Tuesday, October 18, 2011

Endowment Money a New Necessity?

The Recent article in the Chronicle Top Fund-Raising Organizations Expect an Uptick in Giving but Still Face Struggles really made me think about institutional funding due to the current economic state and what the future holds for institutions, especially public colleges and universities. The article explained that of the 400 non-profit organizations that appear on the The Chronicle of Philanthropy's ranking, 112 of them are institutions of higher education. In 2010, donations to the 400 organizations rose 2.5 percent on average while institutions of higher education saw a loss of one percent. The groups expect donations to go up slightly in 2011. What really started me thinking about the change in higher education funding was when the article spoke about Amherst College which started a large fund-raising campaign and raised $60 million in 2010, a $31 million increase since 2007.

I’ve been part of several conversations in the last few months about institution’s endowments and how the money they receive through donations affects rankings, recruitment, scholarship money, etc. What really fascinates me about endowments and donations is the cycle that a large amount of money seems to create. Granted this is simplifying a much larger situation but take rankings, recruitment and scholarships as an example; higher endowment equals more scholarship money which makes it easier to recruit, easy recruitment leads to a higher caliber class, higher caliber class leads to higher rankings and higher rankings can lead to higher prestige and potentially larger endowment. Again, this is simplifying an idea that has many more pieces but one gets the idea.

I haven’t been in the field of higher education prior to the economy being at the low it has been in the last few years. In the time that I have been working on a college campus, it is nothing to hear about a college and university starting a fundraising campaign. I Googled “university fundraising” and chose stories from the last 24 hours and the result was everything from fundraising job postings to companies who provide fundraising support and most importantly, institutions announcing their fundraising campaigns. Just over a year ago, Rutgers announced their largest fundraising campaign ever in light of state budget cuts to “fund scholarships, endowed chairs for professors, new buildings and other projects.”

Shortly after I graduated from my alma mater they started a fundraising campaign in which they have boasted will contribute millions of dollars in scholarship money to help students attend college. Colorado State University’s RAMp it Up project web site explains that endowment dollars aid in a higher ranking in the U.S. News and World Report and “high rankings not only increase the value of your Colorado State University degree, they also help attract high-caliber students, renowned faculty, and grant money from foundations and businesses.”

Rutgers and CSU are just a couple examples of the huge efforts being made by public institutions to increase their fundraising efforts and endowments. In a time where money is limited across the board and public institutions are quickly losing state funding, this is just one way colleges and universities are trying to make up for loss. I can’t help but wonder how far this goes and what the implications are. Is this an effect of higher education becoming a mature industry? Are alumni and donors going to become a primary source for funding education? If this becomes the standard, will endowments affect rankings in the future like they currently do?

3 comments:

  1. The Chronicle's Almanac had some interesting data to support what you're writing about. Last year, Stanford got almost $600 million in support. Indiana University (tenth on the list) was at $340 million. Within the top ten, alumni support doubles between 10th place and first place. Although Stanford has $780,000 in endowmnent per student (10th place in that category), they continue charge tuition. Interesting.

    As you allude to, the rich get richer. I understand that endowments can't be used for whatever the institution wants (i.e. they can't just write off everyone's tuition). How can universities recruit support so it directly benefits students?

    Although Stanford has $780,000 in the bank per student, they aren't even in the top ten for alumni giving per student (tenth place got $12,000). So, they probably recognize that funding that goes directly to student tuition/fees would run out. At $40,000 a year, their endowment would only support students for 20 years.

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  2. Dana this is a really interesting post and prompts a lot of different thinking for me. As state budgets get thinner and it becomes less viable to continue raising tuition it seems like a natural reaction to ramp up fundraising efforts. I have to wonder, too, what the implications are - for example some high dollar donors have had buildings or rooms named after them - others dictate where their dollars go whether or not its an institutional priority. So, I agree Beau what would be great would be donors who would donate in an 'unrestricted' category so that institutions could put money where it was needed most.

    Our foundation for example raises a lot of money for scholarships which is great for students and helps us meet a need to provide additional financial aid to students. We also do a lot of fundraising to help pay for new rennovations and buildings because there are no other funding streams that can help us move these kinds of priorities forward.

    The part about rankings was also really interesting and seems to suggest that colleges and universities are really focused on this. Do students and parents really pay that much attention to rankings? What do rankings really suggest about the quality of the education you as a student will receive? Are large endowments and fundraising efforts paying for higher rankings and are academic standards and quality programs keeping pace? I guess that all depends on where that money goes.

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  3. One of the most cited outcomes I have heard recently for helping students get involved and become connected to their institutions through co-curricular experiences is that once students build the relationship with the school, they are more inclined to give back later. In fact, many of the students with whom I have worked have indicated exactly that: that even if they would not donate to the institution in general, they would always provide assistant to the groups or activities in which they were involved. Alum assistance does not just mean in a financial manner, although that’s the hope of many endowment associations. When alums mentor or make internships or jobs available to current students, that helps build the community-institution connection. In many ways, by creating the welcoming environment for students now, we establish the foundation for sustainable giving – in many definitions of the word – later.

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