University of Minnesota Foundation President Gerald Fischer said a proposed tax credit would bring about 20,000 new private donors to the school.
The credit, introduced last week at a press conference, would allow residents of Minnesota to donate to accredited universities and colleges and deduct 50 percent of that donation from their state tax returns.
Currently, 14 states have some form of tax credits for higher education. The bill is similar to laws already existing in Michigan and Indiana.
The University currently raises $11.9 million from 40,000 private donors each year. In addition to new donors, the University expects to gain $2 million in private donations if the tax credit is passed and signed into law. Fischer said the foundation hopes that number would increase to about $6 million in new funds each year by 2001 or 2002. Fischer said, however, that the number is difficult to determine.
“How fast (fund raising) occurs will be a function of our marketing,” Fischer said.
According to the University of Minnesota Foundation’s statistics, Indiana received $6.4 million in credits in 1994 from this program. No newer figures were available.
The donated money to colleges and universities in Michigan doubled in the span of a decade, when donations increased from $9.4 million in 1983 to $21.5 in 1993.
Both Michigan and Indiana have the tax credit on state tax forms. Fischer said he would prefer the credit being on the Minnesota tax form, which people are already required to fill out, rather than have a separate tax form.
Unlike Indiana and Michigan, the tax credit does not include businesses. The proposal in Minnesota is only for individual donors.
Sen. John Hottinger, DFL-Mankato, the bill’s sponsor, said he is not sure if the program would increase revenue immediately, but said it should grow from year to year.
“Like the Michigan and Indiana examples, we hope the program will build over time,” Hottinger said.
Initially, the bill was introduced in 1996 and passed in the Senate, but failed in the House. Hottinger said it has a much better chance of passing this year.
“This year is a budget year,” Hottinger said. “Last year wasn’t, and we didn’t have a good handle on the costs to the state.”
Hottinger estimates that the program will displace $5 million from the state in lost revenue, but that revenue will be accounted for in donations to the colleges and universities.
The state needs the bill to replace diminishing funds for higher education, Hottinger said. “It is designed to encourage people to give,” he said. Citizens can give a maximum of $500 per person or $,1000 per joint return for the credit.
The credit stands to benefit other public and private universities in Minnesota, as well. Currently, an estimated $23 million is donated to Minnesota’s private colleges and universities, and another $7 million is donated to the Minnesota state colleges and universities
The House version of the legislation was sponsored by Rep. Gene Pelowski, who chairs the House Higher Education Finance Division. Pelowski said he backs the bill because it will create new sources of revenue for higher education. Both bills could be heard later this month.
If passed, the law would be effective Dec. 31, 1997.