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Regaining Confidence

August 31, 2011

In 2006 and 2007, it seemed like every wealthy college and university was announcing a record-breaking fund-raising campaign that would bring its research and education endeavors to new heights. Major research universities talked about bringing in $3 billion or $4 billion, much of it in "mega-gifts."

That talk quieted down in 2008, when the economic downturn began, and the past few years have not seen the kinds of pre-recession goals that used to make headlines. A handful of universities announced that they had met or exceeded their goals, but, for the most part, the bravado of exceptional and even unprecedented goals was absent.

But on Sunday, the University of Southern California announced it would launch a $6 billion fund-raising campaign, the largest ever in higher education. That announcement comes on the heels of an announcement in December that Columbia University would up its previous $4 billion campaign goal to $5 billion. Harvard University is preparing to announce its own fund-raising drive, but officials there have so far refused to comment on any aspect of it.

Fund-raising officers, consultants, and representatives of support organizations say USC's announcement is an indication that fund-raisers feel positive about the next few years. While overall economic recovery has been slower than expected, several fund-raising officials say the gains they've seen in the last year, combined with what they're hearing from donors, make them confident that they will be able to bring in large dollar amounts in the near future.

"When the recession hit -- and it hit hard -- we saw a big decline in giving to education," said Rae Goldsmith, vice president for advancement resources at the Council for Advancement and Support of Education. "Donors who were thinking about making major gifts adopted a wait-and-see attitude. Now you're seeing an increase in giving, a return to the larger campaign, and a return of the mega-gift -- which was pretty sparse during the heart of the recession. Donors have more confidence in their long-term capacity to give, even though the economy is still sputtering."

2009 and 2010 were bad years for many fund-raising offices. After a record-breaking year in 2008, giving to colleges dropped 12 percent in 2009, according to an annual study by the Council for Aid to Education. That was the steepest decline since the council started keeping track of giving data in 1969. The study found that contributions grew only 0.5 percent in 2010.

Despite weak results for the past two years and the fact that economic growth has been less than many economists predicted, fund-raisers are optimistic about 2011-12. In a July survey by CASE, fund-raising officials predicted that donations would increase 5.5 percent during the upcoming academic year, an increase over their 2010-11 estimate of 4.7 percent.

Officials attribute that optimism to several factors. They say that while the recession scared donors and made them cut back on the number of organizations they gave to, many donors have maintained their relationships with higher education institutions. "Even in the toughest of economic times, higher education tends to be among the most resilient industries," said Donald M. Fellows, president and CEO of Marts & Lundy, a consulting firm that works with nonprofit institutions to improve their fund-raising efforts.

Fellows and others attribute the drop in 2009 to concern among donors about the health of the national economy and the security of investments. Now that the fear about long-term economic stability is waning, officials said they are starting to see donors who were in the "wait-and-see" mode become more receptive to pitches.

Officials also said they're optimistic because the past year has been a good one for many institutions, with several colleges and universities breaking records and securing large gifts. This year the University of Wyoming broke by $100,000 the $43 million record it set in 2008. The University of Louisville, which has had four consecutive record-breaking years, brought in almost $141 million last year, $19 million more than the preceding year. Several other institutions, including Cornell University, the University of Virginia, and the University of Akron, also had record-breaking years in fund-raising. USC announced a few months ago that it secured its largest-ever gift, a $200 million donation to the College of Letters, Arts and Sciences.

Universities like Louisville and Wyoming attribute part of their success to being flexible in how they've approached donors. In the past, institutions tended to focus on large cash donations, most often paid out over five years. But officials say donors are now interested in structuring their gifts to pay out over a longer period of time; having payments "balloon" at the end of the giving period; or pledging to give as part of their estates. Institutions are likely to continue to focus on these sorts of arrangements to meet goals in coming years, Goldsmith said.

Colleges have also seen corporations make up a larger share of the donor pool than in the past. Ben Blalock, president of the University of Wyoming Foundation, the university's fund-raising arm, said part of his office's success is attributable to companies making donations to the university's School of Energy Resources, which opened in 2006.

And it hasn't just been large research universities receiving donations either, observers say. While larger and older institutions like USC and Columbia tend to have the alumni network and infrastructure in place to run large campaigns, several smaller institutions have also been successful during the downturn. "Those organizations that have really strong principles guiding their fund-raising, who focus on donors and donor relationships more than just on getting the cash they need, those people are doing fine in this environment," said Kathryn W. Miree, a consultant to nonprofit groups on development issues. While some institutions have not had much success at fund-raising, the divide has been attributable to how they run their fund-raising offices rather than institutional size, Miree said.

Miree and Fellows both noted that several institutions have invested in fund-raising efforts in recent years as other sources of revenue have decreased. Those investments will likely pay dividends over the next few years, as the economy recovers.

While fund-raising officials say there is reason to be optimistic, they note that Southern California's unprecedented goal is a tall order.

Major gifts of more than a million dollars, which in recent years have made up the bulk of money brought in during major campaigns, tend to track pretty closely with the stock market, Fellows said. To reach its $6-billion goal, Southern California will likely have to rely on a lot of these major gifts. If the economy falters or growth remains slow, history shows that such gifts could be tough to come by.

But others say that it is unlikely that the university is leaping before it looks. "Universities do pretty thorough work before they set goals," Goldsmith said. "They undergo a feasibility study and explore whether they have the donor base to help them reach their goal. They wouldn't do it if they didn't have a pretty good sense that it’s doable."

 

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