College fundraising revenue will likely drop over the next two years as donors close their wallets to wait out the pandemic and resulting economic downturn, according to a new survey released today.
The survey by EAB, a higher education technology and consulting firm, queried 110 university fundraising professionals about current revenue projections. It found that more than 40 percent of colleges are projecting a 10 percent or larger decline in fundraising revenue for fiscal year 2020, which concludes for most institutions at the end of this month. More than one in five institutions expect fundraising revenue to fall by at least 20 percent, the survey showed.
In fiscal 2021, the declines are projected to be even steeper. Nearly 45 percent of institutions project double-digit declines in fundraising revenue, and a growing number of colleges project a decline of 30 percent or more compared to 2019 totals.
Fundraising officers are having trouble reaching new donors, said Jeff Martin, EAB senior director.
“Consistently I’m hearing that front-line fundraisers are having trouble getting new prospects to take meetings. They’re having trouble opening up the conversation about giving with people who they don’t have established relationships with,” he said.
Major gifts are likely to be hit harder than smaller donations, according to the survey. Fundraising officers said they’re more likely to see revenue decline from gifts under $1 million by between 10 percent and 19 percent. But revenue declines from larger gifts are projected at closer to 20 percent and 30 percent. Small gift revenue, in general, tends to be more reliable than revenue from gifts above $1 million, which are more volatile, Martin said.
“The law of small numbers applies. Namely, that there are so few gifts above that level that fundraising returns there are just going to be prone to extremes,” he said. “If a single individual decides not to give a cornerstone gift for a campaign, then the campaign is no longer viable.”
Martin predicts that athletics could see a hit in giving because donors to athletic departments are on average more wealthy than donors to other college programs, like libraries. Gifts restricted for spending on current operations -- in other words, gifts "earmarked for a specific, immediate purpose" -- will likely grow as they have during past recessions, while unrestricted gifts will decline, Martin said.
Bill Stanczykiewicz, assistant dean at the Indiana University-Purdue University Indianapolis’s Lilly Family School of Philanthropy, noted that trends in charitable giving during a recession tend to take on a V shape, with steep declines followed by steep recoveries over a period of several years. During the Great Recession, charitable giving declined by 5 percent, he said. In the years following, from 2014 to 2018, “we had seen the most generous level of charitable giving in U.S. history.”
That doesn’t necessarily mean the current economic downturn will follow the same trend, Stanczykiewicz said.
“As my research colleagues like to say, if you’ve seen one recession, you’ve seen one recession. There are some commonalities, but each one is distinct,” he said.
Colleges are facing financial pressure on all fronts as a result of the pandemic, and the number of colleges expected to close has increased. Sometimes, on the brink of closure, colleges rely on a last-ditch fundraising push, but this isn’t a foolproof strategy at any time, Martin said.
“I would say that those institutions that hope they can rely on philanthropy to build a sustainable enterprise are likely misguided. There will certainly be exceptions to that,” Martin said, pointing to Sweet Briar College and Hampshire College. “For the average institution, fundraising, as big as the revenue numbers are, is still a small slice in the entire budgetary pie.”
Along with revenue projections, fundraising practices have also been impacted by the pandemic. Since shifting to remote work, many donor meetings have been brought online, and fundraising officers are reaching more donors in shorter amounts of time, Martin said. He predicts some of these practices will stick around.
“I think a lot of gift officers previously adhered to a ‘visit or nothing’ mentality, whereby if I couldn’t go see the person in person, then I couldn’t engage with them at all. That’s going to erode to some extent,” he said.
Stanczykiewicz said that despite the decline in consumer spending, personal income increased by 11 percent in April, in part due to government-issued stimulus checks. April also saw a 33 percent increase in personal savings.
“When you see this increase in the savings rate,” he said, “you just have to wonder if the economy comes back strongly, what are people going to do with that money?”