

Education Anarchists: Virginia Education Officials Discuss Radical Reforms

Billy Cannaday, vice provost of academic outreach at the University of Virginia, is leading the university’s distance-learning endeavors. He also serves as president of the Virginia Board of Education.

How well prepared are Virginia’s high school graduates for what comes next in their lives, whether it’s college, community college or a job? Virginia’s top education officials began asking that question in 2015, and they explored the topic with 24 stakeholder groups, from parents and school counselors to college admissions staff and university deans.

“We went 0 for 24,” Steve Staples, Virginia’s superintendent of public instruction, told the State Council of Higher Education for Virginia (SCHEV) earlier today. Every stakeholder group said that most high school grads are ill prepared for the world that awaits them. A common sentiment: Schools are “working on the wrong stuff.”

Virginia’s public school system is geared to teaching content, said Staples and Billy Cannaday, president of the Virginia Board of Education, in a joint presentation. Knowledge of content, as measured by multiple choice tests, is a necessary part of the K-12 education but it’s not sufficient. Content, they said, must be supplemented by the ability to communicate, collaborate, think critically, think creatively, and solve problems.

Steven R. Staples, Virginia Superintendent of Public Instruction.

The presentation by Virginia’s two top K-12 officials followed by a lengthy discussion was a first for SCHEV. Senior K-12 and higher-ed administrators rarely talk in formal settings. Indeed, although both work in the same high-rise building in downtown Richmond, they take separate elevators to their respective offices. But both camps acknowledge the need to build bridges, and the outreach to SCHEV may portend greater cooperation between the two education systems in the future.

Virginia’s high school system was designed in the late 1800s for a manufacturing-dominated economy. That system is not working for the 21st-century economy, said Cannaday. New skill sets are needed.

The Standards of Learning (SOL) tests assess students’ mastery of content in narrow silos — mathematics, English, history, science, etc. Students are rarely taught how to integrate those disciplines. Calling for a “deeper learning,” Staples said schools need to “blend disciplines.” He gave as an example a school in Southwest Virginia that linked English, history and civic engagement by assigning students the book, “All Quiet on the Western Front,” and coupling it with interviews of veterans in the community.

The Virginia Department of Education (VDOE) is early in its reappraisal of Virginia K-12 education. High-level goals have yet to be translated into concrete action. The first step, said Staples, is to establish what should get done. The second is to figure out how to get it done. “We’re still working on that.”

The response of SCHEV board members was uniformly positive, although the obvious question came up: Does VDOE have the resources to pull off changes of the magnitude outlined by Staples and Cannaday?

“This vision isn’t all about resources,” said Staples. “It’s about allocating those resources in a different way.” One strategy might be to scale back state directives to local school districts. For example, the state requires schools to hire a library aide. Maybe the school principal says he’d rather hire a career coach. Another approach: Schools may have to re-think the way teachers allocate their time: five classes, 30 students per class, five  hours a day. Maybe teachers need more flexibility.

“I am somewhat of an anarchist,” Staples said. “We need to re-define high school expectations that drive change throughout the system.”

In response to questions, both Staples and Cannaday said they were open to implementation of quality pre-K programs, which can have measurable impact on pupils’ academic achievement for years, and also to charter schools — although charter schools need to be held accountable for performance just like other public schools.

An essential component of K-12 reform will be defining what is expected of high school graduates, and that requires dialogue with higher education. Said Cannaday: “We have an opportunity to talk about not only K-12 but how it connects to what comes next: college and the workplace.”

Author Files Suit to Spur Investigation of UVa Admissions

Jeff Thomas delved into UVa admissions practices in his book, 'Virginia Politics & Government in a New Century."

Jeff Thomas delved into UVa admissions practices in his book, ‘Virginia Politics & Government in a New Century.”

Jeff Thomas, author of “Virginia Politics & Government in a New Century: The Price of Power,” has filed a complaint asking the U.S. Attorney’s office for the Western District of Virginia to launch an independent investigation into admissions practices at the University of Virginia. Reports the Cavalier Daily:

Thomas said in an email to The Cavalier Daily he filed the federal complaint because the University and the state government are incapable of independently investigating what he called a “corruption scandal,” which could implicate political donors, legislators and members of the University Board of Visitors.

“If U.Va. will not release the complete, unredacted documents, then an investigating body with subpoena power must compel them to do so,” Thomas said.

Thomas brought public attention to the issue of favoritism in admissions when he passed along documents he obtained though a Freedom of Information Act to the Washington Post. The heavily redacted documents showed that the UVa department of university advancement maintained a “watch list” of applicants of interest to potential donors, and lobbied the president’s office on their behalf. The documents did not indicate whether the president’s office passed along the requests for preferential treatment or how the admissions office might have responded.

University spokesman Anthony de Bruyn said in an email to the Cavalier Daily that the university objects to Thomas’ allegations. “The University remains confident in the integrity of its rigorous admission process. There is no evidence to support this speculation.”

Thomas brushed off the university’s denials: “It is also imperative that U.Va., end this potentially illegal practice immediately and that President Sullivan issue an apology to the many deserving students in Virginia who have been denied admission under her watch because their parents could not or did not contribute money to the University.”

Bacon’s bottom line: Given the evidence I’ve seen, it seems clear that the advancement office sought preferential consideration of rich-kid applicants. The question in my mind is whether the advancement office went through the motions of appealing to the president’s office so they could go back and tell their donors, “Hey, we tried,” or whether advancement officials truly expected the president’s office to intervene. The ultimate question, of course, is whether the admissions office ever caved in to a special request.

When I was publisher of Virginia Business magazine, the sales guys frequently brought me special requests from advertisers asking for preferential editorial treatment. I’d say, “No,” and the sales guys would go back to their clients and say, “We gave it a shot.” Sometimes we’d lose an advertiser, but sometimes the client felt grateful that the sales guys made an effort on their behalf.

That’s the innocent explanation of what’s happening at UVa.

Denials from the university administration are to be expected, however, and no serious journalist would accept its word on the matter without vetting it thoroughly. After all, UVa would be the exception if it didn’t play favorites. On the other hand, while giving preferential treatment to rich kids might be bad optics, it’s not clear from the Cavalier Daily article upon what grounds the practice would be illegal, even if proven to be true. I would be astonished if the U.S. Attorney picked up the case.

A Liberal Arts College Is a Terrible Thing to Waste

Virginia Wesleyan College is expanding. To what purpose? That's unclear.

Virginia Wesleyan College is expanding. To what purpose? That’s unclear.

Norfolk’s Virginia Wesleyan College will become Virginia Wesleyan University later this year, reports the Virginian-Pilot. In the face of stagnant college enrollments nationally, the small, private liberal-arts institution is boldly expanding, adding two new graduate programs, a new online division and an honors college program.

What is driving this change? The Pilot has little to say beyond this quote from President Scott Miller: “It is our desire to grow the institution for one, and to be more of a local institution with a national reputation.”

“We are sleepy no more,” Miller told WAVY-TV. “It comes down to complexity of the institution, the mission and purpose and we have become a comprehensive institution in recent years.”

The college website has little else to offer by way of explanation. Look at the strategic plan, “Vision 2020: Pathway to Prominence,” and you’ll read a lot of airy rhetoric about “providing a transformational experience for students” and “preparing students for a meaningful life and career.” The plan illuminates such lofty goals as experiential learning, innovative teaching, student engagement, community connections and an inspiring sense of place.

That’s all very fine, but what’s the connection with new degree programs and online learning? And how does the rhetoric square with Miller’s desire to change Virginia Wesleyan from a “sleepy” local institution to one with a “national reputation” — in effect to bolster its prestige.

A small college with a $60 million annual budget and $53 million endowment might have the resources to create enriching, transformational experiences for students or to create ambitious new programs and expand enrollment by 300 to 1,700, but does it have both? How does the addition of new programs serve the need of students? Has the university identified un-met needs in the educational marketplace, or is the expansion a ploy to upgrade its rankings? (At present, Virginia Wesleyan doesn’t even warrant a score in the U.S. News & World-Report best colleges ranking.)

Virginia Wesleyan is a private institution, so it is under no obligation to explain its actions to the public. Hopefully, though, the Board of Trustees, alumni, and philanthropists are asking tougher questions than the local media. Even a small liberal arts college is a terrible thing to waste.

UVa’s Invisible Research Subsidies

David S. Wilkes, dean of the UVa schools of medicine

The Trump administration’s proposed budget cuts to the National Institutes of Health will make it harder to find new cures — and harder to create new jobs, contends David S. Wilkes, dean of the University of Virginia’s School of Medicine. In 2016 UVa received $126 million in NIH funding, accounting for about 60% of its research funding.

NIH backing allowed UVa researchers to discover a link between the brain and immune system, potentially leading to treatments of neurological diseases such as autism and Alzheimer’s. An NIH-supported clinical trial is providing the final tests for a UVa-developed artificial pancreas that can help people with Type 1 diabetes. Meanwhile, scientific research at UVa is stimulating the rise of a job-creating innovation ecosystem in the Charlottesville area. Writing in the Richmond Times-Dispatch op-ed page, Wilkes says:

In 2016, the National Venture Capital Association ranked Charlottesville as the fastest-growing venture capital ecosystem in the U.S., and medical start-ups are [an] important part of that boom.

U.Va. Innovation, which helps bring U.Va. research discoveries to the marketplace, has identified more than 50 active companies advancing U.Va. discoveries. Many of those companies were founded to develop U.Va. medical research breakthroughs.

A study conducted by the research firm Tripp Umbach found that in fiscal year 2015, U.Va. School of Medicine’s research generated an economic impact to Virginia of $425.4 million. That economic impact would be greatly diminished if NIH funding were slashed.

Bacon’s bottom line: One can pick at these numbers, but let us accept them as valid for the moment. Wilkes is making the argument that what’s good for UVa research is good for Virginia economic development. Advocates of investing in life sciences are employing similar logic for life-science initiatives in Northern Virginia, Richmond, Norfolk and Roanoke.

UVa is playing a hyper-competitive industry sector, however, and it starts with big competitive disadvantages as it tries to build a biomedical ecosystem from scratch in a small metropolitan area. According to the 2016 Jones Lang Lasalle study, the Boston, San Francisco, Raleigh-Durham and San Diego metropolitan areas have the nation’s leading life-sciences clusters. None of the top 16 clusters are located in Virginia. The closest geographically is the “Maryland suburbs/D.C. metro.” It takes a lot more than a research university to play in this sandbox. A large labor pool is a necessity for recruiting top scientific and entrepreneurial talent, and UVa’s location in little Charlottesville presents a big handicap.

If UVa were investing only its endowment dollars in competing for NIH grants and other life-science research, that would be UVa’s business and nobody else’s. As long as the money for this initiative comes exclusively from wealthy alumni and philanthropists, and as long as Virginia taxpayers, tuition-paying families, and bill-paying patients of UVa’s medical system are held harmless, no one has grounds for complaint.

Unfortunately, UVa isn’t relying solely upon wealthy donors to fund its ambitions to build a world-class medical research center. UVa has developed mechanisms to extract wealth from others — patients, students, taxpayers — to underwrite its efforts. Because these mechanisms are so opaque, however, no one in Virginia sees them.

Wilkes does mention one of these funding sources, UVa’s controversial, $2.1 billion Strategic Investment Fund, in a positive light. The fund was cobbled together from various pots of money which were generating minimal investment returns. By combining these pools of money and handing them over to the University of Virginia Investment Management Company, the university hopes to generate an estimated $100 million a year in investment revenue. The Board of Visitors has approved using most of this money for institutional advancement, including R&D. But that is a choice. Alternatives include using the money to reduce tuition, bolster financial aid, or build non-research programs. Accordingly, students and parents who pay tuition, and the Commonwealth of Virginia, which pays millions of dollars in state support, have a direct interest in how Strategic Investment Fund proceeds are allocated.

According to the National Science Foundation, a third of UVa’s R&D expenditures are internally generated (classified as “institution funds” in the table to the left). Institution funds amounted to $74.8 million for life sciences and $122.6 million for all R&D in 2015 — before the Strategic Investment Fund existed.

I could not find a definition of “institution funds” on the NSF website, but I expect that it includes monies flowing from one or all of the following: (1) the university’s endowment, which is funded by philanthropy; (2) discretionary academic monies, which are funded through tuition and state support; and/or (3) surplus revenues (profits) from the UVa Medical Center, which is derived from patient revenues. To the extent that UVa research is funded by tuition, tax dollars, and patient revenues to cover buildings, faculty, grad students administrative overheard, and the like, it is fair to say that students, taxpayers, and patients are subsidizing research. The size of that subsidy remains a mystery. I don’t believe UVa (or any other Virginia public university) publishes such a number. It may not even calculate a number.

While R&D-generated economic development might be a good thing for Charlottesville and Virginia from the perspective of creating high-paying research and technology jobs, much of the funding ultimately comes from populations who have no idea what they’re subsidizing. Students are paying higher tuition (and accumulating more debt) and patients are paying more for medical services. The system is so opaque, the accounting so arcane, that no one sees or understands these wealth transfers. Perhaps the economic development is worth the cost of higher tuition and patient fees, but who can say unless we have an open and honest conversation?