Declines in state appropriations and negative financial trends have made American universities rely more on alumni and wealthy benefactors for cash donations. So as the University of Louisville tries to rebound from three straight years of financial deficits and slumping net worth, a proposed $6 million infusion from the Charles Koch Foundation and Papa John’s International CEO John Schnatter would appear to be a very welcome gift.
A university spokesman wouldn’t talk about the gift, but the Kentucky Center for Investigative Reporting has learned that Koch would give $1.5 million, Schnatter $4.5 million. The three parties are said to be negotiating, with Schnatter deferring to Koch on contract terms. Neither the Koch Foundation nor Schnatter would comment on the gift.
But the university’s own record-keepers, in turning down a request for copies of draft contracts, e-mails and other documents, confirmed that a deal is in the works.
“These documents contain preliminary recommendations and opinions,” wrote senior compliance officer Sherri Pawson. “None were intended as the final action in the matter.”
Said Kenyatta Martin, records custodian for the University of Louisville Foundation, which serves as a receptacle for charitable contributions: “At this point, I know it’s still in draft form because there are aspects of the contract that haven’t been finalized.”
Already, though, the proposed gift — and its accompanying conditions — from one of the controversial Koch brothers has rattled some faculty members and university supporters who have knowledge of it. Billionaire businessmen from Kansas, the Kochs give extensively to charity but are perhaps best known as mega-backers of conservative causes and politicians who favor less government regulation.
According to three sources familiar with the proposed contract, the $6 million would go not to the university endowment but to the College of Business over five years. It calls for the creation of a “center for free enterprise” to be led by U of L economics professor Stephan Gohmann, who would have authority to approve anyone hired with the grant money.
One of those sources, a U of L professor who has read the contract, said it would violate “all sorts of things” precious to the university. “The university sent back a revised contract, and I know some of the things the university didn’t like were changed,” said the professor, who asked not to be identified because he is not authorized to discuss the contract.
As the University of Louisville leadership ponders the deal with Koch and Schnatter, large gifts from Koch to other universities have come under sharp criticism. At George Mason University in Virginia, students are concerned that $23 million in gifts from the Charles Koch Foundation has made the college a “subsidiary of Koch Industries.” Students and former professors at Florida State University complain about Koch control over business faculty hiring and instruction. FSU has received $2.8 million from Koch.
The FSU-Koch relationship could factor into the decision process at the University of Louisville. Consider what former FSU Economics Department Chairman Bruce Benson wrote to his colleagues in 2007 on the eve of the Koch gift:
“The Koch Foundation agenda is to expose students to free-market ideas and to provide opportunities for students who want to study with faculty who share Koch’s appreciation for markets and distrust of government. The proposal is, therefore, not to just give us money to hire anyone we want and fund any graduate student that we choose,” Benson wrote.
Koch’s gift to FSU led to the creation of the Study of Political Economy and Free Enterprise (SPEFE) and the Program for Excellence in Economic Education (EEE), both in a free-markets enclave of the College of Social Sciences. It pays the salaries of two FSU economics professors.
Not just any professors, but advocates of “free markets” principles. Those hired must support the “objectives and purposes” of advancing “the understanding and practice of those free voluntary processes and principles that promote social progress, human well-being, individual freedom, opportunity and prosperity based on the rule of law, constitutional government, private property and the laws, regulations, organizations, institutions and social norms upon which they rely.”
The FSU-Koch contract states that the professors will be “recruited and hired in a manner consistent with the FSU Faculty Handbook.” But once the dean of the College of Social Sciences and Public Policy makes an offer to a candidate, it then goes to the Charles Koch Foundation to decide whether or not it will “fund the position.”
In a May 2014 online question-and-answer session, FSU denied that Koch plays a role in Economics Department hiring. FSU said two professors have been hired under the program. One left, but was replaced by a new hire paid for with Koch money.
The Koch deal bolstered the standing of free-markets philosophy at Florida State. Beyond the programs and like-minded professors, free-markets content has gained greater prominence in economics instruction. Students in an Introduction to Economics class this summer, according to its syllabus, had to watch 15 videos of Fox News journalist and government regulation critic John Stossel, who makes appearances paid for by the Koch brothers-backed Americans for Prosperity. Stossel’s latest book is titled “No They Can’t: Why Government Fails — But Individuals Succeed.”
What’s more, FSU’s economics program serves as a gateway to the websites of free-market advocacy groups. On the FSU web page hosting the SPEFE and EEE programs is a link to FreeTheWorld.com, “website of the Economic Freedom Network” run by the libertarian Fraser Institute in Vancouver, Canada. And in the syllabus of this summer’s Economics 101 class is a link to LearnLiberty.org, a “free society” template of the Institute for Humane Studies — at George Mason University.
“The influence throughout the department is pervasive, it’s intense and it’s shaping the vast majority of students’ views on politics and economics,” Jerry Funt, a senior economics major at FSU, said in an e-mail interview. “It’s almost as if, to a large extent, critical inquiry has gone out the window in exchange for sponge-like absorption of information.” Funt is a member of “Progress Coalition,” a student group against corporate influence in education.
Another FSU student, math doctoral candidate and Progress Coalition member Ralph Wilson, noted that the contract with FSU gives Koch the right to pull its funding at any time.
“What this means is that the professors and students funded by CKF are not free to investigate as they should be, as they are only paid to produce specific research outcomes that favor free-market, deregulatory, anti-government findings,” Wilson wrote by e-mail. “This is constrained inquiry and is supposed to be protected against.”
FSU spokeswoman Jill Elish said the Charles Koch Foundation is just one of many donors with a wide range of views and values.
“Donor gifts, regardless of their size, have always been accepted with the clear understanding that the gift will not compromise academic integrity or infringe on the academic freedom of our faculty,” she said.
Charles Koch Foundation spokeswoman Trice Jacobson said, “Our grants to universities are made in line with university policies regarding hiring and curriculum. We support the academic freedom of the faculty to make those decisions.”
Nevertheless, concerns have begun to surface at the University of Louisville — among students, faculty and community advisers.
From a member of the U of L advisory Board of Overseers, who asked not to be identified: “Everybody’s gossiping about it. The issue is academic freedom and the control by specific philosophies. What are the ties to the money?”
From the professor who has read the proposed contract: “There are certainly some on the faculty who would embrace (the proposed agreement with Koch and Schnatter). But if you had everything out on the table, you probably couldn’t get a majority vote out of the Faculty Senate.”
From a student, senior political science and philosophy major Rebecca Peek: “Gifts should be provided to forward the best interest of students and not to promote a particular political agenda,” she said by e-mail. “It seems that it would be impossible for a donation of this size from donors that have historically attempted to influence policy through monetary contributions to not influence curriculum.”
Others at U of L would welcome the Koch-Schnatter gift.
“I would not have a problem with the university taking donations from the Koch brothers any more than I would have with them taking money from George Soros or someone with a left-leaning ideological bent,” said U of L history major Sam Whittaker by e-mail.
“Obviously we don’t want U of L to force political or other beliefs on its students and we desire to openly and honestly engage with all sorts of ideas freely,” Whittaker added. “However, I do not think special centers for the study of capitalism or endowed chairs in economic freedom create an environment which is hostile to opposing thought or open dialogue.”
The Koch-Schnatter gift would not be the first to expand free-markets instruction at the University of Louisville. Six years ago, BB&T Bank gave the university $1 million to bankroll a professorship in free enterprise and a new course, then called The Moral Foundations of Capitalism, drawing in part from the philosophy of novelist Ayn Rand. The course is now called Capitalism and Economic Freedom. Students in the class receive a free copy of Rand’s book “Atlas Shrugged.”
The BB&T Distinguished Professor in Free Enterprise is longtime U of L economics teacher Stephan Gohmann. Two sources said he would oversee the program created with the Koch and Schnatter money. Gohmann’s roles would include having pre-approval authority over new hires and serving as director of what could be named the Schnatter Center for Free Enterprise.
Gohmann declined to comment.
Whittaker, who is minoring in economics, took the Capitalism and Economic Freedom class, taught by Gohmann. He said lectures covered the spectrum of economic theory.
“We were exposed to ideas such as those that the Koch brothers promote, such as Ayn Rand, along with alternatives such as Marx, and we had open and honest discussion,” Whittaker said. “I did not feel beliefs were forced on me there. In sum, a few million from the Koch brothers to create a center or new free enterprise class would not be able to change the ideological bent or force political beliefs down the throat of 20,000 students or a university with a budget and endowment of hundreds of millions of dollars.”
The proposed $6 million gift would come at an opportune time for the university’s economics department. In the 2013-14 school year, 212 students majored in economics, more than double the 103 in 2009-10.
“The department is in the process of hiring a new full-time faculty member but is struggling to get enough funding, faculty and class offerings to keep pace with student demand,” said university spokesman Mark Hebert.
Hebert said the department focuses on applied microeconomics, which includes statistics and econometrics instruction needed for health, industrial organization, labor and environmental studies. “The department would like to expand all of these areas if funding and faculty were to become available,” he said.
The Kentucky Center for Investigative Reporting asked for U of L President James Ramsey’s thoughts about the Koch gift. Hebert put the kibosh on that by saying the university doesn’t discuss potential gifts.
Both the Charles Koch Foundation and Schnatter have given money to the University of Louisville. According to its tax returns, the Charles Koch Foundation gave $45,055 to U of L between 2010 and 2012. The larger gift — $31,055 in 2010 — went toward “educational programs.”
Schnatter, an Anchorage resident and alumnus of Ball State University, is a longtime U of L supporter. He is best known for his company’s $5 million gift toward the construction — and naming rights — of Papa John’s Cardinal Stadium, but he, his company and his wife Annette have given a total of $20 million to help pay for athletic facilities.
The connection between Schnatter and the Koch brothers is less known. Mother Jones magazine in February identified him as a donor to the Koch political machine. Public records show that Schnatter is a regular donor to the Republican party and its candidates, including Sen. Mitch McConnell. Tax returns for his John H. Schnatter Family Foundation show $564,625 in donations to numerous charities, but nothing to U of L.
If the $6 million gift contract is approved and made available for review, it will continue the trend away from public funding of higher education and toward financing by private parties.
“If the people of Kentucky are worried about corporate influence distorting education, they must insist that the state reinvest in public higher education,” said Avery Kolers, a U of L philosophy professor. “For 15 years now, the state has been cutting budgets, leaving universities scrambling for any dollar they can find.
“The fact is, education is the only real path to long-term improvements in the quality of life of all Kentuckians,” he said. “Kentuckians who care about this need to demand a first-rate public higher education system and must insist that the state find a way to provide the public funding that makes it possible.”
Clarification: The story has been updated to note that two FSU students quoted in the article are members of “Progress Coalition,” a student group against corporate influence in education.
Disclosure: In October 2014, the University of Louisville, which for years has donated to Louisville Public Media, earmarked $10,000 to KyCIR as part of a larger LPM donation. Our newsroom has previously reported on the institution and will continue to report on it.