The Scoop
The next phase of the Trump administration’s pressure campaign on elite universities will focus on their financial investments, particularly in areas disfavored by the White House like clean energy and China, people familiar with the plans said.
The White House’s war on top universities, which it accuses of antisemitism and fostering progressive ideology, began two weeks ago with frozen federal funding, and escalated Wednesday to a threat to revoke the nonprofit status of Harvard University and others, a move first reported by CNN. The new acting director of the IRS has been preparing internally to challenge the tax-exempt status enjoyed by universities, even those with huge endowments — Harvard’s is $53 billion, Princeton’s is $34 billion — that operate more like hedge funds than charities.
A third phase would put university endowments themselves under the microscope. White House officials plan to examine investments in China and ESG-related stances inside these investment shops, the people said. Congress is also examining ways to tax endowment profits, some of the people said.
“It is past time for American universities to stop supporting foreign adversaries with their investment decisions, much as they should stop granting university access to supporters of terrorism,” the White House wrote in a February memo on “America-First Investments.” The memo presaged the coming crackdown, which could extend to include public universities and pensions, some of the people said.
An administration official said that any reviews of a university’s tax-exempt status by the IRS are independent and weren’t personally directed by the president.
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Elite universities’ endowments are huge and notoriously secretive. Research from Future Union, a bipartisan think tank with a hawkish national-security bent, has tracked hundreds of millions of dollars from university endowments, including Princeton’s and Stanford’s, into Chinese funds or US funds that invest in China, but the actual number is likely far larger, said Future Union’s executive director, Andrew King.
Public universities in California and Texas are heavily invested in such funds and “we would project such investment to be either on par or greater” at private universities, given their bigger emphasis on private and international investments, he said.
“In focusing solely on returns, they have turned a blind eye to the national security ramifications,” he said.
Liz’s view
University endowments may end up being as much of a liability as the DEI programs and Middle Eastern Studies departments they help fund. At $53 billion, Harvard’s endowment would be a whale on Wall Street and free to invest in whatever it wants. Ditto for Yale ($42 billion) and Princeton ($34 billion).
But their reliance on two pillars of government support — a tax-exempt status and billions of dollars in federal funding — puts those investments under Washington’s microscope.
Universities are big businesses. Penn has $15.8 billion in annual revenue, profit margins of 4%, a $22 billion investment portfolio, and a hospital system whose identified growth areas, outpatient surgery and infusion therapies, would be indistinguishable from any for-profit health care company.
As I wrote in late 2023: “You could argue about what trading multiple it might get in the market — half its revenue comes from health care, and 10% from what investors might call a four-year subscription to classes and rent — but it’s a serious commercial enterprise.”
Back then, universities were caving to their donors. Now the pressure is from the White House, and universities may regret having relied so much on federal favor.
Room for Disagreement
- Endowments may be less of a soft spot than reliance on federal funding, which “has allowed our research universities to be able to conduct research... that we could not conduct even at a place like Princeton with its endowment resources,” Princeton President Chris Eisgruber told The New York Times last week.