When the State Giveth, and Taketh

Public college foundations raise money in part to offset tight state budgets. But Rhode Island's governor is tapping foundation money to pay for state business.

February 19, 2016

When public college foundations ask for donations, they tell a familiar story: state funding is tight, and donors can help support the community. Their dollars fund scholarships, buildings, academic programs. And almost always, the foundations’ money goes directly to the colleges they support.

But in Rhode Island, Governor Gina Raimondo has other ideas.

It started with a trip to Switzerland. Raimondo wanted to attend the World Economic Forum in Davos, and the University of Rhode Island Foundation offered to cover up to $10,000 of her travel costs.

During the same week of her request, when Raimondo wanted a state innovation office, another public institution's foundation, the Rhode Island College Foundation, agreed to create it. The office’s one employee -- a chief innovation officer -- will make $210,000 a year and serve on the governor’s cabinet.

“It's kind of a step out of the box in terms of the traditional ways to support a college,” said Edwin R. Pacheco, the Rhode Island College Foundation’s associate vice president for college advancement and external affairs.

He’s right -- using foundation money to fund the state is rare. While it's not unheard of for private, nonprofit colleges to make payments in lieu of taxes, public college foundations are nonprofit fund-raising groups that support specific institutions; typically, they stick to funding the colleges they were set up to support.

After learning about the trip to Davos, many alumni of and donors to the University of Rhode Island pushed back. They argued that the foundation’s funds should be used to fund the state's flagship university, not the governor’s travel budget. In the days following the announcement, they contacted the foundation to express their concerns.

Lorne Adrain, the foundation’s executive board chair, estimated that the decision put $1.5 million in potential donations at risk, and at least one of the foundation’s trustees resigned. “I made a mistake in not considering the range of perspective our donors might have,” he wrote in a formal apology.

‘It Just Doesn’t Look Right’

Raimondo never made it to Switzerland; hours before her flight, she canceled the trip due to severe weather. But her requests spurred debate over the role of public college foundations and the kinds of initiatives they should support.

At Rhode Island College, quite a few donors contacted the foundation after it announced that it would fund the innovation office. “There has been some pushback,” Pacheco said. “But any unprecedented initiative such as this is going to raise questions.”

After talking with alumni and donors, Pacheco said most of them are willing to give the innovation office a chance. But opponents say it isn’t higher education’s job to fund the state, and they worry that the foundation is crossing a line.

“It just doesn't look right,” said John Thelin, a professor of higher education history at the University of Kentucky. “Probably that amount of money is fairly large for a small, underfunded institution like Rhode Island College.”

For Thelin, the problem isn’t necessarily a formal violation of donor intent. In both Rhode Island foundations, the governor’s money came from unrestricted funds. That’s money not designated by a donor for a specific purpose, like scholarships or academic programs. It can be used however the foundation sees fit, without going against the donors’ wishes.

But even if donors don’t place restrictions on their gifts, do they expect it to be used to fund state business?

“If you go to Rhode Island College Foundation's website and read about the kinds of things they give as examples that they fund,” Thelin said, “they seem to be campus specific. A new building, a new project, a new program. And so it’s very out of character.”

But while it’s rare for foundations to fund state projects, it’s not unheard of. Raimondo got the idea from the University of Connecticut Foundation, which paid for two trips by Governor Dannel Malloy in 2012.

Over 90 percent of the UConn foundation’s funds are restricted, according to Derek Slap, the foundation’s associate vice president for external relations. But to fund the governor’s travel, the organization only tapped unrestricted donations.

“When a donor gives a gift for a particular reason, we have an obligation to make sure they are spent as the donor wants them to be spent,” Pacheco said. “That is our top priority, and we followed that in this case.”

‘Why Give?’

On the University of Rhode Island Foundation’s website, there is a section titled “Why Give?” The site goes on to answer its own question -- and it cites, among other reasons, the gap between state funding and the university’s operating costs.

“With state support to URI hovering at under 10 percent, and over 75 percent of all URI students receiving some form of financial aid,” it reads, “private support remains critical to the university.”

For potential donors, Thelin said, there is a contradiction here: they know their alma mater is getting less state support, so they decide to make a donation. But then they find out that their alma mater is spending money on the state government -- the same state government that is giving the college less money.

But the foundations argue that there is no contradiction, because the initiatives they are funding also serve their institutions.

At Rhode Island College, the state innovation office will mean research opportunities, fellowships and internships for faculty and students, Pacheco said. “Students, once they graduate from here, will be that much more competitive in the workplace.”

In Connecticut, Slap made the same argument. “Part of the university's mission and academic plan is to expand international partnerships,” he said. “This was something that was aligned with the mission of the university.”


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