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As Donors Retrench, Challenges for Universities

Credit...Minh Uong

AS the stock market soared for two decades, college and university endowments swelled with gifts. Over the last 10 years, contributions to higher education have risen an average of 4.1 percent a year, despite the downturn.

These endowments allowed many public universities to help offset declines in government contributions and let many private universities increase financial aid to a widening number of families that could not afford the high costs of education.

But in 2009, giving to 1,027 universities and colleges plummeted 11.9 percent, to $27.85 billion, according to data compiled by the Council for Aid to Education, the greatest single annual decline since the Depression. Fund-raising advisers and experts anticipate a slow recovery.

Indicators are that overall giving for fiscal 2010 may be flat; data for the year, which generally ended June 30, is not available yet. A handful of institutions have already released their numbers. At Harvard, for example, giving was down 1 percent, to $596 million, and Yale also had a slight decline. Chicago was up 1 percent, and for the University of Texas, Austin, giving rose more than 3 percent.

Behind those numbers are changes in giving styles that make the job of fund-raisers even more difficult. “I have been in the business for 40 years, and I have never seen such a tough environment,” said William P. McGoldrick, a partner at Washburn & McGoldrick in Latham, N.Y., which advises higher education institutions on how to raise money.

He added: “Whether you are supporting a child who does not have a job or benefits, or worrying about imminent changes in the tax law, people are very cautious. Donors, especially major donors, ask tougher questions about institutions than they did when they trusted leadership throughout society.”

In the past, donors were often willing to make gifts that were paid over a number of years, but fund-raisers are finding a reluctance to commit for more than one year.

“Instead of a donor pledging a gift for $500,000 over five years, they will give $100,000 and wait and see about the rest,” said Trish Jackson, vice president for development at Smith College.

For the University of Texas, Austin, about 30 percent of donors who make a bequest decline to put a value on the amount of the gift because they are unsure of what it will be worth, said Kevin Hegarty, vice president and chief financial officer.

John Lippincott, president of the Council for Advancement and Support to Education, which provides services in alumni relations, said: “The greatest impact of the recession, aside from the impact on people’s net worth, is that it has created great uncertainty. In that atmosphere, people are reluctant to make long-term commitments.”

Long-term gifts are extremely important to institutions because they provide certainty that a specific amount of money is guaranteed to come into the endowment in subsequent years, whatever the economic situation.

As the gap between the superwealthy and others has increased, fund-raisers have come under pressure to court the superrich. “It used to be that 20 percent of your donors provided 80 percent of your revenue,” said Tom Farrell, vice president for alumni relations at the University of Chicago. “Today, 5 to 10 percent of your donors generate 80 percent to 90 percent of your revenue.”

At Yale, for example, $3.2 billion has been raised toward its $3.5 billion capital campaign. “According to our analysis, one-half of 1 percent of the donors have given 75 percent of the total,” said Inge Reichenbach, vice president for development.

As a result, some universities have been honing their skills at courting the wealthiest donors. Institutions have developed programs to reach out to donors who can give major gifts, which for some start at $1 million and for others, $5 million, said Tim Rippinger, senior associate vice president for development at Marquette University in Milwaukee.

At Columbia, which is completing a $4 billion campaign that started six years ago, Lee Bollinger, the president, said, “Big ideas attract big gifts, because people of big wealth respond to opportunities for major institutional advancement and big opportunities for growth.”

Columbia is planning a second business school campus in Manhattanville, to which the financier Henry R. Kravis has pledged $100 million. The late John Werner Kluge, who built the Metromedia broadcast empire, pledged $400 million for financial aid.

In 2009, gifts to the 20 universities that raised the largest amounts of money accounted for 26.2 percent of all giving. Among them were Stanford, Harvard, Cornell, and the Universities of Michigan, North Carolina at Chapel Hill and California at Berkeley and at San Francisco.

The slowdown in giving comes at a crucial time for American colleges, as state governments continue to cut financing. Mr. Hegarty said that in the mid-1980s, the University of Texas, Austin, received roughly 50 percent of its financing from the government. Today it is 14 percent.

“And the tuition is controlled by the government,” he added. That means the university cannot raise tuition to meet any shortfall.

At Stanford, Martin Shell, vice president for development, said that despite the increase in support that came with the stimulus, in real terms, government financing has been declining, so the university is increasing its emphasis on fund-raising, particularly for gifts that can be used for general budget purposes, as opposed to restricted gifts.

Some colleges report an increase in anonymous giving. “Out of our top gifts over $1 million, probably about 30 percent are anonymous,” Mr. Rippinger of Marquette said. “It used to be a rarity. Now people want to be charitable, but they don’t want to advertise. They think it will bring an unfavorable light on them, because in a bizarre way, they think it might look flashy, or people worry that others will seek them out to donate to their list of things.”

Mr. Shell said that he, too, was finding more interest in anonymous giving. “Now, some of our donors are saying that we can use their names privately with other people, but they do not want any publicity about their gifts.”

Perilously for some colleges, including the University of Texas, Austin, as budgets are cut, so are fund-raising operations.

The good news for Stanford, at least, is that though giving was down last year, the number of donors rose. “People want to help, and they are participating,” Mr. Shell said.

A version of this article appears in print on  , Section F, Page 17 of the New York edition with the headline: As Donors Retrench, Challenges for Universities. Order Reprints | Today’s Paper | Subscribe

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