Yesterday I mentioned that I had given a talk on megaphilanthropy and the universities to a group of university fundraisers. The general subject is one I wrote about in the Chronicle over a year ago, but yesterday I was trying to work through the implications of the phenomenon for higher education.
The basic fact is simply that the explosion of privately owned liquid capital in the United States that began in the 1990s (in part stimulated and supported by Bush-administration tax policies) has resulted in the creation of a large number of extremely large new private philanthropic foundations and mega-rich individuals. It used to be that the list of the largest foundations was dominated by Ford, Rockefeller, Carnegie, and other reasonably old institutions. But that has changed very rapidly. The list is now led (by a huge margin) by the Bill & Melinda Gates Foundation, which had assets of $39-billion at the end of last year, almost exactly three times the size of the second-ranked Ford Foundation. Next on the list are the Robert Wood Johnson Foundation, the William and Flora Hewlett Foundation, the W.K. Kellogg Foundation and the Lilly Endowment—all with net assets of more than $7-billion dollars.
There are currently 62 foundations (many of which I bet you have never heard of) with assets exceeding $1-billion. As I mentioned yesterday, these private foundation are required by law to pay out at least 5 percent of their annual investment returns each year, so that even if these institutions are paying the legal minimum, they have huge sums to distribute annually. But even foundations lower on the net-assets list are very large by historical standards. Many of them are “family” foundations, sort of private banks for wealthy individuals, upon which they draw to make gifts to nonprofit institutions.
The donee institutions receiving gifts are predominantly colleges and universities. Many of the gifts are capital gifts for buildings (the “edifice complex”) or other campus projects, but even more are contributions to university endowments. Higher-education institutions have been so successful in raising endowment funds that last year there were 76 colleges and universities with endowments exceeding $1-billion, and another 9 in the $900-million range. And, of course, the largest endowments are huge: As of a year ago, Harvard had $35-billion, Yale $23-billion, and Stanford $17-billion in endowment assets. Further, the size of individual private gifts to these institutions has been steadily growing—since 1967 there have been 48 gifts of more than $100-million to American colleges and universities, and another 51 gifts of exactly $100-million (which seems for the moment to be the threshold of “big” in the academy). As a result, there are, as of this week, capital fund campaigns for more than $1-billion at 28 universities, including $4-billion campaigns at Columbia, Cornell, and Stanford, and $3-billion campaigns at Johns Hopkins, Penn, Virginia and Yale.
There is huge confidence among the wealthy in these institutions. Mega-rich donors are clearly voting for them. And yet the need for continued institutional fund raising does not abate. One capital campaign is necessarily followed by another. As the calf gets larger, after all, it takes more feed to sustain it. More buildings, more financial aid, more faculty, more student services, more athletic facilities, more libraries . . . are needed. Or so we are told. The case is fairly easily made for each specific fund-raising objective. But do we understand what the net, long-term impact of this financial giganticism will be? Or what it will do to the system of higher education. I am not so sure I know. And I am not sure anyone else does, either.
