University Born Again as Nonprofit

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January 18, 2011; Source: South Florida Business Journal | NPQ has recently noted a number of news stories about for-profits in a number of fields converting to nonprofit status. For instance, for-profit Keiser University in Port St. Lucie, Fla., owned by Arthur and Belinda Keiser, changed its DNA virtually overnight and was reborn a nonprofit. This is especially perplexing, since Arthur Keiser was board chair of the Association of Private Sector Colleges and Universities, the national lobbying organization of for-profit colleges and universities.

With 18,000 students and 3,500 employees on 14 campuses, this becomes a significant nonprofit college. The Kaiser Career College, which teaches some 1,500 students vocational skills will remain privately owned by the Keiser family. To make Keiser a nonprofit, it wasn't simply the result of a quickie application to the IRS for a 501(c)(3) certificate. Keiser sold the College to the nonprofit Everglades College (which owns Everglades University) for an undisclosed sum. Although no longer owning the university and now responsible to the Everglades board of directors (on which Keiser himself sat until recently), Keiser will continue to be chancellor and CEO of Kaiser University. “Still . . . driving this institution and leading it,” he said.

Why the switch? There's the nice spin for public consumption that the 57-year-old CEO wanted to ensure that the school would "remain a legacy of the Keiser family," which might not happen somehow if it stayed for-profit. But there is the more pragmatic economic explanation that is equally if not more compelling. Nonprofit status exempts the university from property taxes. It becomes eligible for donations and for tax-exempt bonds.

But also Keiser was among the leaders of the for-profit colleges' campaign against the U.S. Department of Education's proposed "gainful employment" regulation which would deprive for-profit colleges of federal money if too high a proportion of their students couldn't pay their federal student loans; apparently. As a nonprofit, Keiser University would be exempt from this regulation. The conversion would mean more subsidies for Keiser students, who would be eligible for a $2,425 annual grant to students attending nonprofit colleges compared to $945 for attending for-profit schools.

Making this more confusing is that Arthur and Belinda Keiser bought Everglades in 1998 (when it was American Flyers College), converted that 1,200-student school to nonprofit status, and structured it so that it purchased many of its administrative functions from the for-profit Keiser University.

Keiser says that this is all on the up and up, with no ulterior motives, but the executive director of the American Association of Collegiate Registrars and Admissions Officers queried, "Until now, the very purpose of this entity was to be a profit-maximizing firm. Now we're being told it has suddenly done a 180 degree turn and become a charity?" Is it all so easy simply to say, “Today we are a nonprofit?”—Rick Cohen

  • ForProfitED

    It is a plan by Keiser to carry out the agenda of the Career College Association (now APSCU) and the new face of the industry lobby, The Coalition for Education Success.

  • David Cearley

    With the administration’s relentless attacks on for profit education, expect to see many many more shifts from private schools to non-profit, at least until the current profit hating administration is out of office.

  • bob

    to david cearley, most private schools are non-profit, so private schools don’t change to nonprofit. Only a few universities are for-profit and they are usually pretty insignificant schools. All of the top universities are either public/state schools or private nonprofit organizations.

  • Ham Grandley

    Hi Bob —
    The U. of Phoenix has 470,000 students, more than twice as many as the next highest institution or system. You can call it many things, but insignificant isn’t one of them!

  • rick cohen

    tell us more, if you would…Thanks!

  • rik

    We would do well to remember that most schools, be they private or public, outsource huge amounts of money to for profit entities for various services.