Build, Baby, Build: Higher Ed Funders Keep the Spigot Open for Construction Projects

Last December, I asked, “Is there a limit to alumni support for tuition-busting construction projects?” Two months later, we received an answer courtesy of the Council for Advancement and Support of Education (CASE), which found that funder support for capital purposes in 2019 increased 6.5 percent, adjusted for inflation, over the previous year. This was the third consecutive year in which gifts for capital purposes increased more than twice as much as those for current operations.

To be clear, the increase wasn’t solely driven by gifts for construction projects. CASE’s definition of “capital purposes” includes gifts for property, buildings, and equipment; loan funds deferred gifts; and endowments. At roughly $12 billion, contributions to restricted endowments represented the largest percentage of capital purpose gifts reported by respondents. Nonetheless, gifts for “property, buildings, and equipment” clocked in at $4.7 billion, a 5.5 percent increase in average over 2018 within the “capital purposes” category and a 4.1 percent increase in total support. 

The takeaway here is obvious. Funder support for brick-and-mortar projects continues to rise, despite the fact that an institution can expect to pay twice the initial cost of a new building to maintain it. As a result, administrators pass these expenses onto students in the form of higher tuition and with it, more debt. An overview of some recent gifts underscores why funders remain committed to ambitious shovel-ready initiatives.

STEM

Jim and Thomas Duff, brothers and business leaders based in Hattiesburg, Mississippi, gave $26 million to construct a new STEM facility at the University of Mississippi (UM). With a $160 million total budget, the 202,000 square-foot Jim and Thomas Duff Center for Science and Technology Innovation will be the largest single construction project in the university’s Oxford campus history. The brothers run Duff Capital Investors, a Columbia, Mississippi-based holding company with total revenue of more than $2.6 billion. Last May, Forbes dubbed the brothers “the richest people in Mississippi.”

The gift is another example of how the STEM gold rush, which once seemed confined to the usual suspects located on the coasts, continues to branch out to smaller university towns thanks to the regional philanthropy boom and donors’ impulse to address a projected skills gap. According to the National Math and Science Initiative, the U.S. may be short as many as 1 million skilled workers over the next decade. 

Thomas Duff, who is also a member of Mississippi’s Institutions on Higher Learning Board, the governing body responsible for policy and financial overusing of the state’s eight public universities, echoed these sentiments. “It is absolutely crucial to our state’s future to have an educated STEM workforce, he said. “We want to see talented high school graduates in our state have exceptional opportunities to prepare for some of the most rewarding careers possible. It’s what they deserve, and it’s what Mississippi needs.”

Other private support for the building includes a $25 million gift from the Gertrude C. Ford Foundation in Jackson, a longtime donor to Ole Miss. The Duff brothers previously contributed $1 million previously to support UM’s Flagship Constellations research initiative.

Funders have also dug deep for new buildings to support the burgeoning field of data sciences at the University of Wisconsin, the University of Texas, and the University of Virginia (UVA).

Student Health

Highmark Health, the Pittsburgh-based nonprofit health company, announced a $35 million grant from Highmark Inc. to support the construction of a new student health, wellness and athletics center at Carnegie Mellon University (CMU). The 160,000-square-foot building will bring student well-being services under one roof on the university’s Pittsburgh campus.

The gift highlights two key drivers behind funders’ ongoing support for big capital projects—an interest in catalyzing regional economic development and extending the corporate brand. “Highmark Health is committed to continuing to invest in the western Pennsylvania region, both in our continued expansion of Allegheny Health Network and in our partnerships with organizations who share our vision for a health system that provides remarkable experiences to consumers,” said David Holmberg, president and CEO of Highmark Health.

The gift, which came on the heels of the Huntsman Family’s $150 million gift to the University of Utah to fund a new mental health institute, finds another funder zeroing on what CMU calls student “physical and psychological well-being.” This type of support often includes a strong capital component. “This new centralized facility will improve access to health services, counseling, wellness and athletics activities,” Highmark’s Holmberg said.

Big capital gifts share two additional common ingredients. They’re often preceded by a series of smaller commitments and integrated into a larger fundraising campaign. In 2013, CMU and Highmark Health established a research partnership to identify and accelerate the development of health information technologies with the potential to impact patient care and the patient’s experience. To date, Highmark Inc. has invested $16 million in the partnership. Highmark’s recent gift supports CMU’s $2 billion Make Possible: The Campaign for Carnegie Mellon University, which launched in late 2019.

Athletics

In 2018, CASE found that alumni prioritized gifts earmarked for athletics over student financial aid and research. Recent anecdotal evidence suggests donors’ interest in construction projects earmarked for athletic purposes remains strong.

In mid-February, an anonymous donor gave New York’s Binghamton University (BU) $60 million, earmarked for the construction of a new baseball stadium complex. The 84,000 square-foot facility will include a new stadium, clubhouse, and indoor training facility. The gift is the largest in the school’s history.

The gift came a couple of months after the Moody Foundation, made a $130 million naming rights gift towards the University of Texas’ new basketball area. The gift for the new facility, dubbed the Moody Center, marks the single largest gift from a foundation in the University of Texas’ history. A big proponent of capital projects, Moody’s name graces dozens of buildings across Texas.

Despite a student debt crisis that has eclipsed $1.6 trillion and foundations’ near-universal interest in promoting “student access and support” for underrepresented demographics, funders continue to write huge checks for construction projects that serve a fraction of the financially strapped student population. Why?

First, donors dispute the idea that athletic gifts don’t have a larger ripple effect. Speaking of his school’s $60 million gift, BU president 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. It helps generate pride among friends and alumni who in-turn will look for ways to engage with their passion on the campus.” Second, just like STEM gifts, athletic programs create jobs. BU’s Stegner said the school will employ 473 workers during year one of the project.

As for the project’s $60 million price tag—it’s six times as large as the Karsh Family Foundation’s recent gift to endow Howard University’s STEM scholarship program—BU director of athletics Patrick Elliott cites the installation of “flight-scope” and “biometric technology” in the complex’s batting cages. “It’s what the donor family wants,” Elliot said.

Fair enough. But what do students want? In a Forbes piece criticizing the gift, Michael Poliakoff, president of the American Council of Trustees and Alumni, noted that $60 million could give full rides to 6,089 low-income, in-state BU students, or the university could begin a campaign to discount tuition, which, adjusting for inflation, has risen 39 percent since 2008. “Any dubious investment can be justified if it contributes to a university’s ‘profile,’” he wrote.

A Collaborative Residential Experience

Purdue University president Mitch Daniels, who has earned plaudits for cutting tuition while overseeing an increase in undergraduate applicants, once said, “There are a lot of people who think residential higher education is on borrowed time.” Donors, however, seem to disagree.

A unique variant on funders’ infatuation with the residential undergraduate experience comes to us from billionaire Robin Hood Foundation founder Paul Tudor Jones II and his wife, Sonia M. Jones. A big fan of capital projects, Jones gave his alma mater, UVA, a $20 million gift for a sports arena in 2001 and $12 million to establish the Contemplative Sciences Center in 2012.

UVA recently announced a $40 million gift from the Joneses to fund construction of Contemplative Commons, a building “designed to bring students and faculty from different schools together, foster collaboration, and encourage new ways of teaching and learning.” Jones and UVA envision Contemplative Commons and its new School of Data Science, made possible by a $120 million commitment from alumnus Jaffray Woodriff, as a “21st-century answer to the problem of academic isolation.”

UVA’s building boom surfaces a familiar question. By solving the problem of “academic isolation,” are alumni donors exacerbating different problems? Last year, community residents expressed concern that the new School of Data Science would drive up prices in an already expensive housing market, squeezing students and the school’s low-wage workers. In response, Phil Bourne, the acting dean of the School of Data Science, predicted that the university will not see an increase in undergraduate enrollment with the creation of the new school.

To read the article as it originally appeared in Inside Philanthropy, click here >>