The Bowdoin Chapel looms in the background of the quad on April 1. Ben McCanna/Portland Press Herald

The Trump administration’s targeting of higher education through executive orders, budget cuts and lists of demands has put Maine’s colleges on high alert about one area that so far has remained untouched – endowment taxes.

Schools with endowment funds may increasingly have to rely on them to maintain programs and operations as President Donald Trump moves to revoke federal funds and grants from colleges and universities. At the same time, congressional Republicans recently introduced legislation to increase federal taxes on endowment incomes more than tenfold.

Administrators, officials and representatives at Maine schools were reluctant to speak about the endowment proposals, saying they fear future retaliation. Many expressed worry that higher education and financial aid are being used as fodder in a political dispute.

Increasing endowment taxes would have a bigger impact on smaller colleges like those in Maine than on larger Ivy League schools targeted by the Trump administration, the state’s education officials said. Larger schools have more revenue streams to lean on, noted Matthew Orlando, Bowdoin College’s senior vice president of finance and administration.

“They’ve got the endowment, but they’ve also got research money, or sports revenue, or lots of other different buckets,” Orlando said. “This tax has a disproportionate impact on places like us, for better or worse — worse for us.”

Endowments are large, often multimillion or multibillion dollar permanent investment funds comprised of hundreds or even thousands of accounts that are typically designated for specific uses by individual donors or foundations. The funds exist in perpetuity and are largely used for student financial aid, academic research and basic operating expenses. 

Maine colleges and universities cumulatively hold about $5 billion in endowments. More than half that money is held by Bowdoin, Colby and Bates colleges, which are the only schools in Maine that have large enough endowments to be subject to the tax.

Private schools with at least 500 students and endowments with a market value of $500,000 per student or more are currently subject to a 1.4% tax on their annual investment income. Pending federal proposals would raise the rate to as high as 21%.

‘AN ENDOWMENT IS NOT A PIGGY BANK’

The proposals come as colleges and universities have become a target for Republicans in the second Trump administration. The president has threatened to pull funding for universities and states that refuse to comply with his demands, including the University of Maine.

Endowments could help stabilize the schools’ finances, but financial leaders at Maine colleges said the institutions have to manage their endowments carefully. Education officials say spending too much of their money would deplete accounts and defeat their purpose, and many endowment donors specify that the money be used only for student financial aid. Most schools with endowments lean on them to lower tuition costs.

“An endowment is not a piggy bank or reserve account,” said Bates College Treasurer Geoff Swift. “It is an active and essential part of our funding model for the work we do on campus. … Pullback on our ability to meet our ambitions will mean diminished capacity to provide financial aid to those who most need it and fewer resources to fund our operations.”

“It really is that straightforward,” he added.

The existing endowment tax of 1.4% was first implemented in 2017 by a Republican-led Congress and only applied to 56 schools in 2023 who cumulatively paid about $350 million.

The “Endowment Accountability Act” introduced by Rep. Mike Lawler, R-New York, in February would raise the endowment tax rate to 10% and lower the threshold to $200,000 in assets per student. A similar bill from Rep. Troy Nehls, R-Texas, would raise it to 21% but keep the threshold the same.

“Elite private universities have accumulated and sit on massive university endowments and pay a tax less than 2% on the investment earnings of their endowments, which is far lower than what most hardworking Americans pay in taxes,” Nehls said in a written statement.

Members of Maine’s congressional delegation say they are either opposed to any tax increases on endowments or are waiting for more specific proposals before weighing in fully.

Sen. Susan Collins, a Republican, and Rep. Chellie Pingree, D-1st District, have said they oppose efforts to hike endowment taxes and expressed concern about restricting schools’ ability to provide financial aid. Staff for Rep. Jared Golden, D-2nd District, said he is reviewing the proposals and isn’t ready to comment.

A spokesman for Sen. Angus King, an independent who caucuses with Democrats, said it would be “difficult to comment on proposals or possible policy directives without any specifics” because the discussions about taxing endowments have only happened among Senate and House Republicans.

Bates College’s campus in Lewiston in January 2025. Steve Collins/Sun Journal

‘A POLITICAL TOOL’

Bowdoin College has the state’s largest endowment fund, totaling roughly $2.6 billion. The school has roughly $1.3 million in endowment funds per student. About 51% of Bowdoin’s operating budget and 78% of its financial aid is funded by the school’s endowment, Orlando said.

Bowdoin pays about $2.1 million each year under the current tax rate. A 10% tax would raise that to $15 million, and 21% would be $31.5 million, potentially costing the school tens of millions of dollars a year.

“We don’t have the other sources of revenue to offset this hit without making some dramatic choices,” Orlando said. “We’re paying for something, which means less dollars for financial aid, for operating activity, where that’s not the case at other places. It’s creating this separation of schools that otherwise look pretty similar.”

David Greene, president of Colby College, says about 20% of the school’s budget comes from its $1.2 billion endowment.

Because proposals like Lawler’s would only affect a few schools, most of which are small liberal arts colleges, Greene told the New York Times that federal revenue from increasing endowment taxes would be “less than a rounding error.”

The Miller Library looms at the right at Colby College in Waterville in January 2020. Rich Abrahamson/Morning Sentinel

“It’s simply a punishment. A political tool,” Greene said last year. “If you do that, you have to realize who you’re actually punishing. And it’s going to be students.”

While the Trump administration has yet to formally target schools’ endowments, it threatened to revoke nearly $9 billion in federal funding to Harvard and has recently threatened to do the same to Columbia University and the University of Pennsylvania over the schools’ handling of campus protests and transgender student athletes. 

The U.S. Department of Agriculture began a Title IX investigation into the University of Maine System in February after Gov. Janet Mills’ public spat with President Trump over transgender student athletes and threatened to revoke the school’s federal funding.

Maine schools have yet to be targeted directly by the administration over campus protests, but Republicans in the House of Representatives’ Committee on Education and Workforce sent a letter to Bowdoin College questioning the school’s response to a five-day pro-Palestine encampment inside a student center building.

Congressional leaders and administration officials have pushed for the endowment tax as a way to hold schools accountable for anti-Israel protests in recent years.

Pingree said attempts by Republicans to raise taxes on endowments and threaten school funding have nothing to do with fairness or equity.

“It’s about helping the administration open another front in their war on education and pressuring these institutions into subservience, silencing opposition, and undermining the very idea of independent thought,” she said in a written statement.

While much of the current discussion around funding for higher education is rooted in politics, officials warn that the impacts of current policy decisions will affect entire communities in the future.

Colleges, their students, their faculty and their employees are economic drivers within their communities. Future cuts to student aid and operating budgets stemming from rising endowment taxes could curtail schools’ enrollment and staffing, they warn.

“The impact of this endowment tax goes beyond the border of our campus,” Orlando, at Bowdoin, said. “There’s a ripple effect here that I’m not sure folks are thinking about.”