WCU seals the deal on $1.8 million Koch gift

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WCU seals the deal on $1.8 million Koch gift

A year in the making, Western Carolina University has sealed a deal with the Charles Koch Foundation for a $1.8 million gift to set up an economic research center on campus with a focus on economic development and free market ideas.

The controversial gift became a lightning rod for WCU when the Center for the Study of Free Enterprise was floated last fall. Heated discussion ensued on campus and beyond about whether the money from billionaire activist Charles Koch was tainted. Namely, would the center churn out libertarian economic ideology — a brand of unfettered free-market capitalism Koch dogmatically supports?

The gift agreement signed last week takes a stab at ensuring that won’t happen, thanks in part to a five-member faculty task force that has been vetting the terms since August. The committee never had direct contact with the Koch Foundation, but WCU’s Assistant Attorney Shea Browning took on the task of massaging the committee’s philosophical goals into tangible language for the agreement.

“I think Shea Browning did a great job listening to us, and really listened to what our deliberations were,” said Dr. Bill Yang, chair of the faculty senate and an engineering professor.

The committee’s top concern was ensuring the Koch Foundation wouldn’t have undue influence on curriculum or academic freedom.

“That was kind of the starting point. The gift agreement categorically excludes that,” Yang said, citing the opening clause of the contract between WCU and the Koch Foundation.

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A gift agreement — spelling out the terms of how the donor wants their money spent — is common for any university donation. What those terms look like, and how much academic control the donor expects in exchange for the gift, can vary widely.

“There are always strings attached when you get gifts from outside parties, but we want to minimize any strings on how they want their money to be spent and make sure there were not requirements on our faculty or students we weren’t aware of,” said Dr. John Marvel, a professor of management in the College of Business.

But it was impossible to make the gift agreement specific enough to stipulate everything faculty was concerned about, Yang said.

“We can’t look at every scenario we don’t want and insert it into the agreement. We were told that is not the practice,” Yang said. “So what we can do is to put down these very categorical constraints and prohibitions in there.”

Minutes of committee meetings reflect a recurring theme of how to ensure a broad range of viewpoints are represented by the center — rather than one brand of economic philosophy.

“There is a lot implicit here that may pose a danger to academic freedom as well as hidden or open-ended curricular implications,” according to minutes from meetings of the gift vetting committee.

For example, what are the criteria for picking student research Koch money will underwrite?

“Are they handpicked? Do they have to take certain classes or prescribe (sic) to one school of thought?” the gift committee posed in the minutes.

Among the uses of the Koch money will be to send students to conferences and seminars. But the committee wondered how those would be picked.

“Are they Koch-sponsored conferences? Will it end up mattering? If the donor is not happy with having money go to send people to a particular conference, that could influence the center to only support certain approved venues, which goes against academic freedom,” the minutes state.

Another conundrum was the type of speakers funded with Koch money.

For several years, the Koch Foundation has paid for a free enterprise lecture series at WCU, to the tune of $12,000 to $14,000 a year. Nearly all the speakers brought in with Koch funding have had ties to the Koch-funded academic network and share a libertarian worldview.

The gift-vetting committee didn’t want students to be steered toward a certain school of thought by virtue of the conferences they attend or speakers they’re given extra credit to hear.

Minutes from the committee meetings show members were concerned about such an outcome: “Sometimes the curriculum impact comes into play when selecting speakers and even the conferences they go to. That is one of the things we talked about. How will they solicit proposals? How will they review proposals? How will they fund projects?”

Ultimately, those were things the gift vetting committee couldn’t shoehorn into the gift agreement. So the committee drafted an addendum — a summation of concerns that couldn’t be articulated in the gift agreement itself — and penned them in a letter to WCU Chancellor David Belcher.

“Curricular impact extends beyond the walls of the classroom including exposure to invited speakers, seminars, student organizations, conferences and faculty research. The University must be diligent in ensuring the quality and integrity of curricular experience in the broader University mission,” states the letter signed by the five faculty on the gift vetting committee.

Dr. Darrell Parker, Dean of the College of Business, said the process for doling out Koch money will be inclusive.

“The call for proposals will be shared across campus,” Parker said. “The specific process will be developed with the first faculty who choose to be involved and mature each year.”

The tent will be a big one, he assured. Any professor, from any discipline, could try to land Koch money to fund a research project, sabbatical, or conference presentation, as long as they can make a pitch that the subject dovetails with the center’s mission.

The same is true for students seeking stipends for internships, conferences, fellowships and the like.

“We expect students from a variety of majors to benefit from the opportunity,” Parker said.

Line of defense

To Dr. Erin McNelis, a math professor who served on the gift-vetting committee, it would be ideal to spell out exact details of the center’s operations in the gift agreement itself, but it wasn’t practical and potentially not even possible.

Instead, the committee invoked the importance of the center’s advisory board to take up that mantle.

“That level of detail wouldn’t be appropriate for the contract, but what is appropriate is for the contract to reference the advisory board,” McNelis said. “The advisory board is dynamic, and they can meet needs as they arise rather than being in a fixed document.”

A lot of stock is being placed on the advisory board to act as a defense against “curricular creep” of the Koch gift, a phrase that appears often in the meeting minutes of the gift-vetting committee.

“They will need to be vigilant and do their job. They will need to hold in paramount importance the academic freedom and integrity of those affiliated with the center and the entire faculty,” Yang said of the advisory board.

The gift-vetting committee wanted to insert a reference to the advisory board’s role into the gift agreement but were told by Browning that wouldn’t work.

Browning said a certain level of trust is required — trust in the center’s leadership, trust that the advisory board will function as intended and trust that bylaws yet to be developed will ensure internal oversight.

“It was pointed out that given some of the questionable past practices, everyone will need to be eternally vigilant and these trusts will need to be earned,” the committee minutes state.

Ultimately, the gift-vetting committee is proud of its final product.

“With all those fail-safes in place, the idea is that hopefully we won’t be concerned. Any system that you set up in anything, not just universities but anywhere, is not going to be foolproof. But I think we have enough safeguards that they should be alleviated,” Marvel said.

Off and running

What happens next has been an elusive question.

All eyes have been focused on the gift contract, wondering if and when Koch and WCU would agree to each other’s stipulations.

With that now done, Dr. Edward J. Lopez, BB&T Distinguished Professor of Capitalism and the visionary behind the center, is ready to roll up his sleeves. There’s a lot still being hammered out on how the center will operate.

The $1.8 million gift will be spread over five years. The gift agreement contains four broad budget lines, but no details yet.

“Now that we are funded we can develop a budget based on the actual gift, honoring the categories specified in the gift agreement,” Parker said.

The gift-vetting committee wasn’t particularly happy with the lack of detail on how money would be spent.

“The lack of details … hinders the committee’s ability to determine the potential curricular implications. The committee would have not done its job right if the agreement were recommended with loopholes that could allow unforeseen curricular implications to creep in later,” the committee’s minutes state.

Over five years, the gift would provide $500,000 for salaries and center personnel; $200,000 to fund research reports on timely economic development policies; $300,000 for student stipends; and $800,000 to host speakers and seminars, publish and distribute reports and fund travel to outside symposiums.

Of the $500,000 set aside for salaries, the only faculty salary being paid with Koch money is Lopez’s.

Lopez currently makes $139,000 a year, plus benefits. He will get an extra stipend of $30,000 from the Koch money to serve as the center’s director.

The rest of the salary line item will go toward administrative support for the center, but the types of positions and the job descriptions aren’t determined yet, Parker said.

Early on, plans for the center called for Koch money to fund the salary of 1.5 economics professors. But that was struck based on faculty concerns about Koch money buying professor lines and controlling the hiring.

By backing out professor salaries from the gift, more money had been freed up to fund faculty research projects, Parker said.

Cutting the cord

The Koch Foundation reserves the right to suspend or halt its payments to the university if the center strays from its mission. The gift won’t come in a lump sum, but will be doled out annually for five years.

Each year, the university will have to re-apply for its next installment. Part of that process includes an annual report justifying how funds were spent and that the center’s mission is being carried out as expected.

That’s problematic, according to Ralph Wilson with UnKoch My Campus, a national student group that’s fought Koch monetary influence in academia.

Going hat-in-hand to the Koch Foundation every year is a slippery slope that puts the Koch Foundation in the driver’s seat to indirectly influence curriculum.

The gift-vetting committee didn’t particularly like the idea of the center having to prove its mettle very year to unlock the next round of funding.

“That could impact choices … if the donors don’t like a conference students went to, that would mean we don’t send students to that conference,” according to the gift-vetting committee minutes.

Charlie Ruger, the director of the Koch Foundation’s university investments, said the Koch Foundation will pull the plug if a university spends the gift in a way that wasn’t intended.

“If it does anything else with it, you know, best of luck but the next check isn’t coming,” Ruger said during a panel discussion at the Association of Private Enterprise Education in Las Vegas this April.

In fairness, Ruger was referring to a university siphoning money to sports or wrapping the gift into the university’s general budget. But Ruger also cited “regime change” in university leadership, like a new dean, that could threaten the center’s mission.

Ruger said leaving the annual funding open-ended — and something that has to be reapplied for — is aimed at flexibility.

“It allows us to build sort of a framework to channel these resources without saying exactly what everyone has to do, and when it has to happen,” Ruger said. “We wanna say, ‘Go build a center, hire some people, start doing things, see what works and what doesn’t. Stop doing the stuff that doesn’t work. Scale up on the stuff that does, and let’s get this thing going for the long term.’”

Ruger talked specifically about crafting gift agreements during the session, calling it a “long, involved process.”

“The way we think about this is not to come up with the perfect grant contract and sort of go and throw it on the table at the university and say ‘Here’s our position, you can sign it or we’ll walk, and our money walks with us,’” Ruger said.

Instead, it’s about coming up with a “mutual vision for what we wanna accomplish together.”

While Koch reserves the right to terminate a gift in its contracts, that’s never the desired outcome, Ruger said.

“We’re not just gonna cut off funding, because these programs create value. They’re important,” Ruger said.

While the funding pledge from the Koch foundation is only for five years, that doesn’t mean the university will pick up the tab for the center’s operations when five years is up.

A press release last week about the gift called the $1.8 million from the Koch Foundation “seed funding.”

“The center is expected to be self-sufficient and to identify other sources of funding for its continued operation,” the press release stated.

Lopez believes the Koch gift could unlock additional donors. Indeed, many Koch-funded university centers have leveraged big money from additional donors.

“We can be proud of forging this agreement with the Foundation, and we will move the Center forward in building a broad base of grants and gifts, similar to other centers and institutes on campus,” Lopez said.

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