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News

Donations to Colleges Decline for the First Time Since 1988

By Goldie Blumenstyk March 21, 2003

Drop in alumni giving is the biggest factor, survey finds

The ripple effects of the floundering stock market and the poor economy are finally hitting home in college fund raising, a new


ALSO SEE:

Year-to-Year Changes in Giving

Gifts to Higher Education, 2001-2

Top Fund Raisers, 2001-2


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Drop in alumni giving is the biggest factor, survey finds

The ripple effects of the floundering stock market and the poor economy are finally hitting home in college fund raising, a new


ALSO SEE:

Year-to-Year Changes in Giving

Gifts to Higher Education, 2001-2

Top Fund Raisers, 2001-2


survey shows, as giving fell slightly in the 2002 fiscal year. The dip is the first in 14 years.

A sharp drop in gifts from alumni was the primary source of the 1.2-percent decline, according to the Council for Aid to Education, which conducts the annual Voluntary Support of Education survey. Alumni giving, which the council calls “the bedrock” of higher-education support, was off by nearly 14 percent, or about $1-billion, in 2002.

The council estimates that private gifts to colleges totaled $23.9-billion in the fiscal year that ended in June 2002. The council, which has tracked giving to colleges for more than 50 years, bases its estimate for 2002 on fund-raising reports from 955 institutions.

In the 2001 fiscal year, despite the poor economy, the total value of gifts to higher education was estimated at a record $24.2-billion, an increase of 4.3 percent over the previous year. Despite the drop in 2002, total giving was still more than double the amount raised nine years earlier.

Researchers at the council, who were surprised at the continued strong giving through 2001, said the 2002 results were inevitable.

Support for higher education “does tend to decline when the economy does,” said Ann E. Kaplan, director of the survey. “But then it tends to rebound when the economy rebounds.”

That rebound isn’t in sight. According to a number of college fund raisers, giving has been noticeably off since the end of the last fiscal year, even at institutions that reported increases in 2002.

Still, Ms. Kaplan said that compared with previous periods, the falloff is not as severe as it appears because inflation is also very low. From 1978 to 1979, for example, overall giving to colleges increased by 6 percent, but because of the era’s high inflation rate, it actually declined by 4.6 percent in inflation-adjusted dollars. For 2002, the inflation-adjusted figure was -2.5 percent.

Running Out of Luck

While the decline in giving will have an impact, it may not be earthshaking. Even in the best of times, philanthropy is not a major source of support for most colleges’ day-to-day operations. Donations accounted for 8.1 percent of colleges’ spending in 2002, the survey shows. That’s down from 8.7 percent in 2001 and 8.8 percent in 2000.

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Even institutions that managed to buck the downward trend in alumni giving said their luck was running out.

Cornell University raised more money from alumni in the 2002 fiscal year than did any other institution -- $158-million, or about 43 percent of its total. And 2002 was also a record year for overall giving to Cornell. But that was largely the result of a


TOP FUND RAISERS, 2001-2
1. U of Southern California $585,161,932
2. Harvard U $477,617,144
3. Stanford U $454,769,878
4. Cornell U $363,031,766
5. U of Pennsylvania $319,742,070
6. Johns Hopkins U $318,687,392
7. U of Wisconsin at Madison $307,213,842
8. U of California at Los Angeles $282,343,369
9. Columbia U $271,231,231
10. Duke U $264,580,048
SOURCE: Council for Aid to Education

“very fortunate confluence of things,” including payments on previous commitments and some unexpected new gifts, said Inge T. Reichenbach, vice president for alumni affairs and development.

“Somehow the anxiety and the uncertainty was not that much of a factor yet,” she said. But in the current fiscal year, she said that gifts were down by 12 to 15 percent. Institutions with long traditions of giving “could weather the storm a little bit better, up to a point,” Ms. Reichenbach suggested. “But from now on, we are all in the same boat.”

Bigger Role for Family Foundations

The council found that the decline in alumni giving might be somewhat exaggerated because some alumni gifts might be showing up as foundation gifts. That’s because many wealthy people have begun to create so-called family foundations that are used as vehicles for their philanthropy.

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Gifts from foundations surpassed those from alumni for the first time in more than 25 years, the survey shows. In 2002, alumni gifts accounted for 25 percent of all donations and foundation gifts accounted for 26 percent. Five years ago, those proportions were 29 percent from alumni and 20 percent from foundations.

Karen Green, managing director of family-foundation services at the Council on Foundations, said her work with such organizations seemed to confirm that trend.

“Giving to education, generally, is a high priority for family foundations,” Ms. Green said. Especially in their early years, she said, giving by family foundations tends to “parallel the personal giving of the donor,” until the foundations develop more-elaborate strategies for their philanthropy.

One institution that is focusing on the rise of family foundations is the Massachusetts Institute of Technology. Fund raisers at MIT, which is in the midst of a capital campaign and raised more than $220-million in the 2002 fiscal year, have made family foundations a priority. “We’re being as tastefully aggressive as we can,” said Stephen A. Dare, MIT’s director of resource development.

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“We built up some pretty good momentum early in the campaign,” he said. Before the campaign began, in 1997, giving to MIT stood at about $100-million a year.

The council estimates that giving to colleges from all kinds of foundations increased by about 5 percent, “a modest rise” compared with the double-digit increases seen from 1996 through 2001.

The council, which conducts research on higher-education policy, also said foundation giving tends to taper off more slowly in a down economy than do other sources of support. That’s because the amount provided in grants is based on the foundations’ asset values in past years. Also, in some cases, commitments for grants in 2002 could have been made several years earlier, when the economy was stronger.

Several colleges and universities say they have been advised by foundations to expect less in the next few years. The SBC Foundation, for example, asked Ohio State University not to submit a grant request this year. The university had received support from the foundation in the past.

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Lawrence University, a liberal-arts college in Wisconsin, has heard a similar message. A number of foundations have made it clear that their grant making will be down, “and the competition has probably never been tougher,” said Greg Volk, vice president for development.

Among the 955 colleges reporting results, the council found that giving to research and doctoral institutions fell off much less (-4.1 percent) than it did for liberal-arts colleges (-10.7 percent) and for community colleges (-15.2 percent).

“It’s a tougher year, certainly,” said Perry Hammock, president of the Council for Resource Development, an organization that promotes fund raising by community colleges.

But Mr. Hammock, who is also executive director of development operations at the Ivy Tech State College system, in Indiana, said the statistics on community colleges may not be representative because they include reports from just 96 institutions. Many of the nation’s 1,500 community colleges, including his, did not report their results, he said. Giving at Ivy Tech was up 30 percent in 2002, he said, due in large part to planned gifts.

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He said a decline in alumni giving would have the least effect on community colleges because most tend to depend more on corporations and foundations for donations.

At Lawrence, donations were up by 40 percent in the 2002 fiscal year. But just about half of the $18.5-million the college raised was attributable to a single bequest. So far in the current fiscal year, giving is down by about 13 percent because of declining support from foundations and a falloff in major gifts. At Lawrence and other institutions that are also being squeezed by drops in endowment values, “the need for unrestricted operating gifts has never been more pressing,” said Mr. Volk.

The council estimates that contributions to higher education from corporations grew by less than 1 percent, to $4.4-billion, in the 2002 fiscal year. Gifts from individuals who were not alumni increased by 3.8 percent, to $5.4-billion, while gifts from fund-raising consortia, like the United Way, grew by 8 percent, to $1.6-billion. Contributions from religious organizations fell by 2.7 percent, to $360-million.

The University of Southern California ranked first among the colleges surveyed in total fund raising for the year, with more than $585-million. The university recently concluded the largest fund-raising campaign in the history of higher education, collecting $2.85-billion in nine years.

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Harvard University, which led the list in 2001 with more than $683-million, ranked second in 2002, with just under $469-million. The previous year’s record figure was an anomaly, said Andrew K. Tiedemann, a development-office spokesman. Harvard, he noted, had concluded a major fund-raising campaign in December 1999, and many of the gifts pledged in that effort were still trickling in during the year ending June 30, 2001. He said the amount raised in 2002 was the third-highest ever for Harvard. It took in about $483-million in the 2000 fiscal year.

The University of Wisconsin at Madison was the highest-ranking public university in overall fund raising. It collected $307.2-million, placing seventh. But Andrew Wilcox, president of the university’s fund-raising foundation, said he and his colleagues “can’t take credit.” The institution benefited substantially from donations from three other foundations that are associated with the university: one that manages patent income, one that manages revenues from the university’s hospital, and a third that a benefactor set up years ago to support the university.

Over all, said Mr. Wilcox, the number of gifts to Wisconsin has gone up substantially, but the dollar value of those gifts has declined. Wisconsin recorded about 110,000 gifts in the 2002 calendar year, the first time that figure cracked 100,000. But the value of the gifts was down $17-million, compared with the previous year.

As might be expected, the volume and value of gifts of appreciated stock were off noticeably in 2002. “We got a sense that there was a malaise” among donors, said Mr. Wilcox.

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And with the economy now in its third year of decline, Mr. Wilcox said he had noticed, just like Cornell’s fund raisers, that the dour mood is continuing. The end of the calendar year is traditionally a very busy time for fund raisers, he noted. But last year, he said, “December didn’t feel as frantic” as it usually does.

The report on the council’s survey, “Voluntary Support of Education, 2002,” will be available in May. Copies will cost $65 each for survey respondents and $100 for nonrespondents; they will be free for subscribers to the council’s Data Miner service. Ordering information is available online (http://www.cae.org).


GIFTS TO HIGHER EDUCATION, 2001-2
By type of institution
Number of institutions Amount
(in thousands)
Average per institution
(in thousands)
1-year change in average
Research 200 $14,580,893 $72,904 -4.1%
Private 68 $7,029,433 $103,374 -2.7%
Public 132 $7,551,459 $57,208 -5.3%
Master’s 283 $1,798,393 $6,355 -5.5%
Private 135 $1,018,548 $7,545 -3.7%
Public 148 $779,846 $5,269 -7.1%
Liberal arts 304 $2,490,316 $8,192 -10.7%
Private 284 $2,456,948 $8,651 -10.0%
Public 20 $33,368 $1,668 -6.9%
Specialized 72 $837,399 $11,631 +6.1%
Private 49 $448,505 $9,153 +0.4%
Public 23 $388,894 $16,908 +7.0%
Two-year 96 $116,675 $1,215 -15.2%
Private 4 $11,576 $2,894 -31.2%
Public 92 $105,099 $1,142 -7.6%
Total 955 $19,823,676 $20,758 -3.1%

Sources and uses


http://chronicle.com Section: Money & Management Volume 49, Issue 28, Page A29

We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
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About the Author
Goldie Blumenstyk
The veteran reporter Goldie Blumenstyk writes a weekly newsletter, The Edge, about the people, ideas, and trends changing higher education. Find her on Twitter @GoldieStandard. She is also the author of the bestselling book American Higher Education in Crisis? What Everyone Needs to Know.
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