Don't Panic

October 23, 2008

John Fry is skipping over some of the biggest names in his Rolodex these days. With the economy in a downward spiral, the Franklin & Marshall College president says he’s not calling on donors who have fallen on hard times.

“I think in this kind of environment you have to be very sensitive to people’s situations,” Fry said Tuesday. “It’s been a very interesting two weeks, because on one hand I’ve purposely avoided visiting or soliciting [certain] people.… On the other hand, I know a significant number of other people who are in better [economic] situations, and I’ve been actively soliciting them.

“Those who I know are going through direct turmoil in their businesses, I’ve been giving them sort of a chance to recover.”

Franklin & Marshall, a private college in Lancaster, Pa., had planned to launch the quiet phase of its $250 million capital campaign in July 2009. Fry may now postpone that launch for as much as a year, hoping the market will begin to stabilize.

“I’m going to put that off probably for six to 12 months, but that doesn’t mean we’re not going to lay the groundwork,” he said.

Other than some small tactical changes, not much has changed in Franklin & Marshall’s development office, according to Fry. That sentiment is shared by a number of fund raisers across the country, who have publicly retained a sunny outlook -- despite the prospect of a recession and an unpredictable financial crisis that is crossing vital sectors of the economy.

A number of institutions have retained bold fund raising plans. The University of Texas at Austin, for instance, announced a $3 billion capital campaign this month.

Privately, fund raisers may be having different conversations. Matt Bisset, vice president for advancement at Eckerd College, in St. Petersburg, Fla., said member-restricted listservs are abuzz with development officers who are rethinking major campaigns.

“I’ve seen 35 to 40 [postings] from vice presidents at institutions that are saying they’re adjusting their goals and that they are slowing down,” said Bisset, who assures that Eckerd’s $80 million capital campaign is moving forward unabated.

History Offers Hope

Given historical trends, staying upbeat about fund raising during an economic downturn may not be Pollyanna-ish. The Giving USA Foundation, which has recorded total charitable donations from 1967 through 2007, reports that giving increased in current dollars for every year on record with the exception of 1987. The dip in 1987 is largely attributable to a change in tax law that prompted people to give early to maximize their tax breaks, according to Giving USA’s analysis.

Charitable giving has historically increased by an average of 6.2 percent, even in recession years, Giving USA reports. That’s 2.2 percentage points lower than giving in non-recession years.

Despite a history of growth in overall giving during recessions, higher education hasn’t always fared as well when viewed in isolation. In 2001, after 9/11, a recession led to a 1.2 percent decline in donations to colleges, according to the Council for Aid to Education's Voluntary Support of Education Survey. Colleges also saw a 3.5 percent decline in giving in 1987, the report found.

On the other hand, the downturns are usually brief and most colleges find a way through them, experts say.

“I think by nature my colleagues and I in the advancement field are genetically optimistic,” said John Lippincott, president of the Council for Advancement and Support of Education. “Part of that optimism comes by looking at the historical patterns, and giving to higher education rarely declines in absolute numbers even in difficult times. And even when that happens it bounces back quickly. What’s a little difficult is when you’re in the middle of it it’s hard to see where the end is.”

Never Let ‘Em See You Sweat

If some development officers are panicking, it’s best that they do so quietly, according to fund-raising consultants. It would be a mistake, for instance, for fund raisers at small, tuition-driven private colleges -- often viewed as the institutions at greatest risk in this economy -- to approach donors in desperation, according to Donald Summers, one consultant.

“That’s what they teach you the first day in fund raising school: It’s always a happy picture,” said Summers, director of Principal Consulting LLC. “There’s nothing to be gained by [saying], ‘Give or suffering will happen.’ Giving is fun; it’s optimistic.”

At the College of Saint Rose, there’s a mix of optimism and realism among fund raisers. The Albany, N.Y.-based college expects that unrestricted annual contributions, which typically bring in about $700,000, will probably be reduced in the next fiscal year by $100,000 or even $150,000.

“We believe, given our place in the market, that we’re going to come out of this thing – this economic mess that the country is in – that we will survive,” said Marcus Buckley, vice president for finance and administration. “Now what kind of shape we’re going to be in at the end of it all, I don’t think any institution -- save for the flagships -- really know the kind of shape they’re going to be in.”

Saint Rose has a relatively small endowment of $28 million, leaving little margin to weather a potentially long economic downturn that could reduce enrollments and tuition revenue. But the college has budgeted conservatively and continues to raise money aggressively, Buckley said.

“[Our] efforts toward fund raising have not abated,” he said. “They are doing as much, maybe even more than they were [last year].”

Staying Afloat

College leaders who have embarked on campaigns that target strategic goals will be loathe to surrender their visions, but that may be the byproduct of this economic downturn for some cash-strapped institutions, according to Rita Bornstein, former president of Rollins College and a professor of philanthropy and leadership. Small colleges that had hoped to bolster core programs or add tenure-track lines with fund raising may have to focus efforts instead on hiring adjunct faculty just to stay afloat, she said.

“They are going to do what they have to do to survive,” Bornstein said. “They’ll make some compromises.”

Rollins, which had an endowment of $35 million when Bornstein took over in 1990, is much better positioned now to weather the storm. Its endowment currently stands around $400 million, thanks in no small part to a $93 million bequest given by alumnus George Cornell in 2004.

Colleges with small endowments may need donors’ money for survival purposes, and that presents a tricky problem for fund raisers, Bornstein said. Colleges will have to get creative, promoting gifts for causes like adjunct hiring in a way that doesn’t smack of desperation, she said.

“It requires some ingenuity in how you package so you don’t look like a bag lady on the street begging for money,” she said.

Emory Exudes Confidence

If there’s an economic crisis afoot, it would be hard to tell from some of the nation’s wealthiest institutions. Emory University, which already boasts a $5.5 billion endowment, publicly launched a significant capital campaign last month.

Susan Cruse, senior vice president of development and alumni relations, is brimming with confidence about Emory’s plan to raise $1.6 billion by 2012.

“I have 50 years worth of data that says a recession doesn’t affect philanthropy,” said Cruse, citing Giving USA reports.

“Higher education is virtually recession proof, because we’re trying to solve problems,” she added.

Emory kicked off its public campaign in style. A black-tie ball hosted by the university featured “Cirque du Soleil-style” performances by acrobats, dancers and musicians, according to Emory’s student newspaper.

Cruse acknowledged that she heard “a little bit” of criticism from donors who found the event too lavish in light of the hardships many are suffering now. She stressed, however, that Emory’s peer institutions have hosted kick-off events that were far more costly.

“The people who were dissatisfied will come in a little bit later [with donations], and that’s probably what’s happening,” Cruse said. “I’m sure there are people who would say, ‘Why didn’t you use that money to do something [more meaningful]?’ and the fact is there wasn’t money there to do much of anything other than to thank people.”

Tactics for Troubled Times

In difficult economic times, fund raising consultants frequently suggest colleges go back to basics. That means connecting with donors who have given before, including the widowed spouses of once-great contributors.

“The June Cleavers of the world are deciding who's going to get the money, and the schools who are ignoring her right now are not going to be included with the other charities who are involved in her life,” said Robert Sharpe, a charitable gift planning consultant and president of the Sharpe Group.

Sharpe also stresses that colleges must be creative in helping donors to plan the timing of their gifts, accepting that economic uncertainty will make some people nervous about giving gifts outright.

“The college or university may have to compromise,” he said. “And instead of getting the million dollars now, they may have to get it after the death of an 80 year old, which is five years away.”

There's some uncertainty about which types of donors' giving patterns -- big or small, etc. -- may be most affected by the current economic environment. Joe Emmick, dean for college advancement at Wabash College, said that in past economic downturns he's seen small annual donors who contribute $100 to $500 either "don't give in a year or they give less." These donors typically have a pre-determined annual giving budget, and they're forced to make tough choices, Emmick said.

While fund raisers can point to some historical trends for guidance, there's continued concern that history may not mean much in these uncharted economic waters.

“The past is only at best a rough indicator of what may happen today,” Sharpe said. “Things are so different now than they were last time we saw a recession.”

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