Contributions To Higher Ed Up 9.4 Percent, Hits 28 Billion

March 15, 2007       Paul Clolery      

Charitable contributions to colleges and universities in the United States grew by 9.4 percent during 2006, reaching $28 billion. Endowments, buildings, and equipment were the top targets for donors. As usual, gifts to fund operating expenses lagged with donors.

However, while the total dollar amount given by alumni increased, the percentage of alumni making gifts declined.

According to the Council for Aid to Education (CAE) in New York City, the increase was fueled by contributions from alumni and other individuals. Support from foundations, corporations, and other organizations also increased, but that rate of growth was smaller.

Stanford University raised more money from private donors than any other university ($911.1 million), followed by Harvard ($594.9 million) and Yale ($433.4 million).

Rounding out the top 10 were the University of Pennsylvania ($409.4 million); Cornell University ($406.2 million); University of Southern California ($405.7 million); Johns Hopkins University ($377.3 million); Columbia University ($377.2 million); Duke University ($332 million); and, the University of Wisconsin-Madison ($325.9 million).

The findings are from the annual Voluntary Support of Education (VSE) survey. The 1,014 institutions that participated in the survey represent about a third of the nationÕs four-year institutions, including 77 percent of research and doctoral-granting institutions. Respondents generally account for about 85 percent of the voluntary support raised by all colleges and universities.

Sources of contributions Slightly more than half of the $28 billion raised during 2006 was directly from individuals. Alumni giving–the traditional base of higher education giving–grew by an impressive 18.3 percent in 2006, while individuals other than alumni increased their giving by 14 percent, according to Ann E. Kaplan, director of the Voluntary Support of Education Survey.

Historically, alumni and foundations contribute the largest portions of charitable support of higher education institutions. Following this pattern, alumni giving represented 30 percent, and foundation support represented 25.4 percent of the dollars contributed in 2006, according to Kaplan.

"The very strong increase in alumni giving demonstrates that alumni have rallied to the support of their alma maters," said Kaplan. She added, "There has been some concern that alumni participation is declining. But in spite of that trend, which is real, alumni continue to be a driving force in the charitable support of higher education institutions."

Foundation giving increased by 1.4 percent after increasing 12.9 percent in 2005. It is worth noting the effect one foundation grant in the amount of $296 million had on the foundation giving total in 2005. If the value of that grant were removed from the 2005 foundation estimate, the 2006 increase would have been 5.9 percent. Also, among survey respondents, 29.9 percent of foundation giving is from family foundations, underscoring the fact that individuals, whether contributing directly or through a foundation, are the backbone of voluntary support of higher education.

Corporate giving represents a smaller share of giving to higher education institutions–16.4 percent in 2006, an increase of 4.5 percent over the 2005 amount. It is important to bear in mind, however, that companies support colleges and universities in many ways that are not counted by the VSE survey, including sponsorships, partnerships, and clinical trials.

In keeping with a long-running pattern, the total dollar amount of alumni giving increased as the percentage of alumni making gifts declined. The alumni participation rate fell from 12.4 percent in 2005 to 11.8 percent in 2006, according to the survey results. Even when two-year institutions, which have much lower participation rates than do four-year institutions, are eliminated from the calculations, there is still a decline in participation, said Kaplan.

Total alumni giving increased in recent years in large part because of an increase in the value of the average gift. In other words, those alumni making contributions are making larger contributions. However, it is also true that the number of alumni making gifts has been increasing, even as participation declines. The increase in the number of alumni donors has not translated into higher participation rates because the number of alumni of record (who exist and for whom the institution has a good address) has increased faster than the number who contribute.

In addition, if alumni give through a family foundation, company, or donor-advised fund, the entity, not the individual, receives credit.

For 2006, CAE investigated another aspect of alumni participation by calculating participation in a subset of institutions that report their undergraduate-degreed alumni separately from other alumni. Individuals are more likely to support the institution that granted them an undergraduate degree than they are to support an institution they attended but did not graduate from, or than they are to support the institutions from which they received graduate degrees.

All three are considered alumni relationships, however. A person who attended a college is considered to be an alumnus, whether or not he or she received a degree from that college and whether a degree a person did earn was graduate or undergraduate.

Counting only undergraduate-degreed alumni, alumni participation still declined from 2005 to 2006. However, it was a small decline–from 14.8 to 14.6 percent. Both the number of donors (the numerator of the alumni participation equation) and the number of countable alumni (the denominator of the equation) increased, but the former increased less than the latter.

Whatever nuances of alumni participation, the simple fact is that alumni giving is the primary source of charitable support of higher education institutions. In addition, declines in alumni participation can be the result of institutional practices as much as the personal inclination of alumni themselves. Therefore, it would be a mistake to understate the role of alumni in todayÕs giving picture and their important role in future scenarios.

Purposes of Contributions Gifts for capital purposes — such as endowments, buildings, and equipment — increased by 14 percent in 2006. Over the past three decades, in virtually every year during which total support increased by 9 percent or more, capital purpose giving increased by double-digit percentages. Capital purpose gifts tend to be larger than those for current operations, and those large contributions drive up total giving.

Current operations gifts were also up, by 5.6 percent in 2006. This is ahead of inflation and also played a role in the yearÕs healthy increase.

Gifts of stock In 2006, the average number of gifts of securities that a core group of 517 respondent institutions received increased by 3.4 percent. The average value of those gifts increased by 5.1 percent, from $45,501 in 2005 to $47,806 in 2006. The 2006 value is the highest since CAE started collecting data on the subject in 1993, said Kaplan. Contributions in the form of stock are usually among the larger gifts an institution receives. In addition, when the number and value of stock gifts increases, giving for capital purposes also tends to increase.

Endowments provide an important source of funding for higher education institutions. In 2006 the market value of the endowments of 921 institutions that replied to the VSE survey for two consecutive years increased by 15.2 percent.

Investments of individual and institutional donors also affect university revenue. Large gifts are often made with personal stock holdings, and a householdÕs capacity to make annual gifts of cash is affected by its total assets, investments and income combined.

Voluntary support is an important component of higher education funding, but it accounts for less than 10 percent of expenditures, even in years when giving increases ahead of inflation. "Most institutions raise a small percentage of their expenditures from voluntary support. And, in fact, a large part of voluntary support is earmarked by donors for endowments and other capital purpose uses and is not used to offset expenditures," said Kaplan. "So, for annual operating expenses, institutions must look elsewhere for revenue. Voluntary support could never grow sufficiently to become the primary solution to budgeting challenges." NPT