• April 20, 2014

Private Giving to Colleges Dropped Sharply in 2009

With a battered economy and volatile financial markets taking their tolls on donors' pocketbooks, private giving to American colleges dropped sharply in 2009, according to findings of the annual Voluntary Support of Education survey, which were released on Wednesday. Donations were down $3.75-billion from the previous year—a decline of 11.9 percent, the steepest in the survey's 50-year history.

Colleges brought in an estimated $27.85-billion in gifts in the 2009 fiscal year, according to the survey, which included 1,027 institutions and was conducted by the Council for Aid to Education. The year before, colleges raised $31.6-billion, which was the highest total ever reported in the survey. In 2009, alumni participation dropped to a record low, and the size of the average alumni gift was down, too.

The survey's findings were grim but not unexpected. During the period of the survey—July 1, 2008, to June 30, 2009—college fund raisers had reported "hitting a wall" with donors who had either lost significant portions of their wealth or were nervous that they would.

"The economy was so bad the only thing that would have been a surprise is if it had been a really good year," said Ann E. Kaplan, the survey's director.

Given the economy's troubles, Ms. Kaplan said the drop could have been worse. "Where people could continue to make gifts, they did."

Despite the serious decline in 2009, fund raisers say they're beginning to see signs of recovery, though nothing like the record growth that college fund raising had enjoyed for several years before 2009. They say donors seem less skittish as the financial markets improve.

"I think the institutions are going to weather the change," Ms. Kaplan said. "I don't think people had that same feeling in February '09."

'Nobody Is Unscathed'

Almost no institution was immune from the downturn's negative effects. The 20 universities that raised the most money—$7.28 billion, which represents 26.2 percent of all gifts to higher education—saw a decline of 11.8 percent from the year before.

Private liberal-arts colleges, many of which depend on fund raising for a significant part of their operating budgets, were hit especially hard, showing a decline of 18.8 percent from the previous year.

"Nobody is unscathed," said Robert F. Sharpe Jr., a fund-raising consultant. "Everybody is affected in some degree or another."

Some institutions were less hurt than others, Mr. Sharpe said. Those that had stables of committed longtime donors did better than those with more new­ donors. Also, the recovery varies by region. Institutions whose support is concentrated in harder-hit areas of the country are faring worse.

"It's not like you had a tide come in and everybody's rising and falling evenly," Mr. Sharpe said. "It's complicated."

Of the 10 universities that raised the most money in 2009, all suffered declines except for Cornell, which was No. 3 in fund raising, behind Stanford and Harvard, in first and second place, respectively. Cornell's fund raising increased by 9 percent, to $446.75-million. One thing that helped was that in late 2008, the university asked Sanford I. Weill, a major donor and emeritus trustee, whether he would pay off a $250-million pledge early in return for a discount on the amount, part of which had been committed by his family foundation. He agreed, and after settling with the university on the current value of the pledge total at the time, he and his wife made cash gifts totaling $170-million.

Cornell has a loyal donor base that stayed with the university during the downturn, said Charlie Phlegar, vice president for alumni affairs and development. When donors were unable to give major endowment gifts, Cornell's president asked them if they would be willing to make cash gifts equal to what their intended donations would have paid out from the endowment that year. Almost 200 donors "bridged" their intended gifts in that way, a strategy that helped Cornell increase its annual fund in both dollars and number of donors.

Cornell did see a decline in gifts to capital projects in 2009—as did all colleges, according to the survey. While giving for annual funds remained relatively stable, total giving for capital purposes was down 25 percent.

Alumni Support Falls

The survey found that the proportion of alumni of record who gave continued to decline in 2009, falling one percentage point to 10 percent, the lowest level recorded. The steady drop in alumni participation is troubling for colleges, because alumni are their largest source of contributions, and their donations make up a quarter of total giving.

In recent years, the total amount of alumni giving had been rising, despite the decline in the participation rate. But last year the total amount donated by alumni fell significantly, down 18 percent from the year before, the survey found. In 2009, alumni gave $7.1-billion, compared with $8.7-billion in 2008. The average alumni gift shrank by 13.8 percent.

Michelle L. Janssen, executive director of development for Valparaiso University, in Indiana, says the decades-long downward trend in alumni participation shows no sign of stopping. Valparaiso, which has an above-average participation rate of about 18 percent, is still below the 30-percent alumni participation goal it had for its recently completed campaign.

"I think it's here to stay, and I think it's really worrying," Ms. Janssen said of the decline. "Whoever figures out how to flip that switch, I'm all ears."

Valparaiso had a tough year in 2009. The university raised $12.8-million, far below the $17-million to $30-million a year it had been raising earlier in the campaign, which ended June 30. It was the lowest fund-raising total in two decades.

Donors "were scared to death, absolutely scared to death," Ms. Janssen said.

She attributes the decline to "the two e's"—the economy and the execution of the fund-raising plan. Valparaiso had problems with sending out timely direct-mail appeals, she said, and she believes the university lost out on donations because people had already made up their minds about end-of-year contributions. Also, because it was in the last year of a comprehensive campaign, the university continued its previously established fund-raising plan, rather than readjusting after the economic crisis hit.

Valparaiso is now seeing hints of a recovery, and Ms. Janssen expects this year's donations to be slightly above last year's. University fund raisers are using new strategies, including broadening their prospect pool beyond alumni to parents, friends, and community members. They're going back to emphasizing Valparaiso's mission with donors, and they're working on a "triple ask" with major donors. Instead of just asking for a major gift, fund raising are also asking for continued annual-fund support and, in some cases, a bequest.

Things Looking Up

At Prairie View A&M University, Nelson Bowman III, director of development, believes a fund-raising recovery is happening because people are starting to feel comfortable with giving again.

The Texas institution's fund raising was down about 15 percent last year, from $1.9-million to $1.6-million. This year the university, which finished its first major campaign in December 2008, has already received a donation that practically doubles its 2009 total. A private foundation gave the historically black college a $3-million gift to start a doctorate program in nursing and help increase the number of minority nurses and nurse educators.

"Some of what we were experiencing was a lot of hype," Mr. Bowman said. "The waters just needed to calm down some."

But for more-established fund-raising programs, at least one college leader believes giving may never return to the levels of the years before 2008, which were characterized by megagifts and ever-bigger campaigns.

Scott S. Cowen, president of Tulane University, believes fund raising will be significantly different in the next decade. The economic downturn will have lasting psychological and emotional effects, he said, and while people will continue to give to higher education, their donations will be smaller. "I think we're with this for a decade or more," Mr. Cowen said.

At the same time, Tulane, which saw donations drop about one-third in 2009, is making a large investment in development. The university believes there are alumni and major prospects who have not yet been tapped, as well as more possibilities for planned giving. It plans to spend an additional $2-million a year for the next three years to hire more people for its fund-raising staff, Mr. Cowen said.

The full survey report can be ordered through the Council for Aid to Education's Web site, http://www.cae.org.

Comments

1. dlu39503 - February 03, 2010 at 11:10 am

I wonder if the drop in giving is the same for academics versus athletics, or if one has seen a greater drop in giving.

2. wbh333 - February 03, 2010 at 11:31 am

Being laid off this year has made it hard to give in the same way this year. I found other ways to give back, both with my time through volenteering and using goodalum.com as my search engine. It would be interesting to see if schools have seen a rise in support through non monetary means.

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