Alumni | Philanthropy

Course Correction: Will the Coronavirus Crisis Upend the Higher Ed Fundraising Model?

INSIDE PHILANTHROPY   |  April 8, 2020 by Mike Scutari

A few weeks before the pandemic turned higher ed fundraising upside down, Public Administration Review (PAR) published a study titled “Understanding Motivations of Mega-Gift Donors to Higher Education: A Qualitative Study.”

By attempting to explain what motivates donors to make mega-gifts, the study was an informative read before the coronavirus hit. It’s even more important now, since it’s precisely these donors who will give less during an economic downturn. Research from EAB found that in the aftermath of the Great Recession, universities saw a 33.1 percent drop in the three largest gifts between fiscal year 2008 and 2009. “Giving at the top of the pyramid took a disproportionately big hit,” wrote EAB’s Jeff Martin.

It gets worse. Fundraisers are far more reliant on mega-gifts now than a decade ago. Donald Hasseltine, Aspen Leadership Group senior consultant and former vice president for development at Brown University, found that the top 10 percent of donors provided 94% of the total dollars in 2013, compared to 87% in 2006. The top 1% provide nearly 80% of the total dollars, compared to 64% 10 years ago.

And in 2018, Marts and Lundy found that the total value of gifts exceeding $10 million to universities was up 25% over 2017 the previous year. The increase, the report stated, was due to the proliferation of super mega-gifts at the $50 million to $99 million and $100 million+ levels, which increased in number by 70% and in total value by 47% from 2016. The Marts and Lundy authors attributed this trend to tax reform, the rise in donor-advised funds, and, most ominously, a “strong stock market.”

While fundraisers won’t abandon years-in-the-making mega-gifts, the coronavirus and the recession that follows will force donors to revisit the size and scope of their commitments in the short term. Meanwhile, the crisis has accomplished what seemed impossible as recently as three months ago: It has compelled previously disengaged middle-of-the-pyramid alumni to provide immediate emergency support for students at an unprecedented scale. And so the big question moving forward is the extent to which fundraisers can keep these donors in the fold while weighing the pros and cons of mega-giving in the age of COVID-19.

What Motivates Mega-Donors?

Drawing on the media coverage of mega-gifts, the authors of the PAR study created and qualitatively analyzed donor biographies to examine motivations and evolution in motivations. Click here, should you crave a deeper dive into the study’s methodology. For the sake of brevity, I’ll focus on the main findings.

The study concludes that mega-gift donor motivations fall into four broad categories: altruism, exchange (i.e., “self-interest”), desire to have impact, and leaving a legacy. The authors acknowledge that many mega-donors also have “mixed motives, combining altruism and self-interest.”

As you’d expect, there’s a ton of nuance at play. For instance, “self-interest” can mean anything from reaping generous tax benefits to intangible perks like a reputational boost or “warm feelings and the joy of giving.” Moreover, if a gift was not covered by the media, the authors did not include it in the donor biography. Authors also acknowledge that “media coverage of a gift, even including donor quotations, may not reveal all motivations in all cases.”

The study included an excerpt of the donor biography of billionaire financier David Booth and three of his mega-gifts. Citing Booth’s 2005 $6 million gift earmarked for the University of Kansas’ (UK) fieldhouse, the authors quoted Jim Marchiony, associate athletics director for external affairs, who said that the gift “gives a place to celebrate KU athletics.” The implication here is that Marchiony is channeling Booth’s motivations.

For a more recent window into what motivates Booth, we should refer to his 2017 $50 million gift to KU, earmarked for its football facilities. Calling his donation “a long-term thing,” he said, “It’s like the stock market… You play for the long haul. You try to do the right thing, and that’s all you can do.”

Booth’s rationale echoes the familiar and repeatedly debunked line of thinking employed by proponents of big-time athletics: The “investment” in a football facility will burnish KU’s reputation, make it more attractive to applicants, and better engage crucial athletic boosters.

A Focus on “Impact”

The most commonly observed subcategories of mega-donor motivations cited by authors of the PAR study are “altruism arising from moral principles and values, exchange in the form of repayment for benefits already received, and desire to have an impact to advance either a specific organization or a specific cause.”

Authors cited the “desire to have an impact,” whether to “increase the quality and/or reputation” of a university, as the “most common motivation identified in our research.” Mega-gift donors today are “interested in supporting innovation and entrepreneurship programs and cross-disciplinary approaches to solving social problems, and they are willing to go beyond their alma maters.”

The PAR study corroborates findings from a recent Nonprofit Times survey on mega-givers. Compiled by Joshua Else, associate vice president for development at Johns Hopkins University, the report found that 85 percent of donors want to give with “better impact.”

While it’s hard to argue with either study’s findings—of course mega-donors want to have an “impact”—it’s also important to remember the inherent subjectivity of such terms. Michael Bloomberg made an “impact” for the students that will benefit from his $1.8 billion financial aid gift to Johns Hopkins. But his impact would have been exponentially greater had he directed his money toward an underfunded community college or a public university. “Impact,” in other words, is in the eye of the beholder-donor.

The Bloomberg analogy is apt because it also acknowledges the fluidity of donor motivations. His gift sought to address a growing area of donor concern over the past few years—boosting access to underrepresented students at elite universities. Similarly, the authors of the PAR study analyzed media coverage of Booth’s KU fieldhouse gift all the way back in 2005. If Booth’s motivations have substantially evolved in the last 15 years, it’s probably because the facts on the ground have changed, thereby rendering speculation into his frame of mind in 2005 effectively moot.

The Case for Mega-Gifts

All of which brings me back to the elephant in the room. As the coronavirus continues to upend higher education, the two big questions facing fundraisers shouldn’t involve what motivates mega-donors—we already know the answer; it’s “all sorts of things”—or if they’ll rein in giving in the event of a downturn, since research gleaned from the Great Recession suggests they will.

Rather, the bigger question was recently posed to me by Michael Poliakoff, president of the Washington, D.C.-based American Council of Trustees and Alumni: “I’m curious to see whether in the short term this upends the trend of mega-gifts we’ve seen emerge in recent years, with a few philanthropists jumping in to contribute very large gifts to help colleges in this time of crisis, or whether we’ll see the opposite—a surge of grassroots support in the form of small gifts from alumni.”

Logic suggests it would be myopic for fundraisers to pivot away from their mega-giving patrons. As Aspen Leadership Group’s Hasseltine notes, mega-gifts generate breathless brand-building headlines and exude a sense of momentum and efficiency—“lots of return in a short period of time.”

University officials have become particularly adept at spinning restricted gifts that serve a fraction of the student population as a mechanism to support the greater good. For instance, New York’s Binghamton University (BU) recently netted a $60 million anonymous gift earmarked for the construction of a new baseball stadium complex. President Harvey Stenger said, “Gifts like this get headlines, which will raise the visibility of the entire university. But equally important is the impact it has on our other current and future donors.”

Moreover, public universities, starved of state funding, desperately needed mega-gifts even before the current crisis. In 2016, California received $1.83 billion in total mega-gifts of at least $10 million, topping the list of donation recipients compared to any other state, according to data by The Chronicle of Philanthropy.

The Case Against Mega-Gifts

Despite these economic realities, some commentators have been building a compelling case against mega-gifts long before COVID-19.

For starters, mega-gifts aren’t particularly efficient. Mega-donor skeptic Hasseltine cited a Brown University study which found that 94 percent of $1 million-level alumni donors made a gift to the university within the first 10 years of graduation and were consistent donors for a decade or more before making a seven-figure commitment. Universities can also accumulate unforeseen “soft” and “hard” costs associated with controversial mega-gifts that imperil the school’s academic independence.

Mega-gifts also raise familiar questions about “big philanthropy” involving who, exactly, is running the show. Consider recent developments at the University of Virginia (UVA) and UC Berkeley. Both schools are public institutions with rich liberal arts traditions. Both recently netted super-mega-gifts—$120 million and $252 million respectively—to create new schools devoted to data sciences.

Commenting on the UVA mega-gift, The Cavalier Daily’s Katherine Smith wrote, “As long as institutions remain bound to cash flow coming from the top 1%, students, faculty, staff and alumni are going to have to give up control of the direction of where their resources are headed.”

The irony is that the solution to this problem—more ordinary alumni stepping up with smaller gifts—has become a harder sell in an era when the super-rich dominate campus fundraising, making rank-and-file donors feel irrelevant. “Participation by new donors is very important, and I would love to see that trend at Yale reverse,” said Yale President Peter Salovey. “High rates of participation are good for the university financially, and create a sense of psychological commitment by alumni to the university.” Salovey’s comment came not long after the university agreed to name an iconic campus center at Yale after the private equity billionaire Stephen Schwarzman in return for a $15o million gift.

Reengaging Alienated Donors

It’s understandable that alumni who see mega-donors writing nine-figure checks might conclude that their $1,500 charitable donation would have a far greater impact at a local nonprofit. Commentators have also attributed the decline in middle-of-the-pyramid alumni giving to a perfect storm of causes—stagnant middle-class incomes, campus administrators who “wilt before the activists like flowers,” and the fact that younger debt-ridden alumni have no money to give.

The coronavirus has altered this calculus. Donors across all income brackets are contributing to emergency funds knowing that their donation, no matter the size, will have an immediate impact on students. The same can’t be said for a new academic building that has blown past its budget and is set for completion sometime in the indeterminate future.

Fundraisers realize that a deep, broad donor base encompassing a diverse cross-section of the alumni community is subjectively “better” and less risky to one built on the shaky foundation of a handful of fickle mega-donors whose generosity dries up when the economy enters bear territory. But up until now, market forces, a widening wealth gap, cuts to public funding and the demands of an always-on fundraising apparatus have forced them to pick the low-hanging mega-fruit.

The pandemic has brought disengaged alumni back into the fold. Whether they’ll stay there remains to be seen.


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