College Fundraising Outlook Darkens After Surge

Feb. 25, 2009, Wall Street Journal — Colleges and universities led by Stanford, Harvard and Columbia raised a record $31.6 billion in fiscal year 2008, but their fund-raising outlook has darkened amid the economic crisis.

A survey of 1,052 institutions conducted by the nonprofit Council for Aid to Education shows college fund raising rose 6.2% last year. But that predated the sharp stock-market decline that began last September because most academic fiscal years end June 30. Fund raising in academia is highly sensitive to stock prices because many donors, for tax reasons, give appreciated stock instead of cash.

Ann E. Kaplan, who directs the study, said she has spoken with about 20 institutions recently and all indicated difficulty in fund raising this year, saying they "hit a wall" in January. Ms. Kaplan said she wouldn't be surprised if the current year ended up being worse than fiscal 1975, when contributions fell 3.6%, the biggest drop in half a century. Institutions have already reported to researchers that some multiyear donations have been renegotiated to give philanthropists more time to honor their pledges.

The recent numbers suggest another challenge for higher education, as even the wealthiest schools are suffering painful budget cuts after steep losses in their endowments.

Any decline in giving would follow a decade of dazzling generosity to colleges. Over the past 10 years, contributions to colleges have risen at a 5.7% annual clip.

Still, the survey demonstrated a sharp divide among the haves and have-nots in higher education. The top 20 institutions received 27% of all gifts, with many smaller colleges showing declines in giving. Ms. Kaplan said the wealthiest colleges tended to benefit from successful billion-dollar-plus capital campaigns. But since the money in such efforts tends to flow into endowments, where it is invested, she noted that much was likely lost in the market downturn of recent months.

For the fourth straight year, Stanford University, which has long benefited from its ties to Silicon Valley, topped the annual fund-raising list, receiving $785 million in its 2008 fiscal year, ended in August. Stanford was followed by Harvard's nearly $651 million, Columbia's $495 million and Yale's $487 million.

Lisa Lapin, a Stanford spokeswoman, said the university is in the midst of a five-year, $4.3 billion fund-raising campaign, which ends in 2011. The Palo Alto, Calif., institution's big haul represents a decline from 2007 and from 2006, when it raised $911.6 million, a record for any college in a single year. Ms. Lapin said the school has "seen some slowdown in philanthropic support during the past several months, possibly due to the constraints on the economy and the current level of financial uncertainty."

In line with other wealthy schools, Stanford has said its endowment, which stood at $17.2 billion on Aug. 31, is expected to decline 20% to 30% this year. The university is planning steep cuts to its $3.5 billion budget over the next two years and has already had scattered layoffs and suspended some major capital projects. Ms. Lapin said income from the endowment makes up 28% of Stanford's budget, while annual donations comprise only 5%, so "any changes in giving would have little impact on the university's operating budget."