Part One of College Giving in the Age of COVID-19
April 15, 2020 | Emily Koons Jae
Even before the global pandemic and market freefall, colleges faced an uncertain financial future. Six in ten universities did not meet their enrollment goals for the fall of 2019. An entire industry has emerged to advise colleges on how to merge with other institutions or shut down entirely. The pandemic will accelerate the inevitable, forcing the hand of institutions that were already vulnerable to market forces.
With declining enrollment and fewer families able to afford the skyrocketing cost of tuition, universities must turn to public support and philanthropy. Congress has already stepped in, approving approximately $14 billion to institutions of higher education as part of the $2 trillion stimulus package. But this amount falls short of the sum that university leaders insist they need to stay afloat.
In a recent Forbes.com column, ACTA President Michael Poliakoff urges university leaders not to repeat the mistakes of the 2008 financial crisis. As the pandemic stabilizes, university leaders must resist the urge to return to business as usual. In the past 10 years, administrative expenditures have risen 34%, and student services expenditures have increased 46%. Colleges and universities must rethink these unsustainable costs or risk losing the institutions that they have worked so diligently to build.
Dr. Poliakoff writes, “Ingenuity, entrepreneurship, resourcefulness, and discipline—the engines of American success—will ultimately be far more important than scoring a bigger slice of the debt-fueled pie. Institutions of higher learning need to find their way, and quickly, to such efficiencies.”
In the wake of the pandemic, targeted philanthropy can—and should—play a central role in spurring innovation in higher education. By supporting the best that our colleges have to offer, and refusing to perpetuate enduring problems, college donors have an opportunity to be part of the solution.
How can intelligent giving help institutions emerge from the crisis stronger than before? We recommend that donors restrict their giving, remember that all money is fungible, and consider giving beyond their alma mater.
By tying thoughtful strings to their major gifts, donors communicate their values to an institution. Think carefully about how you would like your gift to be spent. Do you intend to bolster the school’s history department? Create a scholarship for first generation students? From the start, make your intention known and ensure that it is codified in a gift agreement. FAR can help you to make the right on-campus allies to help craft a gift agreement and execute your gift.
In addition, consider what other changes you would like to see on campus. Entrepreneur John Altman has long been a generous benefactor of his alma mater, Miami University of Ohio. This past year, Mr. Altman’s foundation created new guidelines for its higher education grants, requiring that institutions first adopt the Chicago Principles on Freedom of Expression to be eligible to receive funds from the foundation. This new restriction clearly communicated how seriously Mr. Altman values free speech and created a powerful incentive for Miami University to improve its policies.
Donors should remember, however, that money is fungible. Your gift, even when restricted, may free administrators to spend money for other purposes—purposes you may not find worthy of funding. To avoid this fate, specify that your gift must be a net addition to the budget. Donors should also consider giving to outstanding university centers, such as the Oases of Excellence programs that ACTA has designated across the country. Doing so allows a faculty member to be your watchdog, overseeing your gift so that it does not support another part of the university behemoth.
Finally, consider giving beyond your alma mater. Elite schools with sizable endowments will face less hardship than most institutions. A leveraged gift to a small liberal arts college or regional university will have a far greater impact than a gift of the same size to an elite institution. As part of our Intelligent College Giving series, we recently featured a Q&A with Sandy and Ginny MacNeil. On the recommendation of friends, they built a partnership with faculty at Furman University, a liberal arts college near their home. Neither MacNeil attended Furman, but their giving has helped build a transformative program on campus.
In the wake of the pandemic, intelligent giving is needed more than ever. By investing wisely, donors can help turn the tide and secure a brighter future for American higher education.
This article is featured in the upcoming spring edition of FAR's newsletter, the College Donor Quarterly. To receive the newsletter, please contact us at email@example.com.