America's public universities risk compromising their autonomy and better judgement when, faced with major budget deficits from declining taxpayer revenue, they grasp at opportunities to land external funding from private donors. The financial landscape makes institutions vulnerable to ideological predators who, under the cloak of philanthropy, wish to take control of what is taught and by whom.

The issue has been highlighted by the recent controversy over the 2008 decision by Florida State University (FSU) in Tallahassee to accept US$1.5 million from the Charles G. Koch Charitable Foundation in Arlington, Virginia. Like many public universities, FSU has found it harder to attract high-level faculty members in a financial landscape dominated by state budget cuts, an economic downturn that has hit endowments, and limits placed on tuition fees.

The Koch foundation is an example of private philanthropy with an ideology. Its billionaire founder, Charles Koch, is an advocate of minimalist government (a vestige of a nineteenth-century-style free-market economic system), personal responsibility in lieu of social safety nets, privately financed education, and an end to the government-run social-security system. Koch and his brother David have been among the leading funders of the libertarian Tea Party and support its organizations and political candidates.

Let's be clear. It is not unusual for private donors to support university faculty positions in certain fields. But the FSU case is remarkable for the strings that came attached to the money. I have examined many such agreements, but the one that FSU signed with the Koch foundation breaks troubling new ground.

The case is remarkable for the strings that came attached to the money. ,

First, and most publicly discussed, the university agreed to give the foundation the authority to decide the selection criteria used to fill the economics faculty positions that it paid for, and the right to veto candidates of whom it did not approve. This agreement is a marked departure from the well-established separation between private academic philanthropy and faculty hiring decisions.

The university insists that it was aware of the threat to its independence, and was prepared to pull out of the agreement if it felt that its integrity was being undermined by outside influence. It says that the two academics subsequently appointed and funded under the agreement were its choices. Yet it accepts that the contract presents the appearance of outside influence, and says it is now reviewing its decision to sign it.

In my view, the university was at the very least naive, and at most it turned a blind eye to a compromising agreement. FSU should tear the deal up and hand back the cash. This is no idle academic exercise, and there are more problems with the deal than who gets to decide who is hired.

The stated objective of the FSU–Koch agreement, of which I have a copy, is "to advance the understanding and practice of those free voluntary processes and principles that promote social progress, human well-being, individual freedom, opportunity and prosperity based on the rule of law, constitutional government, private property, and the laws, regulations, organizations, institutions and social norms upon which they rely".

The phrase of most concern is the "practice of those free voluntary processes and principles". Students of political economics will recognize similar phrasing in the nineteenth-century anarchist writings of Peter Kropotkin and Pierre-Joseph Proudhon. Neither classical anarchists nor radical libertarians have any use for strong central authorities that oversee social-welfare programmes. I see no problem with funding professorships in the study of classical anarchism or twenty-first-century libertarianism, any more than I would with funding a Marxist scholar. But the autonomy of the university is transgressed when the criteria for funding seek to advance the practice of a political ideology.

According to the agreement, performance objectives for the programme will be reviewed by a three-member advisory board, chosen by the Koch foundation, which will monitor the performance of faculty members and check whether they remain true to the programme's mission. The agreement also states that "Individuals holding the sponsored professorship positions will be treated similarly to all other FSU faculty of similar rank". Really? It is inconceivable that the faculty handbook of FSU or any other state university uses "advancement of the practice" of a political ideology to measure academic success. The agreement also stipulates that an "Undergraduate Political Economy Committee" should be set up in the FSU economics department, with one outside member chosen by the foundation. The purpose of this committee is to shape the undergraduate curriculum to ensure that it meets the goals of the agreement. These conditions are unacceptable at any respectable university.

Let there be no mistake: the controversy over the FSU–Koch agreement is not about the diversity of views on economics at America's universities. It is not even, as the university likes to portray, about whether it hired the staff it wanted to. It is about the wider threat to the independence and autonomy of academic appointments, and the proper boundaries between philanthropy and a university's choices about faculty and curriculum. Compromising these values, even under conditions of financial exigency, will turn a university against itself and corrupt its integral value to society.