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Southern Hospitality, Tulane Style Diverting Taxpayer Money Into the Hands of Legislators and Judges
How Tulane's Scholarship Scheme Works
Instead of paying taxes to the state, Tulane is obligated by Act 43 of 1884 to place scholarship waivers into the hands of state legislators and the mayor of New Orleans who then select the awardees. The law's original purpose was to make a college education available to qualified citizens who could not afford the cost. However, revelations made possible by lawsuits to divulge the names of scholarship recipients showed that many judges and legislators and their relatives have been the beneficiaries of Tulane scholarship gifts. These same judges and legislators have gone on, respectively, to sit in cases in which Tulane was a party and to engage in legislative processes in which Tulane had an interest. Ethics and judicial propriety are among the casualties of this scheme insofar as the indebtedness created by the scholarship gifts has influenced court judgments in cases in which Tulane was a party. This relationship, illustrated schematically in the following figure, complements Tulane's sponsorship of trips for judges and appears to violate federal statutes.
Tulane's Scholarship Scheme, Based on 1996 Government Figures
Legislators want Tulane Scholarships
Louisiana legislators overwhelmingly support Tulane's scholarship scheme and, as indicated below, have vigorously opposed attempts at reform [1]. The reason is not difficult to understand. Handing out scholarships gives legislators power over the recipients and generates gratitude that may be returned in the form of campaign contributions and other types of political support. Many of Tulane's scholarships go to ordinary citizens which establishes popular acceptance and creates good press. However, this is merely a cover that may be viewed as the cost of funneling scholarships to select individuals who either now have or potentially will possess important influence over legal and political affairs affecting Tulane. This is proved by the large number of scholarships that have been given to judges and legislators and their relatives and to campaign supporters as uncovered by The Times-Picayune in 1995 [2,3]. At that time, the politically connected Reggie family had received 34 years worth of Tulane scholarships valued at $748,000 at 1999 tuition rates [3]. In Schwarz v. Tulane, the overt partisanship exhibited by the courts may have resulted from the fact that all four judges who heard the case were tainted by their involvement with Tulane either as adjunct professors, or because they or their relatives were recipients of Tulane scholarships, or as in one case, both.
Mayor, New Orleans (1970-1978)
October 25, 1995Tulane's Savings vs. Costs
The scholarships are given annually to each of the 144 Louisiana legislators and the mayor of New Orleans in exchange for tax breaks to the university. In 1999, the value of each scholarship was $22,000, totaling $3.2 million for the 145 awards [5]. In 1996, the Louisiana Tax Commission reported that Tulane University received more than $23.5 million in tax breaks [1] on tax-exempt property that the Bureau of Governmental Research determined to be worth $115 million [6]. In 1996, the total value of the Tulane scholarships, which was close to $2.9 million, represented only about 12% of the value of Tulane's tax savings. The benefit to Tulane is even greater when one realizes that, while the value of a 1996 scholarship to the recipient was about $20,000, the actual cost to Tulane was considerably less. The cost to Tulane of accommodating the extra students could be as little as $5,000 each, an estimate that admittedly is subject to actuarial correction. Nevertheless, the point remains that 145 students comprise only 1% of the total student population, and this cohort would not require the provision of new facilities or the hiring of new professors or administrators, merely the placement of additional chairs into existing classrooms and the incremental utilization of staff time and materials within existing teaching programs. Based on this assumption, the actual cost of the 1996 scholarship program to Tulane would be $0.73 million, or only about 3% of Tulane's 1996 tax savings. More Perks for Legislators
In 2002, Tulane made a contribution of between $10,000 and $25,000 to lawmakers and their families from Louisiana and other southern states to attend a conference, held this year in New Orleans, to "discuss policy issues" [7]. This generosity continues a policy of cultivating the goodwill of public officials who will be selecting judges at the state level and who will be considering legislation that may affect Tulane. Tulane's expenditures to maintain its political influence parallels its spending to influence the judiciary. In fiscal 2001, Tulane spent $592,943 for "[d]irect contact with legislators, their staffs, government officials, or a legislative body," and comparable sums were spent for lobbying in previous years [8]. In contrast, Emory University, a private university in Atlanta that is often cited in comparisons with Tulane, spent nothing in this category [8]. From Watchdogs to Lapdogs
According to information provided by the Bureau of Governmental Research (BGR), a public watchdog group, a March 1994 report prepared for the Louisiana Tax Commission had appraised the value of known Tulane-owned property not used for educational purposes as $23.5 million [9]. In 1997-98, Tulane was sued in State Court by the District Assessor over a claimed tax exemption for one of its vacant real-estate holdings [10]. A court friendly toward Tulane ruled the property to be exempt, and this ruling was upheld by Louisiana's 4th Circuit Court of Appeal [10]. Methods used by Tulane to insure friendly courts are discussed elsewhere on this Web site. In the case of Schwarz v. Tulane, all of the four State judges involved had material ties to Tulane that rendered their participation in the proceeding a violation of statutory law as well as a breach of the code of judicial conduct. What better way exists to influence the Bureau of Governmental Research than having a member on its board? Thus, in 2002, Tulane's senior vice president for external affairs, Yvette Jones, was installed as a member of BGR's board of directors [11]. Such participation by Tulane in the affairs of a watchdog group that has been critical of its scofflaw activities should help Tulane shield itself from closer public scrutiny, and perhaps even provide cover. Tax Break or Tax Shelter?
In 2004, the City of New Orleans provided public access to some of its real estate records, opening the door to information about commercial property made tax-exempt through Tulane ownership. Notable among Tulane's lesser-known holdings is part of the landmark Fairmont Hotel on Baronne Street [12]. This and other real estate revelations raises the question of whether Tulane insiders and well-connected investors have been able to use the university as a tax shelter. Bread Cast Upon the Waters
The goodwill created by Tulane's generosity to lawmakers is repaid many fold in the form of grants from the state to Tulane. In 2002, the Louisiana Board of Regents awarded Tulane $4 million for professors' salaries [13]. About 40% of those funds were public monies. The figures suggest that, since 1986, the state may have awarded Tulane about $75 million from public sources to help pay for professors' salaries. The Louisiana Board of Regents also awarded Tulane $3.4 million for a new Medical Center program that opened in 2002 [14] and another $1.3 million to help establish a Chair of Humanities and Ethics in Medicine [15]. In 2003, the state awarded "matching funds" for four professorships at Tulane [16] and followed this with an endowed chair and 10 additional professorships later that same year [17]. Such large subsidies to a private institution that is exempt from paying taxes on its real estate and commercial holdings is extraordinary. This use of public funds to benefit a private enterprise comes at a time when Louisiana's public schools are facing severe financial crisis, and teachers are still waiting for a meaningful pay raise as promised by Governor Foster years ago [18]. This situation exemplifies the ability of corrupting politics to influence the behavior of legislators to the detriment of the public they have sworn to serve. Will the Challenge Survive?
In 2002, representative Alexander Heaton of New Orleans introduced HB 7, a proposal that challenged Tulane's tax exemption [19]. The bill was assigned to the House Ways & Means Committee on April 29, 2002, where it apparently languished without public debate. In 2003, Louisiana lawmakers will once again debate whether to abolish the annual scholarship waivers they can award to students to attend Tulane University. The new proposal (HB 651) was introduced by representative Gary Smith of Norco, Louisiana, and will be voted on by taxpayers if it survives the legislative process [20]. In 2008, representative Jerome "Dee" Richard of Thibodaux introduced HB 272 [PDF] to free Tulane from the burden of providing tuition waivers to Louisiana citizens while keeping its tax exemption in place [21]. Although the bill purports to be an extension of ethics codes revisions undertaken by the new administration of Governor Bobby Jindal, its effect is to further enrich Tulane at the expense of Louisiana's public institutions of higher learning. It has been assigned to the House and Governmental Affairs Committee. The Question of Legality
One important question that legislators must consider is whether public support of Tulane is legal. The Attorney General's Office has stated unambiguously that it is illegal for public funds to be used for a private purpose. While Attorney General Opinion 03-0111 of March 17, 2003 was in reference to the Ogden Museum and UNO Foundation — both private institutions — the opinion and the law upon which it is based clearly applies to other private institutions, including Tulane University. "First, any expenditures of funds for the purpose of salaries to the private corporation known as Ogden Museum of Southern Art, Inc. or the UNO Foundation is prohibited. See Attorney General Opinion 93-164. It is the opinion of our office that public funds can only be used for ordinary operating expenses of maintaining the public building, not the salaries, benefits or other emoluments to employees of the non-profit corporation. The "Museum" is not a political subdivision of either the state or a part of LSU. It has no special authorization by statute to operate and is not a creature of local governmental authority. Therefore, any expenditures of public funds towards the salaries, benefits or other compensation of private employees are prohibited under Article VII, Section 14" . . . Moreover, "...what is prohibited directly cannot be accomplished indirectly."(Bold emphasis added)
Attorney General Opinion 03-0111
March 17, 2003, Page 13The Manifest Alternative
In the final analysis, only the reconstitution of Tulane University as a public university would relieve Louisiana of the burden it bears as a result of Tulane's private status. As a public institution, Tulane would: 1) no longer retain the legal right to discriminate, 2) be subject to governmental oversight of practices that could corrupt our judiciary and legislature, 3) restore the protections that are now denied to its faculty because of oppressive "right-to-work" laws, 4) raise the student population above the 15-17% of Louisiana residents it now enrolls, 5) limit plans for the development of resources abroad, 6) render moot the illegality of contributions from the state, and 7) return to the public fisc the public wealth it has incorporated into its endowment. The real challenge for Louisiana lawmakers is not to engage in yet another debate over the propriety of Tulane's legislative scholarship program, but rather to take Tulane by the horns and bring it to bay.
Legislative Resistance to Reform
Tulane scholarships survive
School will also keep property tax breaks
By ED ANDERSON
Capital bureau
(From: The Times-Picayune - May 30, 1996)
BATON ROUGE - Tulane University will keep its property tax breaks and members of the Legislature will continue to get a Tulane scholarship to award each year after the House killed a measure Wednesday designed to abolish both. House Bill 41 by Rep. David Vitter, R-Metairie, a proposed amendment to the Constitution, failed 44-57 in the House. The measure is dead for the session. Vitter said the change is needed to end the controversy that began with revelations that lawmakers had awarded the scholarships to themselves, their children and relatives of contributors. Although reforms have been made, Vitter said, the Legislature should not be getting the scholarships in exchange for tax breaks. "The potential for abuse still exists," he said. Vitter's bill would have phased out the Tulane scholarships, now worth about $20,000 a year, by the 1999-2000 academic year so those who are using the grants could finish their academic careers. The measure also would have stripped Tulane of the property tax breaks the Legislature approved in 1884, when the university started making the scholarships available. "This is the cleanest way to deal with the issue" by repealing both, Vitter said. He said that a recent Louisiana Tax Commission study showed that Tulane gets more than $23.5 million in property tax breaks around the state, far in excess of the $5 million limit the Constitution allows. Tulane officials contend they have strictly adhered to the $5 million limit and disagree with the tax study.
David Vitter
LA House of Representatives (1992-1999)
US House of Representatives (1999-2004)
US Senate (2005-2016)The charge against Vitter's measure was led by Rep. Jimmy Dimos, D-Monroe, who attended Tulane Law School on a scholarship. He said the bill was in response to misleading stories in the state media that tried to paint all lawmakers as abusers of the system. "I have helped 16 to 18 students out of my area who could not have gone to Tulane without this," Dimos said. He said the program is a tool for making Tulane a better school. Vitter said his proposal, which would have faced a vote of the people in the fall, would not do away with Tulane scholarships, only remove them from the tangle of the Legislature and tax breaks. "The question isn't whether there is going to be scholarships," Vitter said. "The question is whether we as taxpayers should pay for it."
A Tulanian View of the Scholarship Scandal
Legislative scholarship misuses revealed
Larry Connelley - Staff Writer
(From: The Tulane Hullabaloo - October 27, 1995)
and Dorothy Adams - News Editor
Misuse of the Tulane tuition waiver program by mayors and legislators has been publicly disclosed due to a two-year lawsuit by the Times-Picayune against Tulane after many legislators refused to release their scholarship lists. Tulane's loss of that suit has allowed 3,000 records to be made public.Former Mayor Sidney Barthelemy, whose actions brought the controversy to the public eye, made his award list public in 1993 after he awarded one such scholarship to his son.
After this, Tulane refused to release the records of those students who had received scholarships. According to Anne Yeoman, executive editor of University Publications, the university couldn't release the information because of the Buckley Amendment. "We can't release the information without the student's consent or a court order," she said. She also said that the university had "no opposition to the information being public."
A court order was provided when the Times-Picayune sued Tulane for the release of the information. According to Peter Kovacs, Times-Picayune New Orleans Metro Editor, the lawsuit was filed "because many legislators refused to disclose their scholarship information." He went on to say, "We take the position that [the records] are and ought to be public; Tulane takes the position that they will turn the records over to the legislators but they are restricted by the Buckley Amendment to make them public."
The Times-Picayune also reported that former Mayor Ernest Morial, 1978-1986, gave a scholarship to his daughter as well as the son and daughter of a top aide in his administration and the children of two judges. Former Mayor Moon Landrieu, 1970-1978, did not make his list public but said that he didn't award any to his children, although he did award a tuition waiver to his nephew Gary Landrieu.
The Times-Picayune also reported that US Senators John Breaux and J. Bennett Johnston and US Representatives Bob Livingston, Jimmy Hayes and Richard Baker are guilty of abusing their legislative scholarship privileges. Others who received the scholarships are Victoria Reggie Kennedy (the wife of Senator Edward Kennedy) and her five siblings. In all, the Reggie children totaled 27 years worth of scholarships. However, in 1993 the State Ethics Board ruled that legislators may not award tuition waivers to their own children or to the children of other legislators.
The year 1880 saw the beginnings of the mayoral scholarships when the Board of Administrators of the University of Louisiana, the predecessor to Tulane, provided five annual scholarships to "educate five boys of indigent parents" in exchange for the elimination of property taxes on the Mechanical Institute, which the board wanted to buy and did for $20,000.
In 1882, a new ordinance was drafted to give the mayor sole authority to award these scholarships. However, according to Tim Mines, an attorney in the General Counsel's office, Tulane no longer receives any benefits from the mayor's scholarship.
In 1884, Act Number 43 of the Louisiana Legislature established Tulane University and exempted all university property used for educational purposes from "state, parochial and municipal" taxes up to $5 million. The act goes on to read that as an "addition consideration," the Board agrees "to give continuously, in the academic department [later determined to be Tulane College], free tuition [now worth $19,471] to one student from each Senatorial and from each Representative district or Parish, to be nominated by its members in the General Assembly from among the bona fide citizens and residents of his district or parish, who shall comply with requirements for admissions established by said Board."
Mines went on to say "there are roughly 144 legislative scholarships" and that "Tulane does receive "an ongoing benefit," but that the amount of the benefit is "difficult to calculate." He also said that "it is clear that [the benefit] does not equal the cost of the legislative scholarship program."
According to Inside Tulane, in 1986 Eamon Kelly, president of the university, sent a letter to then Mayor Sidney Barthelemy stating that the scholarship program's goals and constituency had become unclear. He set forth new guidelines in the letter, including the requirement for recipients to be enrolled in a full-time degree program in any undergraduate division except University College and that instead of just the mayor picking applicants, a committee composed of Tulane representatives, the mayor and the Orleans parish superintendent of education examine candidates. Barthelemy responded by writing that he would not be "comfortable with the prospect of altering the integrity of the mayor's role in this program."
Also in that year the Board of Administrators approved new guidelines requiring recipients to rank in the top 25 percent of their graduating class and have a minimum of 1130 on the SAT or 26 on the ACT. In 1987 Representative Emile Bruneau filed a lawsuit on behalf of a student denied a scholarship because that student did not meet Tulane's new criteria. An injunction was given for the student to attend the university.
According to the Guidelines for Tulane University Legislative Scholarships, published Aug. 21, 1995, to be eligible for consideration a student must: be a graduate of or a graduating senior of a high school located in Louisiana, be a resident of Louisiana and be legally domiciled in Louisiana. Currently there are two ways to receive a legislative scholarship, either through a legislator's nomination or open competition.
To obtain a scholarship through open competition, a student must be admitted to Tulane in a full-time degree program, be a bona fide resident of Louisiana, demonstrate "meritorious academic performance as determined by Tulane," demonstrate financial need, participate in extracurricular activities or community service, exhibit leadership and obtain letters of recommendation.
Stated Yeoman, "the new guidelines and the open competition have gone a long way to correcting the problem that have occurred with the scholarships in the past."
Some have voiced opposition to the legislative scholarships. Said Associated Student Body President Jackie Holmes, "I have several objections to the legislative scholarships in their current form. Because Tulane has a serious budgetary situation drastic cuts are needed and are being made in both merit and need-based financial aid, yet we are obligated to allocate these scholarships to students whose qualifications we have no say over."
Yeoman said that the scholarships benefit the university because they bring in students from Louisiana. "The university would welcome Louisiana scholarships being used to ensure that Louisiana students who are academically qualified and financially needy... have an opportunity to take advantage of the education we offer," she stated. She also said that Louisiana students are an important part of our "demographics" and the scholarships could be a "win-win" situation.
A Classmate's View of the Scholarship Scandal
Patrician Scholarships
(From: The Times-Picayune [Letter] - October 21, 1995)
NEW ORLEANS - The listing of Tulane legislative scholarship recipients in The Times-Picayune made for fascinating reading. I was startled by the number of recipients I knew from my years at Tulane.
But mainly the listing showed many legislators haven't a clue about the noble intent of these scholarships — affording an opportunity for bright students from humbler backgrounds to have a Tulane education.
Two names I recognized were from the millionaire patrician families of their respective parts of Louisiana. Both drove new Mercedes sports cars while Tulane undergraduates, no less.
I guess awarding these scholarships allowed the legislators to hobnob with the local gentry or repay political support. But awarding scholarships to the wealthy indicates an appalling lack of decency on the part of both the legislators and the families who received them.
Bill Hemeter M.D.
§ 107 for a non-profit educational purpose.References
Ed Anderson, "Tulane scholarships survive; School will also keep property tax breaks," The Times-Picayune, New Orleans, May 30, 1996, p. A-2.
Tyler Bridges, "Green Waived; The Legislative Scholarship Scandal at Tulane," The Times-Picayune, New Orleans, July 23, 1995, p. A-1.
Tyler Bridges, "Records reveal more perks to the powerful; The Tulane Scholarship Scandal Part II," The Times-Picayune, New Orleans, October 15, 1995, p. A-1.
Moon Landrieu, "Former Mayor Landrieu on Tulane Scholarships, The Times-Picayune, New Orleans, October 25, 1995, p. B-6.
Littice Bacon-Blood, "Lawmaker targets Tulane's handling of TOPS program," The Times-Picayune, New Orleans, April 20, 1999, p. A-3.
Bruce Eggler, "N.O. trying to make nonprofits pay taxes; Strategy could yield millions in revenue," The Times-Picayune, New Orleans, October 12, 1999, p. B-1.
Ed Anderson, "Southern state lawmakers hold conference in N.O.; 16 States' legislators discuss policy issues," The Times-Picayune, New Orleans, August 3, 2002, p. A-2.
Administrators of the Tulane Educational Fund, IRS Form 990 for 2001 (also, 1997-2000),
Schedule A ,Part VI-B ,line g . (Compare with: Emory University, IRS Form 990 for 2001 (also, 1997-2000),Schedule A , PartVI-B ,line g .)"Property Taxes In New Orleans: Who Pays? Who Doesn't? and Why?" Bureau of Governmental Research, October, 1996.
"Property Tax Exemption and Assessment Administration in Orleans Parish," Bureau of Governmental Research, December, 1999.
"Bureau elects officers; Nonprofit group also picks 8 directors," The Times-Picayune, New Orleans, November 27, 2002, p. B-8.
"City of New Orleans Property Database," http://hi.mayorofno.com/servlet/user/PropertySearch (accessed April 10, 2004).
Coleman Warner, "Program finances professorships; 84 Positions created at Louisiana colleges," The Times-Picayune, New Orleans, August 27, 2002, p. A-2.
Coleman Warner, "Higher Education Notes; Tulane center gets grant," The Times-Picayune, New Orleans, November 16, 2002, p. B-6.
"Applause; New chair invested," The Times-Picayune, New Orleans, January 30, 2003, p. 6A1.
"Applause; Endowment presented," The Times-Picayune, New Orleans, June 19, 2003, p. 4A1.
Coleman Warner, "La. colleges add to endowed positions; $20 million will help recruit, keep scholars," The Times-Picayune, New Orleans, Aug. 21, 2003, p. B-3.
"Teacher pay raise," posted Monday, June 10, 2002 at 6:50 a.m., KATC TV3 Online, Lafayette, LA, (http://www.katc.com). See also: Ed Anderson, "Foster likely to freeze state agency spending; Revenue shortfall over $100 million," The Times-Picayune, August 15, 2002, p. A-2.
Ed. Anderson, "Tulane tax exemption targeted; Lawmaker files bill to end some breaks," The Times-Picayune, New Orleans, February 28, 2002, p. A-2.
Ed Anderson, "Lawmakers propose flood of constitutional changes; Number reaches a four-year high," The Times-Picayune, New Orleans, March 22, 2003, p. A-3.
Ed Anderson, "Bill would scrap Tulane scholarships; Lawmaker says school should award money," The Times-Picayune, New Orleans, March 20, 2008,
National, p. 3 . See also: Jeremy Alford, "Local lawmaker takes aim at legislative perk," Houma Today, March 21, 2008, http://www.houmatoday.com/article/20080321/NEWS/99877116/1026, accessed 03/22/08.
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