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About Oregon daily emerald. (Eugene, Or.) 1920-2012 | View Entire Issue (Jan. 31, 2005)
Funding: Universities looking to private dollars for day-to-day operations Continued from page 1 Washington, D.C.-based Council for Advancement and Support of Educa tion, said institutions across the country have felt the pinch from the lack of state support and have turned to the private sector to supplement their budgets. The University of Michigan, Ann Arbor, is a perfect example. In the past two years, the Univer sity of Michigan has lost 12 percent of its state funding, or $43 million, because of a lagging economy, Uni versity of Michigan spokeswoman Julie Peterson said. State money now only accounts for 8 percent of the university’s budget, she said. “We can’t rely on state funding alone,” Peterson said. “It simply isn’t enough.” The University of Michigan is in the middle of a campaign to raise $2.5 bil lion in private donations. Its last cam > paign, which ended 10 years ago, raised $2.4 billion. In terms of public universities, the University of Michigan is second only to the University of Texas System, Peterson said. Kevin Hegarty, vice president and chief financial officer for University of Texas, Austin, said private monies probably fund about two thirds of the amount the state does for his university. “I think probably every institu tion of higher education, both pri vate and public, are looking to pri vate money to help supplement budgets,” Hegarty said. “There’s no doubt that private funding has be come a big, big part of our and every other school’s future.” Supplementing state funds Experts are quick to point out that private donations are not re placing state dollars, they are supplementing them. Lippincott said universities should n’t see private money as replacing state money for two reasons: Most gifts are restricted and can’t be used for ongoing university costs, and most states still provide more money than private donations. Put simply, the vast majority of pri vate gifts are not blank checks. Most are designated for a specific purpose. “You can’t repair a sudden leaky hole in the roof with money from a professorship or from a scholarship,” Frohnmayer said. “People aren’t go ing to give for maintenance and cus todial care. They want to give for something that puts audio-visuals in the classroom or makes the student lounge look better.” Hegarty said 98 percent of the money raised by the University of Texas, Austin’s, last seven-year cam paign went for very specific purposes. Hegarty characterized private do nations as the icing on the cake, and donors still expect the state to pay for the cake. “We’re looking more to private funding to fund the basic operations of the university,” Hegarty said. “It’s not been the history of donors that they’ve been all that interested in that kind of thing. ” University officials say the problem is not the stipulations on the private gifts, but the lack of state support. “(State money) is still crucial in terms of the basic operations that it UNIVERSITY OF OREGON REVENUES 89-90 90-92 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 Auxiliary, others Total gifts Grants, contracts State appropriations Tuition, fees Revenue sources for the University as a percentage of the total budget. Total gifts represents only dollars released to the University from invested endowments, not total gift dollars. pays for,” Frohnmayer said. “It shouldn’t be paid for with private gifts ... unless they’re endowments, you can’t depend on them year in and year out to be the same level, the same place, the same kind of things they’re given for. That’s why it’s so crucial to have a steady dependable stream of state tax revenues that goes to your basic operations.” Private monies have not ap proached the level of public monies at many universities. Peterson said the University of Michigan currently has an endow ment of about $4.5 billion, but the university would still have to raise another $6 billion in endowment funds to replace what the state is appropriating each year. “We count very much on the state support,” Peterson said. “It is not insignificant, and we have to acknowledge how important it is.” Often the public and members of congress don’t understand why pub lic universities need public money when they receive so much in private support, she said. “I think our challenge is while we’re receiving private dollars, we have to keep reminding public supporters that their support pays for day-in and day-out operations,” Peterson said. Donor disputes Instances are few and far between, but sometimes problems occur when donors try to guide university policy or private money isn’t used to the satis faction of either donor or beneficiary. Those cases often prompt disputes that garner widespread attention. One example of damaged donor university relations occurred when philanthropist Paul F. Glenn sued the University of Southern California in 2000, accusing the school of misusing his $1.6 million gift for biological re search by not spending the money on a researcher he identified as eligible and spending it instead on one he con sidered ineligible and then lying about it. He still gives, but he carefully watch es how universities use the money. “Those instances really are ex tremely rare when you consider that in a given year American education is raising 25 billion from donors,” Lippincott said. However rare, Lippincott told The New York Times that universities should still pay attention and learn from these cases. And many have. Duke University made it clear in its last $2.6 billion fundraising cam paign that it would not allow donors to influence how the university was run, no matter how much money they gave, according to The New York Times. That was a point of contention in past donor disagree ments at Yale University and at Case Western Reserve. One way to learn from these cases is by drawing up clear memoran dums of understanding, so that both the university and donor are sure the money will go to where they want it, Lippincott said. “The nature of the gift itself should be identified,” he said. “That way, down the line there is not any confu sion, but the donor takes satisfaction in knowing that the money is being used for what it is indeed intended for. ”It’s in the absence of those agree ments that you can run into misun derstandings from time to time.” Hegarty said the University of Texas is occasionally approached by a donor interested in trading “dollars for admission.” “We don’t trade seats for gifts,” he said. “So when there’s any hint that that might be the case, we decline. ” At the University, former Nike CEO and President Phil Knight, a philan thropist whose funds helped expand the Knight Library and the Knight Law Center, declared he would no longer give funds to the University after it joined the Worker Rights Consortium, an organization that monitors the rights of workers who produce goods for colleges and universities. The Uni versity later left the WRC, restoring the relationship with Knight. As far as donors attaching unwant ed strings, the University has had no high-profile disaster cases. “We don’t take a gift with any un lawful strings, and we don’t take a gift that’s not in accordance with the needs of the University,” Frohnmayer said. Moseley said he can remember two instances where a donor wanted the money used for a purpose the University did not, hut he declined to give specifics on the cases. “Not often, but it has happened, and usually we’re able to talk to the donor and come up with something that is acceptable,” he said. Campaign Oregon Chair Randy Pape said matching the wishes of donors and the University is the biggest challenge in the fundraising process. “We rarely see a donor who wants to give money and says ‘Do as you choose with that,’” Pape said. Problematic funding More private gifts mean more chances to accept dollars from bad or questionable sources. A. Alfred Taubman, the former chairman of Sotheby’s, gave $7 million to the University of Michigan, pledging an additional $30 million; donated $3.2 million to Brown University; and gave a large gift of an undisclosed val ue to Harvard University, according to a Chronicle of Higher Education re port. Taubman was later convicted of colluding with the auction house to fix prices and was sentenced to one year in prison and fined $7.5 million. Former Enron Chairman Kenneth L. Lay, who gave millions of dollars for named professorships to Rice Uni versity and the University of Hous ton, is currently awaiting trial on counts of fraud. Peregrine System Chairman John J. Moores gave $51.4 million to the University of Houston. His company, which declared bankruptcy in Sept. 2002, came under scrutiny by the U.S. Securities and Exchange Com mission and was named in several class-action lawsuits claiming fraud ulent accounting practices were used to inflate the company’s stocks. And it has happened here at the University too. In 2001 the University renamed its former law school in honor of alumni Jeff and Susan Grayson after Jeff Grayson pledged to give the Universi ty $1.5 million. Jeff Grayson, head of investment firm Capital Consultants, was indicted by a grand jury and charged with 22 counts of mail fraud, conspiracy, money laundering, witness tampering and making illegal payoffs to a former union pension fund trustee. He later pled guilty to mail fraud and filing a false tax form. In the end, the University of Oregon Foundation gave back the $850,000 it received. “I commend the University for that,” Lippincott said. “I think the whole point of this is what you’re real ly doing is trying to get people to buy into, with their donation, the culture and values and mission of the institu tion. So it becomes all that more im portant to become very clear about what your values are. “In the long run, it serves institu tions more if they recognize that money was bad and give it back. ” Pape, who was on the University of Oregon Foundation Board of Trustees at the time of Grayson’s donation, said it dealt with the situation appropriately by giving back the money. “It continues to be a concern, and I think the trustees have put policies in place,” Pape said. “There are some provisions put in place to better un derstand where the donations are coming from.” Competition for gifts According to a Chronicle of High er Education database, 41 universi ties across the nation currently have campaigns to raise at least 1 billion dollars each. The top five — Univer sity of Southern California, Colum bia University, University of Califor nia, Los Angeles, Harvard University and Duke University — have raised $13.2 billion in recent capital campaigns. “The competition is stiffening, and not just from the universities, but from other sectors. Lots more nonprofits are out there raising money,” Lippincott said. “That said, they continue to be successful be cause the amount of money out there continues to increase. There’s a huge transfer of wealth from par ents of baby boomers to baby boomers, and they have those resources to give. “There are more people after those dollars, but there are more dollars.” Lippincott said the standing joke at most institutions is that everybody is either in a fundraising campaign, they have just completed one or they are planning the next one. “It’s actually fairly true for most uni versities these days,” Lippincott said. Frohnmayer said he has also seen the increase in fundraising by univer sities. Campaigns have become more prevalent, professional and constant for universities, he said. “Part of it, I would hope, would be natural evolution,” Frohnmayer said. “But part of it is driven by the fact that we know that to excel or remain competitive we need to be looking for sources other than the state or our students for the margin of excellence. “We’re just beginning to tap the po tential of philanthropy that I think ex ists, and should exist, for a superior institution of higher education.” jaredpaben@dailyememld.com Contribution types □ Current uses (Including facilities and equipment) Endowments □ Trusts and gift annuities Contribution sources Other Alumni Foundations Friends Corporations Contribution purposes Cultural and extracurricular programs Undergraduate education and faculty development Facilities and instructional equipment Graduate education and research
