Fine Print, Restrictive Grants, and Academic Freedom

The limits to “free” in free-market foundation donations at Florida State University.
By Kent S. Miller and Ray Bellamy

When the representatives of the Charles G. Koch Charitable Foundation came to Tallahassee in 2007 with checkbook in hand, they had every reason to expect a warm reception from Florida State University. Florida, along with much of the nation, was busy transferring money from higher education to prisons, and FSU was hurting.

T. K. Wetherell, FSU’s president at the time, had this to say about the Koch Foundation’s generous proposed donation to the economics department: “In these difficult economic times, it is more important than ever that public universities find ways to partner with the private sector to develop the sorts of programs that our society will need in coming decades.”

Then, as now, the governor’s office, the legislature, and the judicial system in Florida were dominated by strong conservatives who held much in common ideologically with the Koch brothers, longtime libertarians whose fortunes place them among the richest people in America. Moreover, one-fifth of the faculty in FSU’s economics department already identified themselves as free-market, antiregulation economists; several professors had strong national reputations for work in this area. The chair of the department, Bruce Benson, was quite open with the St. Petersburg Times about his perspective: “The Kochs find, as I do, that a lot of regulation is actually detrimental and they’re convinced markets work relatively well when left alone. . . . I agree with what they believe, whether they give us money or not.”

There is nothing unique about the Koch brothers’ offer to Florida State. The Koch Foundation has been quietly influencing universities across the country for years; its own list of funded programs for 2011 includes 187 colleges and universities. But much can be learned from events as they have developed in Tallahassee.

The foundation proposed a donation of nearly $6.6 million, with a $1.5 million initial grant to hire staff and fund fellowships and new undergraduate programs. An agreement was reached, and the program got off the ground without much publicity in its first years. By spring 2011, however, some muttering about outside influence on academic matters could be heard on campus and in town. The two of us knew no one in the economics department, but because we have long-term ties with FSU, we decided to take a look at the donor grant agreement and memorandum of understanding between the Charles Koch Foundation, the FSU Foundation, and the FSU economics department.

The provisions called for the appointment of five professors as well as other staff members, the establishment of a Program for the Study of Political Economy and Free Enterprise and a Program for Excellence in Economic Education, and the development of educational programs for undergraduates. The money had strings attached: the major one was the appointment of an advisory board chosen by the Koch Foundation. The board would determine which faculty candidates would qualify to receive funding, review all publicly provided material submitted by applicants for the professorship positions, and review the work of the professors to make sure it complied with the “objectives and purposes” of the foundation. Several clauses made clear that the Koch Foundation could pick up the marbles and go home if dissatisfied.

Before publishing a coauthored op-ed in the Tallahassee Democrat in May 2011, we took our concerns to both the current FSU president, Eric Barron, and the dean of the College of Social Sciences and Public Policy, David Rasmussen. Barron, who hadn’t been president at the time the agreement was signed, said that he had reviewed the documents and didn’t see a problem. Rasmussen told us that the university had not hired anyone who would not have been hired otherwise, that the grant had facilitated the recruitment of two excellent assistant professors and high-quality graduate students, and that it had created new postdoctoral opportunities. He told us, as he subsequently told the St. Petersburg Times, that not taking the money would have been “irresponsible.”

On the face of it, the memorandum of understanding seemed to have the potential to do serious damage to academic freedom and faculty governance. When a reporter for the St. Petersburg Times, Kris Hundley, noticed our article and wrote a news piece, the story went viral, provoking a flood of dueling op-eds, editorials, petitions, and blog posts across the state and the nation. Some of the commentary was reasonably informed; much of it was not. The high visibility of the Koch brothers certainly helped give the story legs.

From the start, there was a misplaced emphasis in the media, with most of the attention going to the hiring of faculty. We thought the long-range damage would more likely come from the impact on the curriculum, with the Koch Foundation effectively having access to thousands of undergraduate students.
 Defenders of the grant tended to concentrate on a limited set of arguments: universities can’t function without outside help; all grants come with strings attached; donors have a right to say how their money is spent; conservative ideas don’t get a fair shake because of the number of liberal professors; no one complains about the influence of liberal funders; intellectual diversity is absent in state universities; the attack on the Kochs is politically driven.

We agree that outside funds are necessary and that donors have a right to specify in general the areas of focus for their gifts and to receive an accounting of how their money is spent—but nothing beyond that. All ideas should be welcomed at a university; the politics of the giver should not be a disqualifying factor. That is the essence of academic freedom. We would hope that any grant from any foundation that had the provisions and restrictions of this one would evoke an identical response from us.

The Faculty Senate Weighs In

As the controversy continued to expand into the summer, FSU’s president acted on a suggestion the two of us made at the outset in our editorial and asked the faculty senate to examine the issues surrounding the grant. He requested a quick response, presumably to get the problem behind him before he initiated a $1 billion fundraising drive.

A five-person committee, consisting of former presidents of the faculty senate and a former president of the university, went to work. They reviewed documents and conducted interviews with current and former members of the economics department, university administrators, and other interested people.

The committee’s first finding was that the appointment of faculty had been properly managed but that there were clauses in the agreement that could lead to undue outside influence in the appointment process:

  • The agreement expressed an inappropriate interest in the selection of the department chair, withholding money unless the current chair was given a raise and continued to serve until the program was implemented.
  • The terms of the agreement raised concerns about a new undergraduate program, including the selection of a program director to supervise activities and the creation of a new course with prescribed content.
  • The teaching of large gateway courses that would reach an estimated seven thousand students a year in sections containing up to five hundred students was ceded to a subset of the department.
  • The implementation of the project was characterized by conflicts of interest and a lack of transparency.

The report concluded with a number of specific recommendations, including ending donor-funded appointments unless modifications are made to the agreement; restructuring the advisory committee; prohibiting future donor agreements that include donor evaluations in the annual evaluation files of faculty; suspending approval of Economics 3131, Market Ethics, until the course’s relationship to the donor agreement is made clear to and the course is reapproved by the university curriculum committee; and reviewing the FSU Foundation’s policies concerning gifts that specify conditions about faculty appointments, faculty evaluation, and the curriculum.

Reactions to the senate report were mixed. Some FSU faculty who spoke to us believe that the committee punted on many of the tougher questions when it elected to focus only on safeguards for future donor grants. A much stronger review of the process might have altered subsequent events.

President Barron seemed pleased by the outcome, telling the media, “We acted with a high level of integrity and followed the normal course of events, in that the faculty picked the faculty they wanted to work with.” He went on to say the agreement “leaves open the possibility” that Koch could have more influence over hiring and course development than was intended.

The Koch Foundation’s director of higher education programs put a good face on the report: “We are pleased that this review of the facts by the faculty committee confirms what FSU administrators have said—that the foundation protected academic integrity and added significant value to FSU.”

As the 2011 fall semester got under way, the story moved out of the spotlight, and there was a return to business as usual. It seemed that many of the major players felt vindicated, and the grant was expected to continue with only cosmetic changes. A new course based on Koch objectives, Market Ethics: The Vices, Virtues, and Values of Capitalism, featuring the work of objectivist Ayn Rand as required by the memorandum of understanding, was to go back through the standard approval procedures. A university committee was charged with developing policies to control future grants. There was a little talk about the need for increased transparency.

At that point we decided to follow up on a faculty senate recommendation that multiple donor agreements involving more than one college at the university be reviewed.

The Demands of BB&T

In attempting to gain a foothold in universities, the Kochs often work in tandem with other groups that share their values. The foundation formed by John Allison, former CEO of the regional financial-services holding company BB&T, is a frequent collaborator with the Kochs, reaching out primarily to economics departments and schools of business. Learning that the BB&T Charitable Foundation had made a grant to FSU in 2008, we asked our university’s foundation for a copy of the agreement. We received a bare-bones, two-page document that announced a $3 million contribution to encourage a thorough discussion of the moral foundations of capitalism. The document contained a reference to an attached letter that detailed the specific conditions of the grant. We requested a copy of this letter and learned it contained the meat of the arrangement.

There was no ambiguity about how the money was to be spent:

  • The Department of Economics would create a new course, Morals and Ethics in Economic Systems, with Ayn Rand as required reading. The course would be offered by the College of Social Sciences to 108 students each term, and the size of the class would eventually increase to as many as five hundred students. The course was also to be offered online.
  • The Department of Finance would add additional readings and course content in free markets, selfinterest, and individualism to its current required coursework.
  • Every undergraduate student in the College of Business and all graduate students in finance and economics would receive a copy of Atlas Shrugged, and discussion groups would explore the book’s themes.
  • A distinguished speakers series would be created, with presentations focused on the “core values of the free-enterprise system” and the “moral and ethical foundations of capitalism.” The Ayn Rand Institute would be consulted for the list of the recommended speakers.
  • Two program professorships would be awarded, and they would play key roles in developing and promoting the free-enterprise curriculum in the classroom.
  • Because of the importance of the program, it would be initially codirected by the heads of the economics and finance departments.
  • The program would sponsor and support the Students in Free Enterprise club.

Could these provisions be considered intrusive? In exchange for his “gift,” the donor got to assign specific readings, select speakers brought to the campus and instruct them with regard to the focus of their lectures, shape the curriculum with new courses and specify the number of students in the courses, name the program’s directors, and initiate a student club. BB&T also received a disturbing amount of free online advertising through the web pages of FSU’s BB&T Center for Free Enterprise.

We do not know how thoroughly the college has obeyed Allison’s instructions. But if there is any concern about avoiding even the appearance of outside interference in the university, we are in trouble.

The university has never existed as an ivory tower, but the ideals of academic freedom, the search for truth, scientific integrity, open debate, and faculty control of the curriculum are worth defending. The university should be a place where the search for and transfer of knowledge are not shaped by outside money.

The BB&T Foundation and similar donors are right, however, that no one is forced to take their money. Agreement comes only with a willing seller and a willing buyer. Thus, when things go wrong, it is because the university has been complicit with the foundation. We hope that the appropriate bodies at FSU will be paying closer attention in the future.

Lessons from Florida State University

Many of the elements in this sad story are present in similar grants to hundreds of colleges and universities across the country. If FSU, or any other institution, is serious about setting up policies to “avoid anything like this happening in the future,” as President Barron said, certain background features need to be considered.

One problem is that most donor contracts are negotiated by administrators and are brought to the faculty late or not at all. The great majority of the faculty often have no knowledge of the existence of grants like the two discussed here.

Transparency is a stranger in such grant making. In the course of our research we learned that it is not unusual for important provisions not to be put on the record but made abundantly clear to the recipient. The grantor usually includes a provision that gives it the ability to discontinue funding if dissatisfied with a program.

We repeatedly heard from administrators that it is standard practice for gifts to come with strings attached. Aside from the question of whether the conditions should be there in the first place, the issue, of course, is how many strings there are and what kinds of stipulations they present. (The meaning of gift—something passed on without expectation of recompense—has been corrupted.)

The concept of academic freedom is relatively plastic. What the two of us see as intrusive actions are highly acceptable to some. The president of the university and the dean of the college apparently saw no problem with the Koch grant. If somebody wants to give some money to read a book, the dean was quoted as saying, why not? The chair of the economics department announced that he would be happy to teach the writings of Ayn Rand—although he apparently had not considered doing so until the money came along. But guidelines regarding academic freedom are quite specific, and we need to do a better job of educating ourselves about their significance. Otherwise, the university becomes just another corporation subject to the market.

Supporters of the Koch grant make an interesting assessment of students’ ability to think for themselves. They portray students as being brainwashed over the years by liberal professors, but when someone expresses concern about the heavy dosage of ideology that comes to undergraduates as a result of the BB&T grants, the response is, “What? You don’t think students have the ability to sort things out for themselves?”

The Koch brothers, BB&T, and their like-minded partners are not going away. They are organized, committed to their cause, focused on pushing their ideology through the educational system, in the game for the long run, and well funded.

Faculty members need to get involved in the grant-review process from the start by demanding more transparency and refusing to be compliant. The fact that most faculty members are now serving in contingent appointments increases the need to defend academic freedom.

In hard times such as these, when there is too much work and too little time, the faculty must resist the temptation to close the door to the office or lab and say, “It’s probably okay. Besides, I don’t have the time to read the fine print.”

Kent S. Miller is emeritus professor of psychology at Florida State University. His e-mail address is ksmiller@fsu.edu.

Ray Bellamy is an orthopedic surgeon in private practice at Tallahassee Orthopedic Clinic and director for surgery at the Tallahassee regional campus of the FSU College of Medicine. His e-mail address is ray_bellamy@ yahoo.com.

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