PRIVATE FUND-RAISING FOR PUBLIC HIGHER EDUCATION

Transcription

1 PRIVATE FUND-RAISING FOR PUBLIC HIGHER EDUCATION The First Fifteen Years: A Progress Report John M. Cash Senior Consultant, Marts & Lundy Copyright 2001 Marts & Lundy, Inc. 1

2 TABLE OF CONTENTS Executive Summary 3 Introduction 14 The Nature of the Study 17 Growth 18 Challenges and Commonalities 20 History of Public University Fund-raising 22 Decentralization in the Public University 28 The Question of Alumni Support at Public Universities 30 Institutional and Research Funding in Public Higher Education 36 Special Factors in Public University Development Programs 44 Organizational and Funding Models 47 Conclusion 51 Appendices 56 Prospectus Questionnaire 2

3 EXECUTIVE SUMMARY Introduction and the Nature of the Study During the fall of 2000, Marts & Lundy invited me to undertake a study of the state of private fund-raising for public higher education. The objective was to identify best practices and trends in order to help both emerging and established public university development offices. The study aims to illustrate the special history and circumstances that characterize public university fund-raising efforts and to show how these organizations differ from those of successful private institutions. The comparison set was drawn from the most successful public university development programs. Sixteen universities were selected, all of which had raised more than $100 million in three of the past ten years according to information provided to the Council on Aid to Education (CAE). All regions of the country were represented except New England. CAE data was analyzed for each institution and the author visited fourteen of the sixteen universities to meet with their senior development staff. The universities included in the study are: The University of California, Berkeley The University of California, Los Angeles The University of Florida The University of Illinois, Urbana Indiana University The University of Michigan The University of Minnesota The University of North Carolina, Chapel Hill Ohio State University Pennsylvania State University The University of Texas, Austin Texas A&M The University of Utah The University of Virginia The University of Washington The University of Wisconsin, Madison Several issues emerged quickly and became the core of the study. The first related to campaign history and how capital campaigns changed the makeup of donors to public institutions. The second examined corporate and foundation funding and how public universities grew their development programs on a base of giving from institutional sources. The third issue examined some of the special circumstances of public university development programs, in particular the role of athletics in their histories and the impact of medicine and research on their gift totals. Finally, the study looks at organizational structures and funding models. 3

4 Historical Development and Growth: By all measures, the rise in private giving to the nation s prominent public universities was one of the most dramatic philanthropic stories of the 1990s. In 1989, the sixteen universities in this study were raising collectively about $950 million a year. By 2000, this figure had grown to $2.5 billion. This growth in private giving paralleled significant reductions in state funding. Most of the institutions in this study have seen the support from the state reduced to between 25%-30% of their general operating budgets (these figures generally exclude medical school and hospital operations that drive down the number even further). In general, the growth in private funding was prompted by state reductions and did not cause it. In many cases, the states have actually awarded entrepreneurial behaviors on the part of public universities through matching programs or major new initiatives that include a private fund-raising component. This is especially true in the area of capital facilities, where state funding for both new buildings and renovations has been dramatically reduced. The sixteen universities in this study are very different in character and in organization, but they share common themes in the history of their development programs. Most saw significant private funding in the 50 years or so following their founding. In some cases, public institutions received the majority of their early funds from private donors. This began to change in the second quarter of the twentieth century as the campuses grew and additional public money supported a growing student population. Following the Second World War and the passage of the GI Bill, state support for public higher education increased dramatically. By the early 1960s, most of the institutions in this study were receiving around 80% of their general operating budgets from their states. The one exception to public funding was athletic programs, which were always independently supported through ticket sales and donations. The early 1980s saw a period of dynamic change in the funding for American higher education, and these changes were keenly felt at public universities. The Reagan presidency stressed reduction in public sources of funding for education and social programs while the boom in the economy led to growth in philanthropy across the country. Further steep reductions were experienced during the severe recessions of the late 1980s and early 1990s. As of this writing, no university in this study anticipates any real dollar increase in the level of state support for higher education. Except for athletics, public universities neglected individual donors throughout the period of significant state funding. This was especially true with alumni. The public university never felt a need to treat its alumni differently from the way it treated the citizens of the state that provided the bulk of its support through their tax dollars. This contrasted dramatically with the attitude toward alumni in private institutions where alumni support and intergenerational alumni relationships 4

5 proved to be central to institutional stability and funding. Public universities had no place for legacy admissions. As a result, nearly all public universities developed independent alumni associations where individual alumni, interested in building networks and relationships, established associations outside the framework of their universities. These associations rarely engaged in any fundraising beyond that needed to support their operations. For the most part, private philanthropy grew on public institutions through relationships between individual campus units schools and departments and corporations and foundations. The mandate of public institutions to support the local economy and to provide an educated managerial workforce led to recruitment-based funding. Research relationships between individual faculty members and departments and the local corporate community further increased private giving. Similar relationships developed between private foundations and academic units. The connection between public universities and the communities they served made them effective laboratories for foundation initiatives. As gifts from institutional sources e.g. corporations and foundations became a major source of discretionary and programmatic funding at the campus unit level, individual giving was increasingly tied to athletics. Throughout the 1960s and 1970s, athletics maintained strong relationships with individual donors and cultivated them for general and scholarship support. Many public university alumni came to feel that their only meaningful relationship with their alma mater came through athletics. In some cases, wealthier alumni tried to begin fund-raising programs within the independent alumni associations to help athletics and to provide presidents or chancellors with discretionary support. These programs often led to the establishment of separate university foundations dedicated to fund-raising. Many came into being in the 1970s. Their trustees had no direct fiduciary responsibilities for the larger university but they came to manage fund-raising and often to manage the funds raised before transferring principal or earnings to the campus. In some cases these foundations were completely independent with their own development staff employed outside of the sponsoring universities. The idea of bringing together these existing sources of funding to try and jumpstart a development program was very appealing to the leadership of the top public universities. Although the University of Michigan mounted a small but highly successful campaign in the late 1970s, the first round of big public university campaigns began with UCLA in Berkeley imitated UCLA and most of the remaining large institutions quickly followed suit. All of these initial major public university capital campaigns were extraordinarily successful, raising funds well beyond their original goals. Their success led to a dramatic growth in the scale of public university development programs and the 5

6 preparation and launching of a second round of capital campaigns. Every institution in this study has either just completed, is in the middle of, or is seriously planning a $1 billion+ comprehensive campaign. Decentralization Understanding the history of public university development programs is important for understanding their distinctive organizational structure. Public university fundraising was built from the outside in. Deans, department heads, and individual faculty researchers laid the foundation working with institutional donors to their units and programs. As private funding became increasingly important to the public university, it grew up from this decentralized model. No institution in this study has effectively managed to create a fund-raising program focused on university-defined priorities, even though a number of schools have highly centralized budgeting and reporting relationships. Money is raised today in public universities as it was at the beginning of their development programs for the decentralized units. This decentralized model had a profound impact on the development of public university alumni identity. Once private giving programs began to pick up with the successes of the initial comprehensive campaigns in the 1980s, a more concerted effort was made by some academic units to reach out to alumni and to begin building an alumni donor giving pyramid. At some schools, this took the form of annual giving programs and alumni relations programs managed by the units themselves. At others funding and reporting relationships were kept in a central office but all staff members were assigned to units and all annual giving raised funds for individual units. Few institutions tried to develop a broader annual giving program that supported the objectives of the president or chancellor or that reflected anything more than an amorphous identity with the bigger university. Without a central core to the development effort that is closely tied to the leadership of the university, public university presidents and chancellors have less incentive to spend time on fund-raising than their counterparts at the major private universities. Conversations with these leaders reveal that they think they spend a great deal of time on development work. Often, however, they confuse general external relations activities the kind of ceremonial and community work that is always the responsibility of a public university executive with serious major gift activity. The absence of a board of trustees keeps the public university president at a distance from the individuals who should be the institution s most important advocates and donors. Some leaders have created kitchen cabinets out of their significant supporters but this is more the exception than the rule in the public university setting. Overall, the public university president and chancellor are slightly detached from the daily press of development work that so engages their counterparts in private institutions. 6

7 The real pressure in public university fund-raising is on the deans, and it is growing. The move from institutional donors to individual donors within the public s decentralized framework has caused academic leaders to devote everincreasing amounts of time to development. Nearly every institution in the study has fund-raising and alumni relations responsibilities as a component of decanel job descriptions. This has been done, moreover, with little serious thought about how these new responsibilities will affect the traditional work of deans. Most development vice presidents routinely interview candidates for schools and college deans, a situation that would have been unthinkable just a few years ago. In the most decentralized environments, deans are called upon to manage complex development budgets and to mount their own unit-specific initiatives or campaigns. The amount of support provided by centralized development services varies from institution to institution, but everywhere the development responsibility of the public university deanery is growing. The Question of Alumni Support of Public Universities A special history, an absence of alumni institutional identity, and a culture of decentralization have contributed to the low level of alumni giving at all but a select few of the major American public universities. At most institutions, only a small number of alumni have ever made a donation, and annual gift participation at most is below 20%. Since most fund-raising is driven by large gifts, the problem for public institutions is even better illustrated by the comparatively small percentage of total gifts that come from alumni. While this percentage has grown modestly over the past decade, it has not yet reflected the extraordinary overall growth of public university fund-raising programs. It also lags significantly behind the major private institutions. This number the percentage of total gifts received from alumni is a very important gauge of maturity among public university development programs. The potential for growth in alumni support is the elemental strength of the public university. Few would disagree that the major private research institutions have historically attracted more students from wealthy families than their public counterparts. Indeed, most private schools honor the legacy admission, and development offices have at least some quiet voice in the admissions process provided academic scores and grades meet requirements. But the sheer number of public university alumni should overwhelm the inherent wealth of private university alumni. Collectively, public school alumni should be a tremendous source of financial support at all levels of the donor pyramid Over eleven years, the percentage of total gifts received from alumni to the sixteen universities in this study averaged just 23.4%. These years saw the alumni totals increase six percent from 22% of all gifts in 1989 to 28% in

8 Nearly all of the increase was fueled by a small number of schools that had entered or were about to enter their second capital campaign. Thus, as overall giving grew from $950 million to $2.5 billion during this period, it was only modestly fueled by increased alumni support. This contrasts dramatically with Stanford and Harvard, the two leading private university fund-raising programs. At these institutions, alumni donations averaged between 35% and 40% of all gifts during the same period. Among the public universities in this study, only the University of Michigan and the University of North Carolina, Chapel Hill matched the alumni totals of these two private institutions over the ten-year period. The range between the best and the worst performers in terms of alumni giving among the sixteen schools in the study is dramatic. Over ten years, Michigan averaged nearly 42% of its totals from alumni followed by the University of Virginia with 34.4%. North Carolina and Texas A&M averaged more than 33% and the University of California, Berkeley rounded out the top performers with 31%. By contrast, the public universities that received the smallest amount of money from alumni show a striking difference in their totals. Three Big Tens schools, Wisconsin, Minnesota, and Illinois, received fewer than 17% of their total gifts during the period from alumni, with Illinois at 10.6%. The University Washington averaged just 15% of its gifts from alumni and UCLA began the decade with only 8% but, thanks to significant growth during its campaign, produced a ten-year average of 16.6%. The one major variable that seems to have had a large impact on the growth of alumni support has been the second capital campaign, usually the first truly comprehensive or university-wide capital campaign. The University of Virginia, the University of California, Berkeley, Penn State University, and UCLA have recently completed or are nearing completion of such efforts. Collectively, these institutions showed a marked improvement in the percentage of total gifts coming from alumni over the decade. Their ten-year increase was 15% versus 6% for all the schools in the study. The individual percentages vary widely from Virginia s 51% figures in to UCLA s 24%, but all demonstrate the point that the campaign can be an excellent vehicle for increasing alumni support Institutional and Research Funding in Public Higher Education Most of the major public universities in the United States built their private giving programs on gifts from institutional sources. This has certainly been the case with the universities in this study. Unlike the alumni giving totals, institutional giving begins and ends the decade of the 1990s at around 50% of all private giving. Indeed, the modest growth in alumni giving appears to have had no real impact on the value of institutional support for public universities. Corporate and foundation funding continues to be the most important source of private gifts to the campuses in this study. 8

9 Support for research also plays a major role in public university fund-raising and nearly all of this money is received from corporations and private foundations. Among the sixteen universities in the study, research averages around 30% of the funds raised from private sources and constitutes more than half of the money donated from corporations and foundations. As with institutional giving, research funding has remained relatively constant among the major public universities over the eleven years of this study, and it continues to be a vital element in the structure of public university fund-raising programs. Seven of the sixteen schools received a significantly higher percentage of their total funds for research purposes alone from institutional donors than they received for all purposes from alumni. Four of these schools received nearly three times as much money for research purposes over the years of this study than they did from alumni for all purposes. Public universities face challenges by relying so heavily on giving from institutional sources. Corporate and foundation money tends to fund program rather than the ongoing needs of the campus. In general, institutional donors do not contribute heavily to university endowments and their support for capital projects is declining. The focus in corporations on return for shareholder value and the focus in private foundations on specific results for dollars invested do little to strengthen the overall university or to replace money that had previously come from public sources. Dependence on institutional giving is therefore problematic as a funding model. Even as foundations and corporations help to establish important and innovative new programs, they rarely continue to fund those programs beyond a short period of time. After seeding these efforts with their grant money, institutional donors expect long-term support to come from individuals or in some way from the university itself. When you combine this philosophy with a declining level of overall giving from corporations, the future of development programs that heavily depend on institutional giving is questionable. For this reason, the private universities have successfully grown their development programs by building up gifts from individuals, especially and critically, from alumni. The contrast between the average of total gifts raised from institutional donors in the sixteen schools in this study and Harvard and Stanford, is really striking. While the public universities received a relatively constant 48% of their gift totals from institutional sources during the decade, Harvard and Stanford saw that percentage drop dramatically from 40% in 1990 to 25% at the end of the decade. This occurred, moreover, as both Harvard and Stanford experienced explosive growth in private giving. The drop in research support as a percentage of total giving was even more dramatic. By the end of the decade, research funding accounted for just 11% of Stanford s gift totals. 9

10 Among most of the public universities that engaged in large capital fund-raising programs during the 1990s, the percentage of funds coming from corporate and foundation sources or directed for research decreased as the percentage received from alumni increased. These second large campaigns served to build up individual and alumni giving that ultimately strengthened institutional infrastructure and endowment. Special Factors in Public University Development Programs The changing nature of alumni support and the fundamental importance of institutional philanthropy are two of the key factors that have shaped the growth of private giving to public universities. Other areas that merit examination are the role of athletics in public university development efforts and the unique place that medicine and hospitals hold at some public universities. Overall, athletics plays a significant role in every one of the sixteen universities in this study, and their independent funding status and their clear importance to alumni and to the community give athletic programs in public universities a considerable degree of autonomy and financial independence. One would think that the independence and the importance of athletics would pose problems for the emerging university development programs and the comprehensive campaign efforts that have come about in the 1990s. The truth, however, is quite the opposite. A number of chief development officers noted in interviews that athletics has proven to be a staunch ally of the academic side in fund-raising. Many of the most important campaign donors were first and foremost donors to athletics. Their gifts to the campaign, however, went to academic purposes or to some combination of athletics and academics. This ability to fold athletic giving opportunities into a larger solicitation plan proved highly beneficial to a number of institutions. In some cases, the commitments were much larger than originally expected because of this package approach. Capital campaigns have served to bring donors out of the limited funding world of athletics and into the larger life of the university. The one complaint heard at nearly every school is a lack of close coordination between athletic fundraisers and central and unit major gift officers. The tradition of autonomy and the personal nature of interactions between athletic directors, development staff, and coaches with donors at sporting events often puts athletic development activity outside of the normal prospect management process. Resentment can build up between academic development officers and athletics when prospects are contacted or approached for large annual gifts outside of the established system. This same issue is also raised frequently in the context of large medical school and hospital fund-raising programs at the big public universities. The scale of these medical efforts at a few key public institutions is significantly different from most of the major private universities. Only three of the universities in this study 10

11 (UC Berkeley, the University of Texas, Austin, and Texas A&M University) lack affiliation with a medical school or teaching hospital. At all the others, medicine is important, but for four campuses -- UCLA, Washington, Utah, and North Carolina -- it plays a central role in the development effort. While the natures of these four programs are different, all have medicine at the center and medical fund-raising usually operates quite independently of the rest of the campus. Gifts for medicine account for more than 50% of university totals at all of these institutions. Organizational and Funding Models Probably the most distinctive feature of public university development programs are their organizational and funding models. Only one institution in this study, the University of Michigan, is established and funded like a private university with the development office treated as a regular arm of the administration supported out of the general fund. All the others have their unique characteristics that generally separate them organizationally and, to some degree financially, from the campuses they serve. No matter how advanced the effort, this separation has challenged the major public universities to integrate their development programs into the academic cultures of their campuses. There are three basic organizational models consisting of self-supporting and independent foundations, affiliated, dependent foundations, and independently funded but dependent central campus development operations. Overlaid onto these organizations are a variety of campus unit development offices that range from shops that are fully integrated into the central program to others that are completely independent. All reflect in some way the special natures of their respective campuses. Fully independent foundations exist at about half of the universities in this study. They have separate boards of trustees and the foundation and not the university employs all central development staff members. In a couple of cases, the executive director of the foundation also serves as the university s vice president for advancement. The foundations generally have their own salary and benefit structures and are able to work outside of the campus bureaucracy. Several of these foundations have active bonus programs tied to performance. Others provide staff with cars and perks unavailable to the campuses they support. Independence allows the foundations to provide salaries for development staff that are considerably higher than equivalent administrators within the campus system. Overall, the independent foundation model seems to function well, especially when foundation executive directors and trustees work closely and effectively with university leadership. Nevertheless, they do emphasize the separateness of the development office and of development work in general. In most cases, development officers employed by the foundation but assigned to campus units 11

12 are physically located at the foundation and do not interact as closely with their colleagues in the dean s office and on the faculty as staff whose offices are in the schools and colleges. But independent foundations have kept fund-raising separate and safe from the politics of state appropriations. This has served donors well. By contrast, the dependent university foundations have few or no separate employees, and the central development operation is officially a part of the university. Dependent foundations require a special level of attention from the university administration. Since they lack institutional responsibilities, these foundations frequently search for a purpose beyond the fund-raising that sits as their core mission. Outside of capital campaigns it can be difficult to attract the most senior and wealthy alumni to dependent foundation boards. But campaigns can energize dependent foundations and give them a special purpose. Often, in the age of the mega-campaign where extraordinarily large gifts are the key to success, universities with dependent foundations establish separate campaign volunteer organizations to attract the most influential volunteers to leadership roles. Multi-layered campaign gifts committees can surface new candidates for board membership while raising the visibility and value of fund-raising volunteers within the larger university community. The dependent university foundation functions best if it is seen as a fully integrated and essential element of campus life. It becomes the heart of all volunteer fund-raising activity and serves as a forum to bring together volunteers, deans, and development staff from across the campus into common purpose. The dependent foundation by its nature is culturally less separate from the life of the campus and helps in integrating development work into the life of the public university. In the final organizational model the development office is established and organized like any unit of the campus administration only it sits on a separate funding base. Functionally, this model is almost indistinguishable from the standard private university development organization. All staff members are employees of the campus and have their set position in the university hierarchy. The money they raise goes directly to the university without the filter of a separate foundation. Campus personnel officers set salaries and benefits. There is, however, a subtle difference that sets these operations apart from their private counterparts. Though totally integrated, these development offices are separately funded outside of the standard university appropriations process. They do not receive state money and they are not eligible for student fees. They are subject to a revenue stream that ebbs and flows and is often called upon, by its very discretionary nature, for other pressing campus priorities. Expansion of these independently funded shops to deal with capital campaigns inevitably presents serious funding issues to the university financial administration. 12

13 Conclusion: Private giving and the administrative structure of fund-raising are making fundamental changes in what we have traditionally thought of as the public university. Over the past fifteen years, public institutions have gone from state supported to state assisted. One administrator predicts that the next fifteen years will see a transition from state assisted to state tolerated. The change is basic, dramatic, and irreversible. The future of public higher education in this country is tied in no small part to the ability of these institutions to grow new sources of revenue. Continued growth in private giving will be an important way to keep student fees at a moderate level so that the public character of the state university is not compromised. Private funds are also playing a critical role in providing the margin of quality that helps to retain top faculty members at public institutions. The establishment of full scale, comprehensive development programs will occur at all levels of public higher education. The sheer number of alumni and the position of these institutions in their communities ensure that they have the potential to create and foster growing fund-raising programs. The campuses that delay will pay a price in the long term. The most successful programs emulate one key aspect of private university development efforts. They recognize that private giving has institutional value to the degree that it allows the university to sustain its basic mission. This translates into money for endowment, budget relief, and unfunded but essential capital facilities. The race for the highest fund-raising totals, that has so obsessed many leaders in public higher education, has not always been in synch with the mission of building a private base to fund infrastructure. As a result, even at some of the top development programs at public institutions, the pressure on student fees continues to rise, endowments grow through investment more than new gifts, and funding for development operations goes up and down with the gift totals. The principal conclusion of this study is that public university development resources need to be more carefully focused on identifying, cultivating, and soliciting support from alumni. Those institutions that have shifted their focus in this direction are leading the pack in raising money that sustains institutional infrastructure. Individual giving overall accounts for close to 90% of philanthropy in the United States. The only area of individual giving to higher education that has outpaced both growth in individual income and the New York Stock Exchange composite index has been in gifts to restricted endowments. Alumni are the natural source of this support for colleges and universities. Until public institutions become more effective at addressing this constituency, even though their gift totals are large these schools will not realize the true value of private philanthropy. 13

14 This does not mean that public institutions should neglect their historic relationships with institutional funders. With this base in institutional giving, public universities are well positioned to grow alumni support and to expand their programs in the direction of sustaining infrastructure in the decades to come. Since the deanery is so important to the success of public university fund-raising programs, more should be done by presidents, chancellors, and vice presidents for development to assist and support campus units in their fund-raising. Training is a key element but so is the recognition that deans need additional funding to maintain their existing operations while expanding their external activities. At a number of schools, unit development officers find themselves pulled into the administrative work of the dean s office and this takes away from their important task of identifying prospects and bringing them forward to the dean. Finally, public university development programs must become better integrated into the academic culture of their institutions if they are to take root fully and blossom. It is important to remember that even the most successful public university fund-raising operations are fairly new. Fifteen years is not a long time in the life of a university where faculty members often serve out their entire careers. Separateness has been further maintained by independent funding structures and separate compensation packages provided to fund-raising staff at many institutions. Public universities need to take proactive steps to help faculty to understand the importance of development work for the future of their institutions while simultaneously challenging fundraisers to a better and more refined understanding of the academic enterprise. 14

15 I. Introduction During the fall of 2000, Marts & Lundy invited me to undertake a study of the state of private fund-raising for public higher education. The objective from the outset was to identify best practices and trends in order to help both emerging and established public university development offices. At the time, I was completing my eighth year as Associate Vice Chancellor and Campaign Director at the University of California, Berkeley. In this capacity, I oversaw what became a $1.4 billion capital campaign. At its announcement, the Berkeley campaign was the largest undertaken by a public university, and the total raised at its conclusion was the highest up to that time for any institution without a medical school. Although a Cal alumnus, all of my prior development experience had been at private institutions. I have two degrees from the University of Chicago and was a development officer at the Illinois Institute of Technology, Mills College, and Stanford before going to Berkeley. My entire orientation as I took on the responsibility of leading Cal s campaign was toward the long and rich fundraising tradition of private universities especially Stanford. By contrast to Berkeley s development effort, Stanford established its first major support group in 1935, and conducted a $100 million campaign in the early 1960s. At Berkeley, serious fund-raising was a relatively new part of the life of the campus. The university undertook its first major capital campaign in the late 1980s. It was not a comprehensively focused campaign, but a drive that stressed a few specific areas. The campaign that we began in 1993 was the first truly comprehensive capital campaign in the history of the campus. Since fund-raising was new, Berkeley lacked much of a volunteer tradition. Governance is vested in the hands of the Board of Regents for the University of California system. The campus itself is administratively highly autonomous, but the Chancellor did not have a senior volunteer advisory group that combined development work with the usual fiduciary responsibilities of trustees. Instead, Berkeley had established a foundation in the mid-1970s to receive gifts and to take responsibility for fund-raising. This foundation had no fiduciary responsibilities beyond the management of a modest portion of the Berkeley campus endowment. The university did not embrace fund-raising as a part of its administrative culture. The central development office had high turnover in staff. Salaries were low and there was little communication between the faculty, deans, and department chairs, and the central office. Campus units maintained independent operations, largely funded through annual giving. Some of these unit staff members continued in their positions for many years as their deans and heads rotated in and out, and their record of achievement was mixed. There was no 15

16 accountability against a broadly established set of performance criterion, and the campus development community had a tradition of divisiveness. Funding for development was also entirely different from private institutions. It was regental policy that no state money or student fees could be used to support fund-raising costs. The central development office existed on a budget provided by the Chancellor and supported by his discretionary money. This included a tax on interest on expendable funds across the campus, annual donations, and a highly unpopular direct tax on gifts. The difference between the organizational model of the private institutions that I had known well and the public university I found in 1993 was striking. Yet the campus was raising more than $100 million annually in gifts and was about to undertake an enormous capital campaign. Clearly, private philanthropy had become a very important element in the fiscal stability of the university and this importance was increasing yearly. Although our public university development programs are comparatively young, they have achieved extraordinary success in a short period of time, and I started out my research for this study believing that fundamentally, public universities were just less mature versions of their private counterparts. My perspective changed, however, as I began to analyze data and meet with my colleagues around the country. I came to understand that these fund-raising programs are very much a reflection of what public universities are as institutions in American society. They mirror the changes that have taken place in the revenue structure of state institutions and to some degree promote changes in that structure, but the nature of the funding base and the organizational models that support it are anchored solidly in the distinctive traditions and history of the public university. I began my study by asking myself what did I think were the most important differences in my experience in private universities and public universities. I knew that Berkeley had a short but interesting history to its development efforts and I was curious to see if other public universities had followed a similar or a different path. As I looked at specific differences between public and private institutions, clearly, the most obvious was the size of the alumni population and their comparative distance from the everyday life of the campus along with their weak history of financial support. At Berkeley, this seemed particularly striking since such a large percentage of its alumni live within easy driving distance of the university. The presence of Cal in the media of the Bay Area was constant and logic seemed to indicate that alumni would be intensely engaged in the campus and at least as connected as alumni of distant private institutions. And yet that special connectedness was somehow not there. 16

17 Thus, the first issue I wanted to explore was how alumni identity and connectedness to public universities related to the development of their fundraising programs. Despite continued poor percentage participation from alumni, the percentage of Berkeley s dollars that came from alumni donors increased dramatically during the capital campaign. I wanted to know if other institutions had experienced similar growth and what that said about the maturation and sophistication of public programs. A second issue of importance was the changing nature of the funding base itself. During the eight years I was at Cal, I noticed a significant shift in the ratio of support from institutional sources to individual sources. Berkeley built its development program from the academic units (especially engineering and business) out to the rest of the campus. These areas grew because of research relationships and recruiting relationships with area corporations. The entire program rested on longstanding relationships with institutional donors. I wanted to know if other schools built their programs in a similar way and if they too were experiencing a shift in support from corporations and foundations to alumni as their development programs grew. Public universities have historically related to their constituencies differently than their private counterparts. Athletics, for example, has a much bigger role in the life of public institutions than it has in most private universities. At Berkeley athletics raised private money from alumni long before the rest of the campus. I knew from working within the University of California system that medicine and the presence of great hospitals on public university campuses had been very important in the growth of several development programs. Berkeley does not have a medical school or a university hospital but I knew that the UCLA program had medicine as a foundation for its extraordinary growth. I wanted to look at these issues and to see if there were any other special funding areas that distinguished the public development programs Finally, I knew that the organizational model at Berkeley and at the other University of California campuses was totally different from private universities. When I got together with my colleagues, funding for development was always the most pressing issue. A strong distaste for the gift tax as a way of paying for fundraising made me want to look at how other big universities were sustaining their programs over time. The model of the private foundation has been a challenging one in some ways, and the Berkeley Foundation had changed considerably during the period of the capital campaign. I also wanted to see how other schools managed their top volunteer organizations. With these issues and a few others in mind, I developed a formal prospectus for Marts & Lundy (appendix ) that was submitted and approved. I spoke with my fellow chief development officers at the UC campuses about the project, and they were very supportive. Subsequently, I met with Dennis Slon, the Associate Vice Chancellor at UCLA, and a person I respected greatly who managed a program 17

18 of similar scale to the one at Berkeley. I asked him to read the prospectus and to let me know if there was anything missing that he wanted to hear from his colleagues at other large public universities. Dennis wanted an answer to the most obvious and pertinent question. All I want to know is why the major private institutions raise more money than we do! After our talk, I reframed the material in my own mind and what follows uses the issues outlined in the prospectus to try and answer this basic question. It really doesn t make sense that the big public universities with their enormous and often intensely loyal alumni have not moved even farther ahead in fund-raising. Because of our history, the challenges are significant but the potential for extraordinary growth remains. 18

19 II. The Nature of the Study Comparison groups are always difficult to determine for colleges and universities. We defend our distinctive characteristics fiercely and yet we bemoan the fact that it is so difficult to find an appropriate set against which to measure a variety of academic and administrative standards. Berkeley, for example, sees the top private universities as its principal competition for faculty recruitment and retention, but the campus looks to large public universities to measure fees, admissions, and other related issues. Development falls somewhere in between. Most of the biggest public university fund-raising programs, however, look to the success of private universities for their models, and they strive to raise money at a similar level. Smaller public universities, in turn, look to the big public universities to lead the way for them in development work. Thus, I decided to focus my analysis on the biggest public university fund-raising programs while drawing a few key comparisons with the best private university fund-raising programs. I chose to use data from the Council on Aid to Education or CAE because it is the closest we can get to a single standard to which all colleges and universities adhere. Even so, both public and private universities pad their numbers by including funds that are clearly not true gift money. The motives for this escape me, but the facts remain. As a result, this study aims to look at trends rather than at specific university performance since some of the reported information does not reflect the reality of their fund-raising programs. In principle, CAE measures the actual cash received by a university in a given fiscal year. What individual campuses report to their donors and community is often a different number looking at pledges out into the future. For example, the conventions used by the University of California system allow the campuses to report annually on commitments going out to five years or more. Assuming high pledge redemption, and this is a considerable assumption, the cash numbers are only a bit behind the pledge numbers. Private institutions have been much more rigorous, by in large, in adhering to the standards of the CAE. Thus, keeping to a cash basis gives a more accurate comparison at how the two sectors of the fundraising world are doing. I wanted to review ten years of data, and I began my data collection before the 2000 numbers were posted by CAE. Once they came up, I folded them in so most of the information that follows incorporates eleven years of reporting on the public institutions. I did not begin gathering any private data, however, until after the 2000 numbers were posted. At this time, the 1989 numbers disappeared from the dataset. Thus some of the comparison charts have ten years of private data and eleven years of public data. 19

20 Reviewing these eleven years, I selected the sixteen public universities that had raised more than $100 million in at least three fiscal years as reported to the CAE. The range is wide and includes every region of the country except the Northeast. In a few cases, the medical program clearly pushed the overall development effort into the $100 million club. But since medicine is one of the special characteristics that I wanted to examine at public universities, I kept these schools in the study. The institutions are: The University of California, Berkeley The University of California, Los Angeles The University of Florida The University of Illinois, Urbana Indiana University The University of Michigan The University of Minnesota The University of North Carolina, Chapel Hill Ohio State University Pennsylvania State University The University of Texas, Austin Texas A&M The University of Utah The University of Virginia The University of Washington The University of Wisconsin, Madison During my tenure at Berkeley, I was approached on a number of occasions to help students and others doing research on fund-raising. Invariably, they sent an elaborate questionnaire that required considerable time on the part of the staff and an awkward and time-consuming recalibration of existing data. My approach was somewhat different. I conducted all of the data analysis using the dataminer functions at CAE in advance of approaching any of the campuses. I then scheduled meetings with senior development personnel at nearly all of the campuses in the study. They were sent a copy of my questionnaire (see appendix ) in advance of the meeting, but I told them that we would have a conversation and that they should not feel required to complete the questionnaire in writing. I taped these conversations and these, along with the data analysis, form the basis for this study. III. Growth When I completed the first cut of my analysis on these schools, I was struck immediately by the phenomenal growth in their programs over the period of the study. In 1989, the sixteen universities were raising collectively about $950 20

21 million a year. By 2000, this figure had grown to $2.5 billion. The following chart (III.1) illustrates this point: Fig. III.1 Public University Gift Totals: ,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000, ,000, By all measures, the rise in private giving to the nation s prominent public universities has been one of the most dramatic philanthropic stories of the 1990s. As these funds have grown in importance, state funding has generally declined in almost all cases as a percentage of the total budget, now averaging around 30% of the core educational budget at most schools. The interplay between private philanthropy and public dollars is another example of the distinction between the public and private universities. At Berkeley, for example, we had some major donors who wrote into their gift agreements that their donation would not replace any existing state support. Their concern was not justified. While the increase in private support has not gone unnoticed by the legislatures, it has not led to parallel reductions in public money. Rather, in most cases, private gifts have shown legislatures that their universities are capable of entrepreneurial behaviors that, in turn, make the most of what public money is available. No school reported a reduction in state support as a direct result of increased private funding, although decreases did occur at the same time as the volume of private support increased. In one area, the relationship between private support and public dollars is particularly important. In almost all cases, overall state funding for capital 21

22 facilities has been reduced. This reduction is felt acutely at the top public institutions since most are old universities with aging facilities. Competition for faculty, especially in the sciences and engineering, demands modern laboratories. Private giving has been everywhere essential in providing funding for new buildings and renovations. In some creative cases, private support has been able to leverage funds from the state for facilities. In Florida, a creative matching program on the part of the legislature has allowed the University of Florida to maximize private gifts in the construction of new facilities. In North Carolina and Wisconsin, the presence of a significant private component of a building project is highly influential in moving that project up the priority list for state funding. In California, a recent scientific and technology initiative by the governor required the university campuses to match state funding for facilities at a 3 to 1 ratio, but at the same time brought $400 million in new public dollars into the University of California system. This interplay between the public funders and the private donors to our public universities will continue and will likely become increasingly sophisticated in the years to come. The growth curve shown in the previous chart shows no real sign of slowing down. It demonstrates strength to leaders in the public sector while simultaneously showing how the public dollar can be extended. IV. Challenges and Commonalities The extraordinary diversity of the American system of higher education is one of its great strengths. From the tiny liberal arts college to the technical school to the institute to the great research university, colleges and universities pride themselves on their independence and unique characteristics. Historically, however, large public universities have tended to be lumped together as a group with academic quality and occasionally athletic prowess as the only differentiator. They are perceived to have grown out of a land-grant tradition where the mechanical arts took precedence over all else. Their distinctions are largely the distinctions of the different states in which they are located. This characterization is overstated. Most of our leading public institutions of higher education are very different one from another. They have special traditions and distinct conceptions of themselves that are every bit as individual as the large private research universities. Michigan is as different from Texas A&M as Yale is from Notre Dame. The history of the University of Virginia and the traditions of UC Berkeley are as deep as any private school in the nation. This distinctiveness presents serious challenges in drawing comparisons. The organizational structures of the development programs vary tremendously from campus to campus. They include independent or quasi-independent foundations that serve as conduits for private gifts. In some universities the foundations are 22

23 the official employers of the development staff. Many institutions have decentralized reporting lines, reflecting the autonomy of schools and colleges. Others have centralized funding under a vice president who sets performance standards across the board. In a couple of examples, fund-raising is located under a system wide operation that uses generalists to secure gifts for specific campuses within the larger organization. Finally, most of the public universities have independent or quasi-independent alumni associations that set their own policies for communicating with the alumni population. The greatest challenge to drawing proper comparisons, however, comes from the unevenness of reporting to the Council on Aid to Education. Without rigorous standards and sanctions, there is little incentive for a campus to adhere to the rules. CAE numbers can be used to secure additional budget and to pump volunteers into thinking that their alma mater is more successful than rival institutions. This need to boost the totals beyond what is reasonable or accurate calls into question the entire process of establishing comparison figures. Within the sixteen institutions covered in this study, I have found patent royalties, clinical practice funds, and enormous amounts of grant and contract money counted as private gifts. While this may give some presidents, vice presidents, and foundation trustees bragging rights, it does little to help these institutions understand the comparative position of their fund-raising programs and how they can be further developed to strengthen institutional infrastructure. This is a key difference with private universities. While some private institutions have distorted their own figures by including clinical trials and patent income as well, their tradition of securing funds to support infrastructure rather than program is much greater than that of the public university. One need only look to the size of their endowments to know that fund-raising for infrastructure has a long history on private university campuses. While one can argue that public institutions have focused their efforts on securing support for infrastructure by working to sustain an ongoing level of public funding, the decline of this funding has not been offset by a parallel growth in private support for infrastructure. The gift totals reported on an annual basis by private universities generally reflect the honest assessment of fund-raising as an actual revenue source that sustains the institution as a whole. Many public universities have not yet come to this realization and see reporting principally as a means to boost self-image. While institutional distinctiveness, differences in organizational structure and a shoddy tradition of reporting present special challenges in making a successful comparison study, there are a number of common characteristics that draw these sixteen schools together. For example, all of them share a fundamental and historic commitment to decentralization as an organizational model. This commitment is quite different from the give-and-take of centralization and decentralization that one sees in many private universities. Fund-raising from the outside to the center is part of the essential character of the public university. I 23

24 will go into this subject in more detail later, but this decentralization leads to some common experiences among all the schools in this study. While there is a varying degree of alumni connectedness among the sixteen schools, all share a problem with the percentage of alumni who contribute annually. The most successful of the public universities have no more than 25% of alumni contributing and most have around 12% giving on an annual basis. With the importance of the U.S. News annual review, some fudging of the numbers is inevitable. Nevertheless, it is a common theme among these universities that the great majority of alumni have never made a gift to their alma mater. By contrast, most of the public universities have a long tradition of support from institutional sources especially local corporations. I will argue later that institutional giving coming out of academic units is the foundation upon which all of these campuses have built their development programs. The percentage of support from corporations and/or foundations varies from university to university, but the support that they provide for program at the unit level is a common theme everywhere. In many cases, institutional giving is tied at public universities to a long history of research support. Grant money from private sources is another foundation for the public university development programs. The percentage of funds for research at these universities is much greater than it is at the privates, and research funding accounts for more than half of the total gift income for at least one of the campuses in this study. Finally, the presence of athletics as a major force for development is apparent in every one of the universities in this study. Athletics certainly plays an important role in the fund-raising programs of a number of private institutions as well. What is distinctive about the publics is its pervasiveness and its unique position in the history of their development efforts. V. History of Public University Fund-raising Each campus in the study has its own particular set of experiences, but the overall history of private philanthropy in public higher education follows a common thread and shares several basic themes grouped around different historical periods. The similarities are quite striking and show a common pattern that reflects the changing public attitude toward higher education as a recipient for public funding. Nearly all of universities covered in this study have deep roots in the histories of their states and communities. From their inceptions, community support in the form of private funding was critical to their establishment and growth. As you walk across campuses from Virginia to Michigan to California, old buildings, 24

25 libraries, and the campus monuments and towers that give so much of the flavor to our public universities bear the names of early donors to the campuses. A recent biography of James Madison, for example, details a meeting of the Virginia board of overseers in the early nineteenth century that centered on how to secure private funds to sustain that university. At Berkeley, private money accounted for the entire budget of the University of California for a number of years in the decades following the founding. Thus, the early history of public higher education is generally firmly grounded in the philanthropic environment of the period usually the nineteenth century. It exhibits the same kind of gilded age patronage that led to the expansion of private higher education and the establishment of such eminent institutions as Stanford and the University of Chicago. The key difference from the outset was in the mission of the public university and its basic commitment to educate a broad public and provide an economic engine for the community. This led to a perspective, which was later greatly reinforced, that the actual constituency for the public university was comprised of the citizens of the state in which it was located. By contrast, private institutions generally saw their constituency in much narrower terms. These might be refined by the mission of the school such as members of a specific religious denomination, but quickly the private institution developed alumni and intergenerational alumni relationships as the heart of their support base. By contrast, public higher education has historically seen its base as the citizenry of the state. Even the writings of the early philanthropists of public institutions often show that their purpose was to strengthen the local economy and to develop the minds of its young people. While the major private schools cast their visions broadly to encompass the nation, most public universities continue to draw the great majority of their undergraduates from the state in which they are located. Berkeley and UCLA pride themselves on being public universities of international academic stature, yet more than 90% of their undergraduate students are California residents. Of the sixteen schools in the study, only the University of Michigan has an undergraduate student body that is more than 50% out-of-state. Growth in population and the resulting growth in the local tax base brought additional public money to the public universities in the twentieth century. While private donations, especially for buildings, were still elements in university life, by the start of the Second World War, the state commitment to funding an accessible, inexpensive higher education system had become the model. The foundation of public support was clearly established by the end of the War with the subsequent explosion of new public university students funded through the GI bill. The onset of the Cold War and the challenges of the space race pumped enormous amounts of federal research funding along with significant 25

26 increases in state funding for institutions of higher education. The early 1960s saw the high water mark for state funding when most of the major public research universities received around 80% of their general operating budget from the state. This period marked the nadir of private philanthropy in the public university setting. The enormous growth in federal research dollars and the great emphasis on science and engineering led to the construction of a wide range of new facilities. A booming economy and a strong tax base, combined with the arrival of the baby boom generation at college age led to the establishment of new public university campuses and great increases in overall state support for the established campuses. In this environment, there was no place for private dollars. Indeed, the few small fund-raising initiatives that took place at public universities in the late 1960s were not very successful, in part because of the unrest caused by the war in Viet Nam. The one exception to this general decline in private support for public universities was athletics. In the absence of other tangible reasons for public university alumni to connect with their alma mater, athletics formed a critical bond and fostered a sense of pride. In many states, football, in particular, but also men s basketball represented a major way in which the university reached the community. This support from citizens for the local college team fostered more general support for the university s presence in the community. Alumni could take the extra pride in actually being graduates of the university, and they formed a core fan base. It was one of the few ways, given these institutions lack of interest in their graduates that alumni could feel a real sense of identity and connectedness with their school. And this translated into financial support. Athletics is everywhere self-supporting and dependent on outside revenue for its existence. While there might be occasional state appropriations to help in the construction of new facilities, the day-to-day management of the program and its heavy scholarship burden rested with athletics itself. During the long period when public universities did not actively seek private money, athletics built relationships with donors and created giving clubs and major gift programs across the country. Within the public university sphere, athletics was the only part of the campus that really cared about its alumni and non-alumni constituency for many years. When campuses began to fundraise for general purposes, it was athletics donors that formed the basis for a significant portion of the early capital campaigns. The whole issue of alumni relations was also very important in the evolution of public university fund-raising programs. Since the universities themselves did nothing to differentiate between their alumni and other citizens of the state, they had no need for an alumni relations program. Public and government affairs might be pursued vigorously, and would take advantage of alumni positioned highly in government or the media, but the objective was always to influence 26

27 public opinion in hopes of receiving higher subsidies from the state. Alumni were not to be engaged in fund-raising. Many of the common features of private institutions were never considered in the public university world. Legacy admissions, for example, were generally not allowed. In most states there was not even a place on the application form to indicate that a parent or close relative had attended the public university. Few schools published or distributed magazines or other communications to alumni. Alumni directories were infrequent and tens of thousands were lost to the rolls of every campus. Alums were simply expected to go out and be general advocates of the university with their friends and families. Some alumni, however, did like to come together to socialize and to form networks. As a result most public universities have independent alumni associations that were created to demonstrate the bond that alumni of a given school had with each other. Most have charters that say they exist to support the mother institution, but their separate status allowed them to take whatever position they choose. Normal alumni relations programs, clubs, events, tours, and networking opportunities came to be held under the umbrella of these independent associations. Campus leaders might fret from time-to-time over some of the public positions taken by their alumni associations. But just as they had no right to communicate or share alumni opinion, these administrators could separate themselves from the associations by virtue of their independent status. Because they receive no funding or formal support from the universities they represented, member dues generally supported public university alumni associations. They had to develop active marketing programs to recruit new members from among the alumni, frequently soliciting parents of new graduates for gifts of lifetime membership. Their publications were usually restricted to their members. Since the campuses did not put out their own publications, nonmember alumni received nothing from their alma mater. The campuses had no programs for alumni and what alumni relations existed, existed only for the dues paying members of the associations. Typically, members constituted 24%-30% of the alumni population. Communications were out of the control of the university and the public schools were unable to mobilize but a portion of their graduates to advocate on behalf of the campus. The independent alumni association has been strong in its defense of its independence and its prerogatives. In the case of several of the universities in this study, wealthier members of the alumni association boards began to fundraise on their own during the late 1960s and into the 1970s. Often this activity was aligned with fund-raising for athletics, but sometimes it was undertaken to provide independent financial support for the president or the chancellor. Most associations did not want to become vehicles for campus fundraising activities. Out of the independent association was created another independent campus organization: the university foundation. These foundations 27

28 were set up to raise and house money for the campuses. In California, individual public university campuses do not have a not-for-profit status separate from the systems that house them. The foundation provided an opportunity for a campus to create its own support mechanism independent from the larger university system. Other states have taken a different route from the California model and have foundations that raise money and fund themselves independently from the campus. From time to time throughout the year, these foundations make contributions to the university but they have completely separate employment structures and an identity all their own. Initially, these foundations all functioned as vehicles for the receipt of gifts and as a means for building a system of private support during an era when public funding seemed almost endless. Their focus was on individuals and, along with athletics, the foundations made a central commitment to the building of individual giving programs at public universities. Since their boards did not have the kinds of fiduciary responsibilities that characterized the autonomous trustees of private institutions, they tended to gather volunteers of exceptional good will who were willing to accept that fund-raising was to be their paramount contribution to their universities. Because these foundations grew out of alumni associations, their boards often had a social character that differed significantly from the trustee relationships typical at private institutions. If athletics and the emerging foundations provided an important element in the rebuilding of public university fund-raising programs, institutional giving through academic units was the essential foundation upon which this rebuilding could take place. Corporate and foundation gifts, especially corporate gifts, were natural to the public funding model. Largely research driven, they nicely complimented the base money provided by the state and federal governments in the 1950s and 1960s, and reflected the special character of public institutions with their mission to advance the local economy and to contribute to the strength and vitality of the community. The booming economy of the 1950s and early 1960s required educated men and women, particularly in science, engineering, and business. The public universities were set up to provide this kind of high volume quality education. Moreover, graduates of public institutions were more likely to settle in the same state or very near their alma mater. Thus the recruiting relationships that developed between corporations seeking employees and the universities that were providing them naturally led to gifts to the affected academic units. Close bonds developed over time and regular money was donated to deans and department chairs on behalf of these corporate relationships. Technology transfer and the production of knowledge for the public good had also long been a theme of public higher education. Corporations found that their 28

29 local public institutions provided excellent opportunities for the kind of basic or even applied research that they were unable to accomplish themselves. These research relationships led to programmatic funding from corporate America that became a central piece in the growing mixture of private support. Some corporations enjoyed the prestige of being associated with the most prominent scientists and engineers in their communities. These associations led to regular giving so that by the end of the 1970s, corporate funding for science, engineering, medicine, and business programs had become a very important element in the overall budget of these units. Private foundations served a similar purpose. The large scale of public universities and their clear mandate to help the community were in most states distinctive from private institutions. The social experimentation and creative ideas of many large foundations found a perfect outlet in the ambitious programs being undertaken at the nation s premier public universities. Their large medical schools were also appropriate recipients of foundation support. The effect of these gifts on the budget was similar to that of corporate giving. If corporations and private foundation funding are combined, the annual level of support from institutional sources became the firm foundation of nearly all of the public university development programs. Institutional giving had a significant impact on the organization of public university development offices. Institutional grants and research grants were made to particular units of the university and not to the center. The foundation of public university fund-raising was built at the unit level by deans and department chairs and individual faculty members with corporate or foundation research relationships. The administration needed to manage this money came into being at the local level or, if centrally funded, it functioned totally in support of the local level. Finally, the presence of private money at the local level prompted many deans to start annual funds. In some cases, this was needed to provide the money to fund the administration of institutionally donated money. Modest programs were put in place at most of the major public universities to provide unrestricted money to the deans of engineering, medicine, and business. These funds generally followed the establishment of athletics annual funds and were modeled on them. By the early 1980s public universities were once again receiving significant amounts of private money from these three elements of their campuses: individual major gifts and annual support to athletics; occasional individual major gifts and volunteers through the university foundations; and large-scale institutional donations and modest annual gifts through the campus units. To this was added an irregular flow of bequests and over-the-transom donations. The early 1980s saw a period of dynamic change in the funding for American higher education, and these changes were keenly felt at public universities. The 29

30 Reagan presidency stressed reduction in public sources of funding for education and social programs while the boom in the economy led to growth in philanthropy across the country. The idea of bringing together these existing sources of funding to try and jump-start a development program was very appealing to the leadership of the top public universities. Although the University of Michigan mounted a small but highly successful campaign in the late 1970s, the first round of big public university campaigns really began with UCLA in Berkeley imitated UCLA and most of the remaining large institutions quickly followed suit. The striking feature of these first big public university campaigns was their extraordinary success. The original goals ranged from $100 million to $400 million and all were exceeded by huge amounts. A sense of euphoria about fund-raising settled on many large public institutions at this sudden and unexpected new source of money. Most schools quickly realized that they needed to professionalize their operations further if they were to continue to grow the development programs quickly. This led to an increase in salaries for development staff and the realization of a need for a more coordinated planning process. The first campaigns paralleled a change in the funding mix for public universities. Institutions in the Midwest, especially the University of Michigan were the first to experience dramatic drops in the level of state support for higher education. In California, the recession of the early 1990s led to a loss of 30% of state money. Throughout the country, public universities could no longer count on the generosity of the citizens of their state, and the average level of state support dropped to around 30% of the operating budget. Public funding for capital improvements dropped even more precipitously and private gifts came to represent the quickest way for these universities to bring their facilities up to evolving standards. The contrast with the situation twenty years earlier could not have been more dramatic. The concept of citizen of the state as the principal constituent of the public university had to change and alumni involvement became increasingly important. As of this writing, every one of the sixteen schools in this study has either just completed, is in the middle of, or will shortly embark upon a second major capital fund-raising campaign. Most of these schools built their first campaigns on the basic foundation of their institutional support. The second campaigns, however, are somewhat different and a number of public universities for the first time have shown that alumni can step forward to fill in the loss of public funding. VI. Decentralization in the Public University Public university fund-raising was built from the outside in. Deans, department heads, and individual faculty researchers laid the foundation working with institutional donors to their units and programs. As private funding became increasingly important to the public university, it grew up from this decentralized 30

31 model. No institution in this study has effectively managed to create a fundraising program focused on university-defined priorities, even though a number of schools have highly centralized budgeting and reporting relationships. Money is raised today in public universities as it was at the beginning of their development programs for the decentralized units. This makes sense within the larger mission of the public institution. The major universities in this study were all designed to serve society at large. Academic programs were wide-ranging and units were decentralized to serve the broader community. Graduates of decentralized units came to identify more with the unit than with the institution at large. The mass of graduates from the arts and sciences colleges frequently felt most at home in their departments or perhaps in their living situations, athletic groups, or clubs. While they knew they were part of a larger whole, personal attachments came at a more intimate level. The larger university was seen as an amorphous umbrella organization, an administrative bureaucracy that made no effort to build personal relationships with alumni since fund-raising was simply not a priority. This decentralized model had a profound impact on the development of public university alumni identity. We have already seen how the campuses viewed alumni the same way that they viewed citizens of their states. Alumni relations were relegated to independent membership organizations and sporadic activities based in the academic units. Arts and sciences alumni were largely neglected and even the most compact and homogenous schools spent much more time cultivating institutional donors than they did reaching out to their alumni populations. Once private giving programs began to pick up with the successes of the initial comprehensive campaigns in the 1980s, a more concerted effort was made by some academic units to reach out to alumni and to begin building an alumni donor giving pyramid. At some schools, this took the form of annual giving programs and alumni relations programs managed by the units themselves. At others, like Penn State, funding and reporting relationships were kept in a central office but all staff members were assigned to units and all annual giving raised funds for individual units. Few institutions tried to develop a broader annual giving program that supported the objectives of the president or chancellor or that reflected anything more than an amorphous identity with the bigger university. A system that does not provide discretionary support for the university leader and that does not build broad institutional loyalty has implications for the management of gift resources. Funding for a centralized development function has to be charged back to the benefiting units. The president has limited ability to talk about his or her priorities directly to the alumni while simultaneously having the responsibility of ensuring that all academic units are successful in their programs. As an example, this can lead to a president being forced to bail out unit capital projects that have not met their fund-raising goals. 31

32 Decentralization can also present serious communication challenges. Many alumni have more than one degree and multiple degrees are frequently present in alumni households. The appeals and other messages sent out by separate units to these households can give conflicting information about institutional priorities. This can make it difficult for even a generous alumnus to determine how to direct money to the campus. For the broader alumni population that does not contribute and that has historically been neglected by the campuses, the mixed messages that are a part of decentralization contribute to a general confusion. Without a central core to the development effort that is closely tied to the leadership of the university, public university presidents and chancellors have less incentive to spend time on fund-raising than their counterparts at the major private universities. Conversations with these leaders reveal that they think they spend a great deal of time on development work. Often, however, they confuse general external relations activities the kind of ceremonial and community work that is always the responsibility of a public university executive with serious major gift activity. The absence of a board of trustees keeps the public university president at a distance from the individuals who should be the institution s most important advocates and donors. Some leaders have created kitchen cabinets out of their significant supporters but this is more the exception than the rule in the public university setting. Overall, the public university president and chancellor are slightly detached from the daily press of development work that so engages their counterparts in private institutions. The real pressure in public university fund-raising is on the deans and it is growing. The move from institutional donors to individual donors within the public s decentralized framework has caused academic leaders to devote everincreasing amounts of time to development. Nearly every institution in the study has fund-raising and alumni relations responsibilities as a component of decanel job descriptions. This has been done, moreover, with little serious thought about how these new responsibilities will affect the traditional work of deans. Most development vice presidents routinely interview candidates for schools and college deans, a situation that would have been unthinkable just a few years ago. In the most decentralized environments, deans are called upon to manage complex development budgets and to mount their own unit-specific initiatives or campaigns. The amount of support provided by centralized development services varies from institution to institution, but everywhere the development responsibility of the public university deanery is growing. Finally, decentralization presents challenges in the establishment of a consistent stewardship program. Stewardship policies from the writing of thank you letters to the long-term reporting on endowments naturally vary from unit to unit. There is little incentive for the central development operation to manage the stewardship responsibilities of the units and often communication with donors is 32

33 uneven and erratic, a situation that further erodes the continuity with alumni donors over time. This issue is further exacerbated by the tendency in many public universities for individual units to develop and manage their own alumni/donor databases. VII. The Question of Alumni Support at Public Universities A special history, an absence of alumni institutional identity, and a culture of decentralization have contributed to the low level of alumni giving at all but a select few of the major American public universities. At most institutions, only a small number of alumni have ever made a donation, and annual gift participation at most is below 20%. Since most fund-raising is driven by large gifts, the problem for public institutions is even better illustrated by the comparatively small percentage of total gifts that come from alumni. While this percentage has grown modestly over the past decade, it has not yet reflected the extraordinary overall growth of public university fund-raising programs. It also lags significantly behind the major private institutions. This number the percentage of total gifts received from alumni is a very important gauge of maturity among public university development programs. Alumni are a natural constituency for fund-raising. They have a personal connection to the institution and have both communal and practical reasons for wanting their schools to maintain academic quality and overall reputation. After all, the value of a degree is a tangible asset in the marketplace and it is not in the interests of alumni to see their university lose local and national prestige through declining support, aging facilities, and a general reduction in quality. The fact that public institutions, with some notable exceptions, have not yet succeeded in building large scale giving from their alumni should be of real concern to campus administrators across the country. This potential for growth in alumni support is the elemental strength of the public university. Few would disagree that the major private research institutions have historically attracted more students from wealthy families than their public counterparts. Indeed, most private schools honor the legacy admission and development offices have at least some quiet voice in the admissions process provided academic scores and grades meet requirements. But the sheer number of public university alumni should overwhelm the inherent wealth of private university alumni. Collectively, public school alumni should be a tremendous source of financial support at all levels of the donor pyramid. Using the CAE totals, percentage increases in the level of alumni giving, like all giving, are generally driven by a small number of very large donations. But these gifts, like all major and leadership gifts, tend to come up through the pyramid from individuals whose initial donations were much more modest. The fact that 33

34 several institutions in this study have managed to grow this percentage significantly over the past decade is indicative of an earlier successful effort at bringing alumni along and into their development programs. The following chart illustrates the growth of alumni giving over the last eleven years as a percentage of all gifts to the sixteen institutions in this study. Fig. VII.1 Alumni Giving as a Percentage of All Gifts: % 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Over eleven years, the number has increased by just six percent from 22% of all gifts in 1989 to 28% in The campuses averaged 23.4 % during this period, and nearly all of the increase was fueled by a small number of schools that had entered or were about to enter their second capital campaign. As we will see later, some of the most successful second campaigns were fueled by growth in alumni giving. Although this study focuses on the sixteen public universities that have been leaders in private giving, the trend line is overall quite similar to that of a broader range of public schools. My colleague, Bruce McClintock, has tracked seventyfive public universities over the past ten years and compared them against an overall average of 375 public and private universities, liberal arts colleges, and independent schools. His work shows that the less mature public university development programs have been even less successful in reaching out to alumni for gifts, ending the decade at something under 20% of all gifts, or at not quite the level that the leading institutions began the decade. The public university experience with alumni giving differs widely from that of the major private institutions. If we look at the two private comprehensive research 34

35 universities that have consistently raised the most money over the past ten years, the support they receive from alumni donors is much greater than the average of the sixteen major public institutions. Stanford and Harvard raise considerably more than any public institution, and their programs are anchored in the generosity of their alumni. The following chart compares the percentage of money raised from alumni over the past ten years at Stanford and Harvard with the percentage raised by the sixteen universities in this study (the final column gives an average of the ten comparative years): Fig. VII.2 Alumni Giving as a Percentage of Total Gifts: Public versus Stanford and Harvard 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Total The differences between the two groups is startling but also narrowing as the decade ends. Any comparison will naturally be influenced greatly by a few large donations that fall in any given fiscal year. Indeed, there is greater consistency in the trend line of the major public universities than there is in the Stanford and Harvard alumni totals. But it is noteworthy that these two great private universities finished the decade where they began with something between 35% and 40% of their total gifts coming from alumni donors. The growth in the public schools shows the impact of a number of the second capital campaigns that have succeeded in beginning to energize alumni and to move them up through the donor pyramid. Two public universities, Michigan and North Carolina, in particular, have been extraordinarily successful in attracting alumni support. The University of Michigan is distinct among public university campuses. It was the first institution to mount a significant fund-raising campaign in the late 1970s and was the first to complete successfully a $1 billion drive. Its alumni are much more broadly 35

36 distributed across the country. Michigan was among the first to see huge reductions in the level of state support, and it has long admitted a considerable percentage of undergraduate students from outside the state, using out-of-state tuition to offset reductions in state funding. The former President of the University of Michigan was the first public university executive to speak openly of privatization. This situation has produced a more diverse alumni population and an alumni perspective on the campus that has much in common with private institutions. For many years, Michigan has published a private magazine that it distributes to all alumni regardless of membership in the Michigan Alumni Association. It has succeeded in building up an institutional identity and connectedness that is significantly different from most other publics. The Wolverines have a special place in the life of their alma mater and they know it. The University of North Carolina, Chapel Hill, has a different history but shares the intense alumni connection with Michigan. The university has a very special place in the life of the state of North Carolina. Unlike most other major public universities, it has been spared really deep budget reductions and has been protected to the greatest extent possible by the legislature many of whom are alumni. The state takes enormous pride in having a nationally prominent public research university. Its alumni constituency appreciates the sacrifices in other services that are made to keep UNC strong, and their support for the larger university is evident. The chart on the next page (Fig.VII.3) shows alumni giving as a percentage of all giving over the decade for Michigan and North Carolina compared to all the public universities in the study and to Stanford and Harvard. 36

37 Fig:VII.3 Alumni Giving: Some Comparisons 60% 50% 40% 30% All Schools Privates Michigan North Carolina 20% 10% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Total For most of the past ten years, the University of Michigan has received a higher percentage of its gifts from alumni than either Stanford or Harvard, and its overall average is also slightly higher. The University of North Carolina, Chapel Hill, has lagged Michigan but is also close to the leading privates. Michigan mounted its $1 billion campaign during this period and North Carolina has been engaged in a quiet phase for its own large campaign. The campaign efforts certainly helped to sustain these percentages but can t account for the ongoing strength of the alumni development program. In the overall giving profile, these two schools are almost indistinguishable from the top private universities. They began and ended the decade with comparable levels of alumni support. The range between the best and the worst performers in terms of alumni giving among the sixteen schools in the study is dramatic. Over ten years, Michigan averaged nearly 42% of its totals from alumni followed by the University of Virginia with 34.4%. North Carolina and Texas A&M averaged more than 33% and the University of California, Berkeley rounded out the top performers with 31%. Both Virginia and Berkeley saw dramatic increases in the percentage of total gifts coming from alumni as a result of their second comprehensive campaigns undertaken during this period. By contrast, the public universities that received the smallest amount of money from alumni show a striking difference in their totals. Three Big Tens schools, Wisconsin, Minnesota, and Illinois, received fewer than 17% of their total gifts during the period from alumni, with Illinois at 10.6% over the ten-year period. 37

38 The University Washington averaged just 15% of its gifts from alumni and UCLA began the decade with only 8% but, thanks to significant growth during its campaign, produced a ten-year average of 16.6%. The one major variable that seems to have had a large impact on the growth of alumni support has been the second capital campaign, usually the first truly comprehensive capital campaign. The University of Virginia, the University of California, Berkeley, Penn State University, and UCLA have recently completed or are nearing completion of such an effort. Collectively, these institutions showed a marked improvement in the percentage of total gifts coming from alumni over the decade. The individual percentages vary widely from Virginia s 51% figures in to UCLA s 24%, but all demonstrate the point that the campaign can be an excellent vehicle for increasing alumni support. The following chart (fig. VII.4) illustrates the improvements that these four universities made during the ten years covered by this study. While the sixteen universities collectively achieved only a 6% increase in alumni support during the decade, these four achieved growth of 15%. The improvements were dramatic during the first four years of the 1990s when several of these universities were embarking on the quiet phases of their campaigns, but the totals kept increasing in an almost steady state throughout the period. Fig. VII.4 Alumni Support as a Percentage of Total Gifts, : Berkeley, Penn State, UCLA, and Virginia 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Each of these schools has its own unique history, but for all, the rise in alumni support is dramatic. Medicine plays a central role in the history of development at UCLA and private foundations have historically been that institution s greatest benefactors. At the beginning of the decade, UCLA had the smallest percentage of private gifts coming from alumni, comprising only 8.7% of the total raised. In 38

39 1995, the campus began the quiet work of raising a nucleus fund for a $1billion+ capital campaign. Shortly thereafter, the amount raised from alumni began to climb significantly. In the last two years of the decade, UCLA averaged 27% of its gifts from alumni donors. The Berkeley experience was similar to that of UCLA. Cal began the decade with 22% of its gifts coming from alumni. The quiet phase of its second campaign was inaugurated in the spring of Within a year, the figure jumped to 28% and by the end of the decade and the conclusion of the campaign was averaging 38%. In addition, a significant number of alumni commitments were also received as donations from private family foundations. The University of Virginia has often been described as the public institution most like a private university. This is reflected recently in the high degree of alumni support for the development effort. For most of the decade, Virginia averaged around 29% of its gifts from alumni donors. Unlike many of the other public research universities, UVA did not receive as high a percentage of donations from private foundations and corporations. Alumni gifts and gifts from friends of the university and parents were central to the overall development effort. The extraordinary success of Virginia s recent capital campaign was generally due to the exceptional support from its alumni, whose giving rose to a peak of 42% in the early years of the campaign and exceeded 50% in its last year, Not all of the public universities involved in large capital campaigns over the past decade have been as successful in increasing the amount of funding from alumni as these four. Several institutions kept at about the same pace during the period despite campaigns and one actually declined. Ohio State University had a highly successful campaign that saw its annual gift totals increase from $74 million to $174 million over the course of the decade. Alumni support, however, showed no real improvement during the campaign period as a percentage of overall giving. It started the decade at 22% of the total funds raised and it ended the decade at 22% of the total funds raised. Indiana University mounted a vigorous campaign for the core programs of its Bloomington campus. Much of the effort was directed at increasing the resources available for undergraduate education. While overall giving increased from $90 million to more than $200 million for the entire Indiana University system, the percentage of that total received from alumni actually declined from 21% to 14%. Finally, Illinois mounted its own $1 billion campaign that lasted nearly the entire decade of the 1990s. While annual private giving increased from around $50 million to about $150 million, the percentage received from alumni averaged only 10.7% -- the lowest of all the universities in this study. 39

40 Six of the universities in the study are either in the early stages or are seriously contemplating a $1 billion+ campaign. Of these institutions, only Michigan and North Carolina have been successful overall at building the level of their gift total from alumni. The others all averaged less than 20% of their private gifts from alumni over the decade, and most have not shown anything like the kinds of improvements seen by Berkeley, Virginia, Penn State or UCLA during the 1990s. These campaigns offer the big public universities an extraordinary opportunity to grow alumni support at a rapid rate. For most of the institutions in this study, the second campaign the comprehensive campaign has been the period when alumni giving starts to grow dramatically and to assume a preeminent position as the most important element in their fund-raising. While most public universities still have a long way to go to catch up with private institutions in their ability to raise money from alumni, the significant increases associated with the capital campaign show that growth is not only possible but also a key element in building a more mature development program. This argument is further illustrated by the history of institutional support for public universities. VIII. Institutional and Research Funding in Public Higher Education Most of the major public universities in the United States built their private giving programs on gifts from institutional sources. Corporate support played an especially significant role in the land grant model. Public universities have historically had close relationships with business and industry. They were created to build the local economy and to provide a foundation in agriculture and industry that would foster the economic and social development of the state. Public institutions were designed to be large to produce the graduates needed to become managers and business leaders in the community. They were from the beginning an escalator raising ordinary citizens into the middle class. In nearly every state where public higher education has taken hold, a significant portion of the executives and managers in local industry hold degrees from the local university. As alumni of the prestigious private institutions became major figures on Wall Street or on boards in the corporate centers of the east, graduates of public institutions led a wealth of local businesses both big and small and populated the middle ranks of the executive corps. Faculty in colleges of engineering and business built close ties with their counterparts in corporate research parks. Fueled by an explosion of public support for science in the late 1950s and 1960s, basic research on public university campuses led to the founding of new technology-based industries. If the ease of movement between the academy and industry was more difficult in the public university setting than at major private institutions, the tradition of open publication of research results and the size of the scientific and engineering 40

41 infrastructure on the public university campuses cemented their close relationship with the corporate world. Private foundations also built close alliances with public universities. The scale of the public enterprise and its mandated focus on issues of importance to the community made it an appealing recipient of foundation grant money. The land grant institution has tended to take a practical approach to the world around it. Faculty members are charged to try and solve problems and large national foundations have supported them with both research funding and capacity building grants. If corporate funding played an important role in funding business, engineering, and the sciences, private foundations helped the social sciences, education, and schools of social service. Even the humanities, at some of the public universities, benefited significantly from private foundation support. Most importantly, private foundations played a leading role in building up research programs and community outreach for academic medicine. At UCLA, for example, where medical development is a major recipient of that institution s private funding, private foundations have contributed an average of 37% of all private gift funds over the past eleven years. Institutional giving of this type required very little in the way of development infrastructure. On most campuses, much of the money was directed as research and was administered by the grants office. Over time, this changed as campuses began to seek institutional funding for broader priorities. These sometimes included capital initiatives at the school or college level but as institutional funding grew, the central campus was increasingly called upon to set campus priorities for corporate and foundation donors and to referee between competing claims from different units. As the major public universities began to build central development operations to transform their fragmented individual giving programs into university-run major gift efforts and annual funds, they were able to rest their development programs on the solid foundation of this institutional support. 41

42 The following chart (fig. VIII.1) illustrates the level of institutional support as a percentage of total gifts for the sixteen public universities in this study. Fig. VIII.1 Institutional Funding of Public Universities 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Unlike the alumni giving totals, institutional giving begins and ends the decade of the 1990s at around 50% of all private giving. Indeed, the modest growth in alumni giving appears to have had no real impact on the value of institutional support for public universities. Corporate and Foundation funding continues to be the most important source of private gifts to the campuses in this study. Support for research also plays a major role in public university fund-raising and nearly all of this money is received from corporations and private foundations. There is a very fine line between what is counted as a sponsored project and what is counted as an institutional gift for research at many public universities. Some of the schools in this study have extraordinarily high percentages of research dollars counted in their gift totals. Four Schools, Indiana University, the University of Utah, the University of Wisconsin and the University of Washington average 44% of all gifts coming to the campus as designated for research purposes. While these numbers are especially high, the overall average at the sixteen schools is also significant and generally distinctive to public institutions. 42

43 The following chart (fig. VIII.2) illustrates the percentage of gifts received for research purposes and compares it to the amount received from institutional sources. Fig. VIII.2 Institutional Funding and Research Support 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Among the sixteen universities in the study, research averages around 30% of the funds raised from private sources and constitutes more than half of the money donated from corporations and foundations. As with institutional giving, research funding has remained relatively constant among the major public universities over the eleven years of this study, and it continues to be a vital element in the structure of the public university fund-raising programs. Seven of the sixteen schools received a significantly higher percentage of their total funds for research purposes alone from institutional donors than they received for all purposes from alumni. Four of these schools received nearly three times as much money for research purposes over the years of this study than they did from alumni for all purposes. This heavy dependence on research dollars from institutional donors reflects a number of features that are generally distinctive to public institutions. The long tradition pressed by deans and department chairs of counting research money as gift funds in order to highlight the research productivity of academic units makes it difficult for the campus professional development offices to change the rules. In my judgment, this view is shortsighted. Institutional funding, especially institutional funding for research, does very little to support the overall infrastructure of the university. Rarely do institutional donors pay indirect costs 43

44 and only occasionally do departments receive any specific benefit for the funds allocated to their faculty for research. The presence of research money in private gift totals does not demonstrate the fundamental strength of a development program nor its importance as a replacement for decreased public funding. Even with private research support excluded, the public universities face challenges by relying so heavily on giving from institutional sources. Corporate and foundation money tends to fund program rather than ongoing needs of the campus. In general, institutional donors do not contribute heavily to university endowments and their support for capital projects is declining. The focus in corporations on return for shareholder value and the focus in private foundations on specific results for dollars invested do little to strengthen the overall university or to replace money that had previously come from public sources. As a funding model, dependence on institutional giving is therefore problematic. Even as foundations and corporations help to establish important and innovative new programs, they rarely continue to fund those programs beyond a short period of time. After seeding these efforts with their grant money, institutional donors expect long-term support to come from individuals or in some way from the university itself. When you combine this philosophy with a declining level of overall giving from corporations, the future of development programs that heavily depend on institutional giving is questionable. For this reason, the private universities have successfully grown their development programs by building up gifts from individuals, especially and critically, from alumni. The contrast between the average of total gifts raised from institutional donors in the sixteen schools in this study and Harvard and Stanford, is really striking (fig. VII.3, next page). 44

45 Fig.VIII.3 Funding from Institutional Sources: Harvard/Stanford vs. Public Universities 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% While the public universities received a relatively constant 48% of their gift totals from institutional sources during the decade, Harvard and Stanford saw that percentage drop dramatically from 40% in 1990 to 25% at the end of the decade. This occurred, moreover, as both Harvard and Stanford experienced explosive growth in private giving. The increase in the amount they received from individual donors was staggering when compared to overall growth. Institutional giving remained stable in dollars but was swamped by growth in individual support. For most of the publics, a different experience played out. They also saw tremendous growth in their development programs, from under $1 billion in 1990 to $2.5 billion in 2000, but that growth was equally fueled by institutional and individual donors. Since a significant percentage of the money counted toward these totals was directed at research, the impact of private giving on the public university infrastructure was no where near as great as it was at the top private institutions. Stanford is generally recognized as a world center for research in all areas. The following chart (fig VIII.4) compares the percentage of gifts allocated to research at Stanford over the decade versus the amount counted by the public universities in this study. 45

46 Fig. VIII.4 Research Funding: Stanford versus Public Universities 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% The figure for public institutions remains nearly constant at a little under 30% of all dollars raised. Stanford, by contrast, drops from 22% in 1990 to around 11% in Research support comes to play a diminished role in the overall development effort in the top private university fund-raising programs throughout the decade. Their programs are increasingly dependent on individual giving in a way that sustains and nurtures the larger university. Whether for purposes of endowment or capital, individual giving provides a more solid base for the larger development effort. It is insufficient for public universities simply to grow their programs for the sake of growth if they are not successfully building the infrastructure that maintains the institution in the face of reduced public funding. The campaign experiences of a number of institutions in this study bear out this point. The University of California, Berkeley was highly dependent on corporate giving as the decade began. The start of the capital campaign in 1993 altered the balance radically. While foundation support grew at almost the same level as alumni giving, much of the new foundation money was, in fact, individually driven. 46

47 The great bulk of new money that came into the university for endowment and capital programs came as new gifts from alumni and other individuals, sometimes through their personal foundations. The results were dramatic (fig. VIII.5). Fig. VIII.5 Sources of Funds: UC Berkeley 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% Corporate Percentage Fdn. Percentage 20.00% Alumni Percentage 15.00% 10.00% 5.00% 0.00% Corporate giving in absolute dollars remained nearly constant, much as it had at Stanford during the same period. But alumni and foundation giving grew dramatically both in absolute dollars and as a percentage of the total raised. Moreover, nearly all of the growth in foundation funds came from family foundations. Other universities in campaigns showed similar changes. Perhaps the most dramatic example of growth in alumni support occurred at the University of Virginia. As with most of the other campuses, Virginia had a small campaign in the early 1980s that greatly exceeded its original goal. The campus is highly decentralized and it was not until the early 1990s that planning began for a second, comprehensive effort. Even though the university has many of the qualities of a private school age, a set of distinctive traditions, a residential campus at a somewhat remote location, and a smaller size the decentralized program with a fully independent alumni association limited the larger university from working with alumni in a cohesive way. This changed dramatically with the $1 billion comprehensive campaign launched in the 1990s. While development operations remained decentralized, the university implemented a reunion program for the first time. Attendance has grown by large numbers each year. Alumni insisted on starting a new tradition of class giving, even though the university development office did not feel it was appropriate to begin such a program in the midst of a capital campaign. The 47

48 strength of the alumni identity at Virginia and the desire of alums to be part of something distinctive to their class and university affiliation has resulted in a much stronger alumni giving program at this old and distinguished institution. The results speak for themselves: Fig. VII.6 Sources of Funds: Virginia 60.00% 50.00% 40.00% 30.00% 20.00% Corporate Percentage Fdn. Percentage Alumni Percentage 10.00% 0.00% While corporations and foundations together provided only 35% of the university s total gifts in , alumni giving sat at around 28%. This alumni figure was fairly constant, but the campaign from about 1993 onward saw some extraordinary spike years in alumni support. Overall giving at Virginia increased from $51 million in to $195 million in Research funding never exceeded 23% and has been declining steadily in recent years as a percentage of the whole. In 2000, it was just 11% of all gifts. In two of the campaign years, alumni support exceeded 40% of all giving to the University of Virginia. In the final year of the campaign, alumni donations hit 51% at just under $100 million. Few public universities have quite the distinctive character and heritage of the University of Virginia, but a number have succeeded in altering the ratio of institutional to individual giving during the course of their second campaign period. In the case of Penn State, the university saw its great reliance on corporate support generally supplanted by growth in individual giving. In 1990, that university depended on corporations for 51% of their total gifts or about $31.4 million. In 2000, the corporate dollar total had grown to $43 million but the percentage had been cut in half. Alumni giving, by contrast, had grown from 48

49 $12.3 million or 19% of the total to $51 million or about 30% of the $170 million raised by Penn State last year. Even UCLA, which has been extraordinarily successful in securing support from private foundations, has seen a significant change in the ratios during its current capital campaign. Over the past ten years, UCLA s program has exploded from around $64 million to more than $253 million. Support from private foundations has accounted for about 45% of the gift totals throughout the period. Corporate giving has played a less important role and generally hovers around 15% of all gifts. The real story is in the growth of alumni support along with gifts from other individuals and parents. These donations have been key to the university s development success. Alumni donations accounted for only 8.8% of the total in 1990 but they rose to more than 24% in 2000, and non-alumni individuals were very important large-gift donors to UCLA. IX. Special Factors in Public University Development Programs The changing nature of alumni support and the fundamental importance of institutional philanthropy are two of the key factors that have shaped the growth of private giving to public universities. Other areas that merit examination are the role of athletics in public university development efforts and the unique place that medicine and hospitals hold at some public universities. Overall, athletics plays a significant role in every one of the sixteen universities in this study. All of the schools support a Division I football team and men s and women s basketball teams. In every school, athletics is self-supporting, depending largely on ticket sales, endowment income, and fund-raising for its programs. In a few cases, renovation or construction of athletic facilities has received funding from the state or from state-subsidized bonds, but generally, the athletic programs at the major public universities raise their own funds to build their own buildings. Their independent funding status and their clear importance to alumni and to the community give athletic programs in public universities a considerable degree of autonomy and financial independence. As was noted earlier, athletics kept donors actively involved with the university during the long years when public institutions paid little or no attention to alumni. They generally created a series of clear benefits for donations ranging from personal contact with athletic directors, coaches, or student athletes to more tangible perks like good seats and parking. In recent years, some public university athletic programs have imitated professional sports by building skyboxes and other special amenities for their most important individual and corporate friends. 49

50 One would think that the independence and the importance of athletics would pose problems for the emerging university development programs and the comprehensive campaign efforts that have come about in the 1990s. The truth, however, is quite the opposite. A number of chief development officers noted in interviews that athletics has proven to be a staunch ally of the academic side in fund-raising. Many of the most important campaign donors were first and foremost donors to athletics. Their gifts to the campaign, however, went to academic purposes or to some combination of athletics and academics. This ability to fold athletic giving opportunities into a larger solicitation proved highly beneficial to a number of institutions. In some cases, the commitments were much larger than originally expected because of this package approach. Capital campaigns have served to bring donors out of the limited funding world of athletics and into the larger life of the university. Over the decade the role of athletics in public university development programs changed as other fund-raising elements took hold. While athletics was a foundational element for development at almost all public universities, as these programs matured, individual donors moved out of athletics and into the larger institutions. Donors generally continue to give to sports over and above money that is directed to academic programs or broader university priorities. Since most athletic development efforts are tied to established systems of points and rewards, donors in general do not change their giving habits when they expand to take in the larger university. As one chief development officer put it: athletics is a portal. Many use this door to reconnect to their alma mater. Most of the schools in this study have independent athletic operations that often conduct campaigns for facilities or scholarships that are independent from university campaigns. There is usually close coordination in the planning of these campaigns, but athletics runs the fund-raising independently at most of the institutions studied. A few schools, Berkeley among them, have folded major athletic components into their comprehensive campaign efforts. But this is the exception even at schools where athletics is generally seen to be at the core of institutional identity. The one complaint heard at nearly every school is a lack of close coordination between athletic fundraisers and central and unit major gift officers. The tradition of autonomy and the personal nature of interactions between athletic directors, development staff, and coaches with donors at sporting events often puts athletic development activity outside of the normal prospect management process. Resentment can build up between academic development officers and athletics when prospects are contacted or approached for large annual gifts outside of the established system. This same issue is also raised frequently in the context of large medical school and hospital fund-raising programs at the big public universities. The scale of these medical efforts at a few key public institutions is significantly different from 50

51 most of the major private universities. Only three of the universities in this study (UC Berkeley, the University of Texas, Austin, and Texas A&M University) lack affiliation with a medical school or teaching hospital. At all the others, medicine is important, but for four campuses -- UCLA, Washington, Utah, and North Carolina -- it plays a central role in the development effort. While the natures of these four programs are different, all have medicine at the center and medical fund-raising usually operates quite independently of the rest of the campus. Two programs, UCLA and Washington, are particularly significant. At UCLA, the development effort was built on the strength of the medical program, including the university s research and teaching hospitals. Medicine has accounted for more than 50% of the money raised during the campus s extraordinarily successful capital campaign, and most of the very largest gifts have been medically related. UCLA has the highest percentage of support from private foundations of any of the schools in this study. While most of this money is not specifically research related, the bulk of the foundation support has gone into the medical school and related hospitals. Institutional and individual giving to medicine has provided UCLA with a strong foundation upon which to build its overall program. In the initial years of the UCLA campaign, medicine was clearly the driving force for the development effort. More recently, the increase in alumni donations has paralleled a significant increase in gifts to other areas of the campus, including the core College of Letters and Science. At Washington, which is in the nucleus phase of what will likely be a $2 billion capital campaign, research money for medicine is providing the foundation for the expanding capital campaign program. Over the ten years of this study, research funding has accounted for an average of 44.6% of all money raised by the University of Washington. This contrasts with the overall average of just under 30% for all of the institutions in this study. In , the campus raised about $80 million with 54% of it going for research purposes. In , Washington raised $225 million with about 42% of the total going to research. This amounted to $94 million or more than the total figure raised by the campus from all sources ten years earlier. Much of this money goes into medically related programs on the campus. Washington is the single repository for this kind of money in the Pacific Northwest. Like UCLA, it has a foundation in medicine upon which to build an expanding program. The difference lies in the amount allocated for research. UCLA, by contrast, raised about $63 million for research in 2000 or 25% of their $253 million total. While private research dollars do not generally support infrastructure in the same way that individual gifts do, Washington is nonetheless poised in its campaign to move the overall program forward as UCLA has done by increasing individual and alumni giving in support of the core of the campus. 51

52 North Carolina and Utah resemble UCLA and Washington, but on a different scale. At UNC, five of the thirteen schools on the campus are medically related. Nearly all unit operations operate autonomously at North Carolina with few reporting relationships into the center. The sheer number of schools places them at the top of importance in the overall development effort on that campus. Utah looks a lot like Washington with an average of 45% of its private funding going for research over the past ten years. Overall gift totals at Utah grew from $46 million in to $144 million in , but $72 million or 50.4% went for research. As at Washington, the bulk of this money was directed to medicine. UCLA is the only one of these four campuses to have largely completed its second campaign. Medicine was at its core but the rise in alumni and individual giving led to a significant rise in the importance of other areas of the campus. The other three schools are in various stages of campaign planning. North Carolina has already established a strong tradition of alumni giving, but the other two have an opportunity to use their campaigns to increase individual donations directed to the heart of their campuses. X. Organizational and Funding Models Probably the most distinctive feature of public university development programs are their organizational and funding models. Only one institution in this study, the University of Michigan, is established and funded like a private university with the development office treated as a regular arm of the administration supported out of the general fund. All the others have their unique characteristics that generally separate them organizationally and, to some degree financially, from the campuses they serve. No matter how advanced the effort, this separation has challenged the major public universities to integrate their development programs into the academic cultures of their campuses. There are three basic organizational models consisting of self-supporting and independent foundations, affiliated, dependent foundations, and independently funded but dependent central campus development operations. Overlaid onto these organizations are a variety of campus unit development offices that range from shops that are fully integrated into the central program to others that are completely independent. All reflect in some way the special natures of their respective campuses. The most distinctive creation of the public university is the fully independent foundation, established at the request of the campus to raise money outside the existing governance structure of the university. All of the independent foundations in this study have good relations with the campuses they support, but this has not always been the case. Several of the universities reported past tensions between foundation leadership and campus leadership. In some cases, this led to the creation of separate campus development shops or to independent 52

53 unit development operations. Legally, the independent foundation can do what it pleases. Fully independent foundations exist at about half of the universities in this study. They have separate boards of trustees and the foundation and not the university employs all central development staff members. In a couple of cases, the executive director of the foundation also serves as the university s vice president for advancement. The foundations generally have their own salary and benefit structures and are able to work outside of the campus bureaucracy. This allows the foundations to develop and implement compensation plans and reward structures that differ from the campuses they serve. At times, they can even be at odds with the prevailing campus culture. Several of these foundations have active bonus programs tied to performance. Others provide staff with cars and perks unavailable to the campuses they support. Independence allows the foundations to provide salaries for development staff that are considerably higher than equivalent administrators within the campus system. The trustees of the independent university foundation have real fiduciary responsibility for the management of the foundation. They hire and fire the Executive Director and often oversee significant facilities. In some cases, the foundation retains control of the endowment assets that their staff members have raised on behalf of the campus. In others, the money is transferred after having been held for a period of time. Interest that accrues during the period when the foundation manages the money is applied toward the costs of running the foundation. In all cases, the independent university foundations generally fund themselves out of the money that they raise for the campus so that no direct development costs run through the university operating budget. Most foundations generally reimburse the campuses for money expended on travel or other cultivation activities by university officers like the president or chancellor. In a few cases, independent foundations cover a system of several campuses. The Indiana University Foundation defines itself as a foundation for a unitary university with distinct elements or campuses. It might mount a campaign, as it recently did, for the Bloomington campus, but it sees such an activity as simply a priority for the larger multi-campus university much as another campus might support the work of a single department. At Illinois, the university foundation has to divide its energies between the Champaign-Urbana and Chicago campuses. Because of the differences between the two and the geographic separation, Champagne has increasingly built its own independent development programs at the unit level. Some of these foundations have built large and impressive buildings. Minnesota, Wisconsin, Texas A&M, and Florida all have splendid facilities to house their development programs. Much like alumni centers, these foundation buildings provide space for large and small meetings and for cultivation events. They are 53

54 usually located on the university campus on university land but are managed independently by the foundations At the University of Wisconsin, the university foundation is only one element in the larger university fund-raising program. At Wisconsin, money is also funneled to the campus from other entities, most notably the Wisconsin Alumni Research Foundation or WARF. This independent foundation receives patent royalties generated by Wisconsin faculty members. WARF makes an annual gift to the campus of these royalties and, like the larger fund-raising foundation, has its money counted in the annual report on private giving and is likewise reported by the university to the CAE. Several campuses have independent athletic foundations that predate the university fund-raising programs. At the University of Virginia, numerous units, including most of the professional schools, have their own independent foundations that coordinate their activities through the larger campus fund-raising office. At Berkeley, several support groups have incorporated themselves separately in order to raise money for specific campus-affiliated programs. Overall, the independent foundation model seems to function well, especially when foundation executive directors and trustees work closely and effectively with university leadership. Nevertheless, they do emphasize the separateness of the development office and of development work in general. In most cases, development officers employed by the foundation but assigned to campus units are physically located at the foundation and do not interact as closely with their colleagues in the dean s office and on the faculty as staff whose offices are in the schools and colleges. But independent foundations have kept fund-raising separate and safe from the politics of state appropriations. This has served donors well. By contrast, the dependent university foundations have few or no separate employees, and the central development operation is officially a part of the university. At Berkeley and UCLA, the foundations manage that portion of the campus endowment that has been contributed through them. The development office has to maintain a separate finance operation to support a foundation investment committee that looks after the endowment. But aside from this one requirement, the trustees of these dependent foundations have no fiduciary responsibilities. They do not hire or fire the foundation president and they manage no other assets. Regents have responsibility for the university and all of its employees, and the foundation trustees function solely as fund-raising volunteers. Dependent foundations require a special level of attention from the university administration. Since they lack institutional responsibilities, these foundations frequently search for a purpose beyond the fund-raising that sits as their core mission. Outside of capital campaigns it can be difficult to attract the most senior 54

55 and wealthy alumni to dependent foundation boards. Some prefer to affiliate with smaller organizations as trustees that truly oversee the operation. Board development is crucial in the dependent foundation, and development staff members are challenged to come up with ongoing and meaningful work for their trustees. Dependent foundations also face considerable challenges in reflecting alumni diversity. Campaigns can energize dependent foundations and give them a special purpose. Often, in the age of the mega-campaign where extraordinarily large gifts are the key to success, universities with dependent foundations establish separate campaign volunteer organizations to attract the most influential volunteers to leadership roles. Multi-layered campaign gifts committees can surface new candidates for board membership while raising the visibility and value of fund-raising volunteers within the larger university community. The dependent university foundation functions best if it is seen as a fully integrated and essential element of campus life. It becomes the heart of all volunteer fund-raising activity and serves as a forum to bring together volunteers, deans, and development staff from across the campus into common purpose. The dependent foundation by its nature is culturally less separate from the life of the campus and helps in integrating development work into the life of the public university. The separate management of endowment assets can allow for flexibility in investment policies outside of the larger multi-campus university system. This, in return, can help individual campuses and chancellor/presidents to achieve specific objectives. With dependent foundations, development staff members are employees of the university and not the foundation. As a result, they are subject to the compensation guidelines of the campus. This presents special challenges in securing the kind of packages needed to attract top fundraisers. Salaries are much more public when they are attached to the larger public university. This is balanced, somewhat, by the added benefits associated with employment by the larger institution. But independent foundations have considerably more flexibility in designing plans to attract the best people to their operations and this could become an increasingly important factor as development salaries rise beyond the norms for university employment. Even though they are essentially at one with the campuses they serve, dependent foundations are often important contributors to the funding of development staff by assessments on their endowment assets or through the transfer of unrestricted foundation gifts. Nearly all of the campuses in this study are unable to use public funds or student fees to support fund-raising. The dependent foundation can provide a useful vehicle for securing discretionary money to pay for the development effort. 55

56 In the final organizational model the development office is established and organized like any unit of the campus administration only it sits on a separate funding base. Functionally, this model is almost indistinguishable from the standard private university development organization. All staff members are employees of the campus and have their set position in the university hierarchy. The money they raise goes directly to the university without the filter of a separate foundation. Campus personnel officers set salaries and benefits. There is, however, a subtle difference that sets these operations apart from their private counterparts. Though totally integrated, these development offices are separately funded outside of the standard university appropriations process. They do not receive state money and they are not eligible for student fees. They are subject to a revenue stream that ebbs and flows and is often called upon, by its very discretionary nature, for other pressing campus priorities. Expansion of these independently funded shops to deal with capital campaigns inevitably presents serious funding issues to the university financial administration. Even in campuses with dependent foundations, separate school and college or unit development offices are often funded out of discretionary money. At Berkeley, for example, it is not unusual for nearly all of the money raised through a given unit annual fund to be used to pay for the development office. Endowment assessments reduce the amount of available capital as it flows directly to the faculty and the campus. Gift taxes, which are used at all of the University of California campuses, irritate donors and also reduce available money to gift recipients. The independently funded development operations struggle to find the right mix of revenue to sustain their fund-raising programs. This inhibits their ability to integrate naturally into the budgeting process of the larger university. It continues to promote fund-raising as something separate or apart from the larger campus and challenges public university development operations to present themselves as central to the long-term success of their campuses. 56

57 XI. Conclusion Private giving and the administrative structure of fund-raising are making fundamental changes in what we have traditionally thought of as the public university. Over the past fifteen years, public institutions have gone from state supported to state assisted. One administrator predicts that the next fifteen years will see a transition from state assisted to state tolerated. The change is basic, dramatic, and, in my view, irreversible. The future of public higher education in this country is tied in no small part to the ability of these institutions to grow new sources of revenue. Continued growth in private giving will be an important way to keep student fees at a moderate level so that the public character of the state university is not compromised. Private funds are also playing a critical role in providing the margin of quality that helps to retain top faculty members at public institutions. The establishment of full scale, comprehensive development programs will occur at all levels of public higher education. The sheer number of alumni and the position of these institutions in their communities ensures that they have the potential to create and foster growing fund-raising programs. The campuses that delay will pay a price in the long term. In my judgment, everyone will eventually board this train and those who begin first will be first to see the benefits. With this as backdrop, the experiences of the leading public university fundraising programs are significant and instructive. Others can learn by assessing the effectiveness of various programs and organizational models. Though the process is continuing and not all results are in, best practices are emerging at these leading programs and the distinctive nature of the public university fundraising environment is becoming increasingly clear. The most successful programs emulate one key aspect of private university development efforts. They recognize that private giving has institutional value to the degree that it allows the university to sustain its basic mission. This translates into money for endowment, budget relief, and unfunded but essential capital facilities. The race for the highest fund-raising totals, that has so obsessed many leaders in public higher education, has not always been in synch with the mission of building a private base to fund infrastructure. As a result, even at some of the top development programs at public institutions, the pressure on student fees continues to rise, endowments grow through investment more than new gifts, and funding for development operations goes up and down with the gift totals. For public university chancellors and presidents, as well as their finance officers, the management of a fund-raising revenue stream can be frustrating and confusing. Faculty and deans see the growth in absolute numbers publicized heavily by independent foundations and integrated development shops alike. 57

58 What they don t see is the impact on their daily lives and students continue to feel the squeeze of higher tuition. The principal conclusion of this study is that public university development resources need to be more carefully focused on identifying, cultivating, and soliciting support from alumni. Those institutions that have shifted their focus in this direction are leading the pack in raising money that sustains institutional infrastructure. Individual giving overall accounts for close to 90% of philanthropy in the United States. The only area of individual giving to higher education that has outpaced both growth in individual income and the New York Stock Exchange composite index has been in gifts to restricted endowments. Alumni are the natural source of this support for colleges and universities. Until public institutions become more effective at addressing this constituency, even though their gift totals are large these schools will not realize the true value of private philanthropy. This does not mean that public institutions should neglect their historic relationships with institutional funders. These relationships are part of the essential character of land grant institutions. In the marketplace of philanthropy, public universities have a competitive advantage with institutional funding sources and this advantage should not be sacrificed at the expense of building alumni support. There needs to be recognition, however, of the limitations of institutional philanthropy and the way in which it affects the larger university as a revenue source. New programmatic initiatives must be balanced with an understanding of the tradeoffs involved and the impact that such initiatives may have on basic, under funded services. With this base in institutional giving, public universities are well positioned to grow alumni support and to expand their programs in the direction of sustaining infrastructure in the decades to come. The clear success of several universities in this study shows how public university programs can grow dramatically in the area of individual giving while maintaining and even modestly expanding their institutional support. Programs, however, that continue to push this institutional support to build their gift totals through the inclusion of sponsored research money are not, in my judgement, building a solid base for real growth in the future. The expansion of development offices and the parallel growth in fund-raising responsibilities among senior academic administrators has placed real burdens on the overall administrative structure of public institutions. Public university chancellors and presidents frequently complain to each other about the enormous amount of time they spend in development work. Counting everything from attendance at an alumni reception to a football game, these leaders see their previously vital work of academic management dissipating in the growing demands of development and campaign. 58

59 Despite clear increases in fund-raising responsibilities among public university chancellors and presidents, they still lag far behind their counterparts in private institutions in the amount of attention and energy dedicated to raising money. This is due to two key factors: most public institutions have yet to accept the centrality of private giving to their fiscal well being; and alumni identity is much more centered at the school and college level and therefore looks to deans rather than presidents for leadership. Indeed, the unsung heroes of the public university development story are the deans who shoulder a fund-raising burden that is equal to or greater than their counterparts at private institutions. This burden has been thrust upon them suddenly, with little or no preparation. The very expectation that public institutions will now raise considerable sums an expectation that is placed upon the campuses by governors, regents, and chancellors and presidents places the responsibility squarely on the shoulders of the deans. Today, every university in this study has all finalists for decanel positions interviewed by someone in the development office, and job descriptions routinely include fund-raising as a key responsibility of the position. Deans of long standing who have heretofore performed splendidly in recruiting faculty and overseeing departmental budgets are now thrust into a new role for which they may not be prepared. As this new responsibility has grown, public universities have done little from the center to aid the deans. Fund-raising has become an overlay on the existing operations of the deans office. Traditional tasks must still be done but the work now goes on in an environment where external activities are given nearly equal weight. Some schools engineering and business as examples are well positioned to take on this extra burden. Others, especially in the humanities and social sciences, struggle mightily to make sense of this new world. Since the deanery is so important to the success of public university fund-raising programs, more should be done by presidents, chancellors, and vice presidents for development to assist and support campus units in their fund-raising. Training is a key element but so is the recognition that deans need additional funding to maintain their existing operations while expanding their external activities. At a number of schools, unit development officers find themselves pulled into the administrative work of the dean s office and this takes away from their important task of identifying prospects and bringing them forward to the dean. All large development programs whether they are at public or private institutions experience tensions between unit and central offices. It is the nature of the central development shop to try and manage contact with prospects whose interests span the campus, and it is in the nature of school and college shops to lay claim on anyone who expresses an interest in their programs. The 59

60 establishment of a truly collegial environment is especially challenging in the public university setting because so much of the real work of fund-raising takes place at the unit level. One of the real surprises of this study was the discovery that nearly all of the leading public universities have worked out these tensions smoothly. Even as major gifts from alumni come to dominate fund-raising activity, most of these schools have developed straightforward prospect tracking and management systems that maintain order in the ranks. Most public university vice presidents and/or chief development officers see smooth unit/central operations as key to their success, and the vice presidents at nearly all of these schools preside over monthly prospect review sessions with the staff. Nearly every institution maintains a single base performance standard for major gift officers whether they reside in a school or in the center, and many have dual reporting relationships and joint funding. Except for Berkeley, all of the schools focus their annual giving solely on the units. Public institutions have not yet found a single model for their volunteer structures. While both the dependent and independent foundations offer boards of trustees whose principal responsibility is fund-raising, most of the chief development officers I interviewed either created independent senior fund-raising groups or augmented the trustees with additional volunteers. This has been especially true in campaigns. The importance of a few very large gifts to the success of any fund-raising campaign today generally calls for a small number of volunteers whose own capacity approaches that of the donor prospects. Most public university foundations do not contain many individuals at this gift level. Calling on outsiders of great wealth to lead small campaign committees has proven to be an effective way of cultivating these same figures for their own lead gifts. This is a practice well known at private institutions. The difference is that at private universities these lead donors are more likely to be sitting trustees. Finally, public university development programs must become better integrated into the academic culture of their institutions if they are to take root fully and blossom. It is important to remember that even the most successful public university fund-raising operations are fairly new. Fifteen years is not a long time in the life of a university where faculty members often serve out their entire careers. Separateness has been further maintained by independent funding structures and separate compensation packages provided to fund-raising staff at many institutions. Public universities need to take proactive steps to help faculty to understand the importance of development work for the future of their institutions while simultaneously challenging fundraisers to a better and more subtle understanding of the academic enterprise. This is already taking place at a number of schools. During the course of the recent Berkeley campaign, one-by-one, the titles of college and school development officers were changed from director of development to assistant or 60

61 associate dean. Vice presidents now routinely address the academic senate at public universities and senior fundraisers give workshops at deans planning retreats. The academic culture of each of these universities is different, but all public universities need to work to develop a better acceptance of fund-raising and the fund-raising staff if they are to retain their best people and maintain the forward momentum of their programs. Years ago, a former provost said to me that all development staff really need to do is eat dinner and be charming. That was said at a time when public institutions, at least, could afford to see their fund-raising programs as something on the margin. Those days are now clearly past. The last decade of the Twentieth Century saw the blossoming of private philanthropy at the nation s leading public universities. The institutions that have so graciously participated in this study are today moving forward quickly and will establish new standards for giving in the years to come. The great majority of public universities are close behind. As the overall level of sophistication increases along with alumni involvement, the nation s public universities will use private philanthropy to take increasing control of their own destinies. In this way, they will be able to continue their mission in service to the public good. 61

62 APPENDIX A Private Fund-raising for Public Higher Education The First Fifteen Years: A Progress Report A Prospectus I. Introduction Since 1985, most of the major public universities in the United States have initiated aggressive fund-raising programs. These efforts have, in a comparatively short period of time, come to compete with the longstanding development programs of private universities. A small number of leading public universities has set the pattern for fund-raising, and these institutions have largely copied the best practices of the successful private universities. This study seeks to review the progress of public university fund-raising during its first fifteen years with a special focus on capital campaigns. It will endeavor to test how the publics have implemented the best practices of private universities and will look to see where public institutions have developed distinctive methods of fund-raising that reflect their particular culture and heritage. II. Historical Overview This section of the study will identify the most successful public university fund-raising programs during the years It will examine in general terms the evolution of their programs, focusing especially on capital campaigns, and will explore both common features and significant anomalies. It will also target a small number of successful private universities and point out any general differences in the structure and nature of their development programs. III. Alumni Identity The creation of alumni identity is one of the most significant challenges faced by public universities. The study will attempt to assess the success of various programs aimed at creating alumni identity including alumni associations and associated activities, reunions, and class campaigns. It will also try to assess the progress of creating non-traditional methods of building alumni community. IV. From Institutional to Individual Giving The historic basis of private support for public institutions has come from institutional sources. Corporations fund faculty research efforts related to their products as well as the science, engineering, and business 62

63 departments that supply them with employees. Foundations offer programmatic support for outreach and other aspects of these universities public mission. The mature development programs of private institutions are much more dependent on gifts from alumni and other individual donors. This section will assess the progress of public universities in broadening their appeal to major individual donors and will examine the shift from institutional to individual support especially as it relates to capital fund-raising drives. V. Special Factors Public universities have a number of issues that distinguish their experience from that of private institutions. These include such internal factors as the enormous influence of athletic fund-raising at many public universities, and such external factors as the public perception that the state provides nearly all funding. The study will explore some of these distinctive experiences and will analyze their impact on the development of public university fund-raising. VI. Organization and Budget Many public institutions have development programs that emerged in highly decentralized ways. The study will compare the organizational structures of the targeted group of universities and will examine how funding for development impacts the way campuses organize the management of their fund-raising programs. VII. Conclusion The study will conclude by analyzing the overall progress of public university fund-raising programs as compared to the established track record of private institutions. The conclusion will compare the public experience collectively in order to assess effectiveness across institutions and programs. 63

64 APPENDIX B PUBLIC UNIVERSITY FUND-RAISING SURVEY Fall 2001 Section I: History of the Program 1. How long have you been associated with the development program at your university? How long have you been in this position? 2. Tell me something about the history of fund-raising at your university. 3. Are you in a capital campaign? If so, describe it. 4. When was your last capital campaign? Describe it. 5. What percentage of the university budget comes from the state? Has that number gone up or down over the past five years, or has it remained relatively constant? 6. Would you describe your program as centralized? Decentralized? Mixed? 7. How do campus unit fund-raising activities work with broader institutional fund-raising activities? Who controls prospect access? 8. What is the structure of your alumni organization? Does it report to the development office, to some other part of the campus, or is it independent? 9. Can you identify any other institutions that your campus has used as models for your fund-raising program? Why did you choose these other institutions? 10. Are there any special best practices from private or public institutions that you have consciously applied to your program? 11. What words would you use to describe your development program today? Section II: Alumni Identity 1. How would you rate the strength of alumni identity at your institution? 64

65 2. Within the context of your institution, what do alumni identify with most? (examples could include class, undergraduate degree, school or college, department, residence, athletics, etc.) 3. As your development program has grown over the past ten years, has there been an equivalent growth in alumni identity? How can you tell? 4. Do you have a centralized annual giving program for alumni? If so, how long has it been in place? 5. What is your alumni participation rate? Is it increasing? Keeping pace? Declining? 6. How do you communicate with alumni? Does the development office have a voice in alumni publications? 7. Do you have a reunion program? If so, describe it and give some history. Are reunions organized by class and is there a class gift program associated with them? 8. What are the objectives of your reunion program? How successful have you been at meeting those objectives? 9. What role has the reunion program played in contributing to the development of alumni identity? How effective is it in creating class identity? 10. Has your institution developed any unusual or non-traditional methods of strengthening alumni identity? 11. Are you using the internet in any way to build an alumni community. If so, what are you doing and how effective is it? Section III: Institutional Donors versus Individual Donors 1. How important has private funding for research been to the growth of your overall fund-raising program? 2. Do you have a medical school? If so, approximately what percentage of the research money counted in your gift totals is directed to medicine? 3. How is corporate gift money for research purposes managed at your university? What role does the central development office play in generating and then managing these gifts? What role do school and college development offices play? 65

66 4. How is foundation gift money for research purposes managed at your university? What role does the central development office play in generating and then managing these gifts? What role do school and college development offices play? 5. Do you have a central university-wide corporate and foundation relations program? If so, how large is it? 6. Do you have an organized central major gifts program? If so, how many professional positions are allocated to this purpose? 7. Do you have written performance standards for your major gift officers? Is there a specific dollar goal assigned to each officer or to the larger unit? 8. Are there specific expectations for major gift fund-raising in campus unit development offices? 9. Have the number of positions dedicated to major gift fund-raising at your university increased in recent years? If so, what is the approximate percentage increase? 10. Do you have any regional offices? If so, how are they staffed? 11. Do you have a separate principal gifts program? Describe it. 12. Do you make special efforts to target non-alumni major prospects. How do you do this? 13. Do you have a bequest program? Describe it. Section IV: Special Factors in Public University Fund-raising 1. What has been the attitude of the state leadership toward the success of your fund-raising program? 2. Do you find that major donors want assurance that their gifts will not lead to further reductions in state support? 3. Does your institution have an office of government affairs? If so, how does the development office support their efforts 4. How important is athletics to development at your institution? Has the athletic program brought new donors to the campus? 66

67 5. Do members of the academic administration play a large role in fundraising at your institution? How active are deans in development work? Approximately how much time does your president or chancellor spend on major gift fund-raising? 6. Are there any special factors that you feel are specific to your institution as a public university that have influenced the growth of your development program? Section V: Organization and Budget 1. How is development funded on your campus? How do you work with the institutional budgeting process? Can public funds be used to support fund-raising in your state? 2. Does money raised from alumni through annual giving go to support the development operations of the central office? Of the campus unit development offices? 3. Do you have a foundation? Is it administratively independent of the campus? Does it have its own budget and sources of funding? 4. If you have a foundation, is it the principal volunteer group responsible for fund-raising? If not, do you have a volunteer group responsible for overall university fund-raising? 5. If you have a foundation, how would you characterize its relationship with the campus? 6. Does the development function report directly to the chief executive at your institution? Does your unit also include non-fund-raising functions? If so, what are they? 7. To what degree has the organization of development at your institution been shaped by the sources of funding? 8. If you could design an ideal organizational and funding structure for your institution, what would it be? Section VI: Conclusion 1. As you reflect back on the growth of your development program over the past ten years, how would you rate its overall success? 2. What do you think are its strongest elements? What are its weakest? 67

68 3. Where would you like your development program to be five years from now? 4. Are there any questions that have been omitted from this survey that you would like to have answered by your peer institutions? 68