Oversized Check From Reality

University of Virginia's $3 billion fund-raising campaign falls short at deadline, a victim of the economy and overly optimistic ambition.

January 5, 2012

In the last eight years, the University of Virginia raised about $2.6 billion in private giving.

Given the state of the economy, the volatility of the stock market, and the low rates of giving during the past few years, most institutions would trumpet that kind of giving as an outstanding achievement.

But for Virginia, the total is still $400 million short of the $3 billion goal the university said it would hit by Dec. 31 when it established the campaign in 2004. While administrators have extended the campaign until they reach $3 billion, the “Campaign for the University of Virginia” is one of the most high-profile fund-raising drives to fail to make its deadline in recent years.

“For campaigns that started prior to the recession, falling short has been the case more often than not,” said Donald M. Fellows, president and chief executive officer of Martz and Lundy, a fund-raising consulting firm. “The issue for Virginia is that institutions are not usually so visible. There aren’t that many campaigns of that magnitude, so they tend to attract more attention.”

The problems Virginia faced – a reluctance to give in the face of widespread economic uncertainty and a particular reluctance by donors capable of giving very large gifts, which are necessary for campaigns of more than a billion dollars – were not unusual or unexpected in the wake of the 2008 financial crisis.

 “While institutions will work very hard to set realizable goals at the outset because they want to position themselves for a successful outcome, events such as a significant recession can cause a shift in goals or change expectations regarding donor capacity, requiring a need for an extension,” said Rae Goldsmith, senior vice president for advancement resources for the Council for the Advancement and Support of Education, in an e-mail. “Most institutions will extend campaigns rather than fall short of their goal. The primary ramification of extending is that the achievement of the goals the campaign was designed to support will also likely be delayed. “

According to reports by CASE, about 30 percent of active or concluding campaigns were extended beyond originally stated goals in 2008-09. For 2009-10, about 25 percent of active or concluding campaigns were extended beyond originally stated goals. But most campaigns that did so were not of the magnitude of Virginia’s, and therefore did not attract the same level of attention.

Virginia's campaign is the first campaign of more than a billion dollars to extend its deadline without increasing its goal.

Columbia and Cornell universities might be the most comparable. Like Virginia, both went public with their campaigns in 2006, though the two were both aiming to reach $4 billion rather than $3 billion. But unlike Virginia, the two Ivy League institutions extended their campaigns and increased their final goals in December 2010 and October 2011, respectively. Administrators at both said the extensions were to capitalize on the momentum they had built through the campaign, rather than because they were falling short of their goal. Several universities also delayed the public launch of their campaigns of more than $1 billion when the economy soured.

But unlike other institutions that had some room at the outset, administrators said the the ambition inherent in Virginia's goal -- $3 billion was more than double the university’s previous campaign, and on a level more typical of an Ivy League institution than a public flagship – meant that everything needed to go right for the university to hit the number. “Consultants said that something in the $2 billion-plus range would have been a much safer approach,” said Robert D. Sweeney, senior vice president for development and public affairs at Virginia. “But our aspirations were greater than that.”

Sweeney said that, compared to campaigns such as Cornell’s and Columbia’s, Virginia’s was a larger stretch. While annual giving streams at private institutions such as Cornell and Columbia averaged around $400 million, Virginia only brought in about $200 million annually before the campaign. To make $3 billion in eight years, Virginia would have to almost double its rate of annual giving.

Another hindrance to Virginia’s fund-raising efforts was that the university had only been operating a large-scale fundraising apparatus for the last 20 years, so it had not established as fertile a pool as the major private institutions.

Administrators set the $3 billion goal in 2004. The university's previous campaign, which wrapped up in December of 2000, brought in $1.43 billion. To reach the $3 billion goal, the university would have to raise about a million dollars a day. When the campaign went public in 2006, the university had already secured gifts totaling $1 billion and was on track. The largest gift to date in the university’s campaign is a $100 million gift from Frank Batten, the former chief executive officer of Landmark Communications, in 2007, to create a school of leadership and public policy.

Sweeney said the university kept pace until September 2008, when Lehman Brothers filed for bankruptcy and the financial crisis began. Donors became more reluctant and giving slowed. The university did not hit $2 billion until February 2011, at which point giving started to return to previous levels.

Fellows said one of the major obstacles facing campaigns like Virginia’s is the lack of gifts larger than $25 million. For campaigns ongoing or ending in 2010 of more than $1 billion, 85 percent of the money raised came from the top 1 percent of donors, and 96 percent of the money raised came from the top 10 percent of donors, according to a report by CASE. But those donors were particularly reluctant to give in 2009 and much of 2010. While gifts of most sizes have started to return to previous levels, Fellows said, gifts of more than $20 million are not rebounding at the same rate.

Consultants such as Fellows said Virginia’s failure to meet its goal by the prescribed deadline won’t have any negative ramifications for the university, particularly because of the time frame under which the campaign operated.

Sweeney said despite not reaching the $3 billion mark by the end of the year, that he was proud of the university’s fund-raising efforts. He said he is certain that if there had not been a financial crisis, the university would have hit the $3 billion mark. “I’ve always come in on time and track,” Sweeney said. “Even in the last weeks of December we were redoubling our efforts through the holidays to keep this thing moving at a good pace.”

He also said the effort has left the university in a good place for its next campaign, which will likely be more ambitious than the current goal and tied to the university’s bicentennial in 2019. He said the institution has created a cadre of significant donors in their 40s and 50s who will likely be in position to give more next time around, as well as a significant volunteer structure.

Sweeney said the university is in talks about several potential gifts of at least $100 million. He said an optimistic scenario would be meeting the goal by June 30.


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