EDITORIAL: Paradise Papers show U. contradictions
Offshore investments are inconsistent to Rutgers’ public image
Last week, the leaked "Paradise Papers" revealed that Rutgers, along with many other universities, uses offshore firms to invest its endowment money. By utilizing these firms, namely Appleby, a law firm specializing in offshore accounts like private equity and hedge funds, the University avoids paying taxes on its profit, leaving more money in its pocket that can presumably allow tuition to remain low while continuing to follow the 2030 Master Plan to improve Rutgers. To be clear, investing large sums of money in offshore accounts like this is not illegal.
The "Paradise Papers" seem to reveal a contradiction between how the University intends to publicly present itself and how it behaves privately. University officials have openly stated that the 2030 Plan is written on an environmentally conscious foundation, aiming to use green technologies and promote alternative transportation solutions like biking and walking. Additionally, after President Donald J. Trump withdrew from the Paris climate accord, Rutgers was one of many universities to sign the "We Are Still In" pledge, supporting the implementation of the climate agreement on college campuses. Interestingly enough, the papers show that Rutgers’ endowment money is being funneled into EnCap Energy Fund IX-C, which, according to the EnCap Investments website, “has been the leading provider of venture capital to the independent sector of the U.S. oil and gas industry.” Presumably, some of the profit from these investments in fossil fuels are returning to the University and being used to carry out what is said to be an environmentally friendly 2030 Plan.
It is reasonable to assume that somewhat of a veil exists between the University and Appleby and that the administration does not have a say in where the endowment money is invested. But with that being said, the fact that the firm clearly invests in things like oil is something the University had to have known prior to initiating business with them. It is clear that the University understands that investing money in offshore accounts raises questions about their ethical standards, otherwise they would have been open about it from the start.
From a utilitarian viewpoint, if the endowment money was invested domestically, it would be taxed and would not be used to the extent it is now to benefit the University. If they had been open about it, they obviously would have experienced severe scrutiny. Rutgers' endowment assets totaled $1.2 billion last June, which represents a 12.4 percent gain on long-term investments over the past year, a portion of which can be attributed to these investment tactics. Additionally, hundreds of the country’s top universities, including Princeton and Stanford, were found to be investing with Appleby. Maybe if the money we save by avoiding taxation gives us the same advantages as the schools we strive to be on par with, the ends justify the means.
On the other hand, tax loopholes like offshore accounts cost federal taxpayers $19.6 billion a year, so it is possible that while schools like Rutgers that invest like this are seemingly working to keep tuition down, they are actually just increasing the tax burden on students and their parents.
In the end, the prioritization of money may be a necessary precursor to the prioritization of education. The reality of the situation is that money is necessary for the advancement of the University, and considering the significant decrease in state funding, this is money we can really use. Maybe it is on the government to formulate a policy that prevents taxation on profits made through the investment of endowments, so as to encourage schools to bring their money back to the states. It comes down to an argument between what some view as ethically unsound and what others view as fiscally pragmatic. We are continually reminded of Rutgers' realist standards when it comes to their attempts to improve the University, but at some point the question becomes — when is it time to sacrifice profit to promote real change?
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