Written by Alyssa Rossodivita
You hear it from every direction: college in the United States is expensive, and getting more so each year. Given that many secondary students will likely be headed off to the ivory tower once they complete secondary school, it may be of interest to them to understand how public and private colleges differ, the importance of philanthropy in curbing some of their college tuition costs, and how they might get involved in higher education philanthropy as alumni.
Because tuition does not cover all the expenses of a university, funding comes from sources beyond students’ tuition, room, and board each year (Peterson’s). Public colleges and universities are funded by the United States government (federal, state, and local), student tuition and fees, and private sources, which include: private gifts, grants and contracts, sales and services of educational activities, hospital revenues, and auxiliary enterprises (Government Accountability Office 2014). In the context of higher education, philanthropy is generally considered to be any money that the university receives that does not come from the government (Thelin and Trollinger 2014). Overall in 2015, universities received $40.3 billion dollars in private donations, the highest amount since the Council for Aid to Education began recording this number in 1957 (Council for Aid to Education 2016). Efforts to grow philanthropic efforts at colleges and universities have led to the development of university foundations, endowments, capital campaigns, and of course, internal development/fundraising teams (Thelin and Trollinger 2014).
In the case of public colleges and universities, philanthropy has accounted for a fairly steady percentage of their annual funding: around 27-30% between 2003. During that same timeframe, however, it was reported that funding from state governments fell substantially, from 32% to 23%, causing tuition at many institutions to rise (Government Accountability Office 2014). While private universities have a rich history of large philanthropic contributions, public universities have relied heavily on government funding, setting public colleges several steps behind in the philanthropic arms race (Thelin and Trollinger 2014). Of the top twenty colleges and universities with the most philanthropic contributions, only five were public; and while the top private university (Stanford) received $1.6 billion dollars in 2015, the top public university (University of California San Francisco) received only about one third this amount, at $603 million in donations (Council for Aid to Education 2016). At the same time, private giving to public universities has more than doubled since 1990 (Mitchell 2015).
Philanthropy has played an important role in the history of higher education since the seminal donation made by John Harvard in 1636, which created the now world-famous college of the same name (Burlingame 2014). However, most, if not all, of the early philanthropy for higher education was dedicated to the founding of new private colleges, whether in the form of donated money, books, parcels of land, or even endowed professorships (Thelin and Trollinger 2014). Intentionally marking itself as different from its previous British colonists, the young United States sought to ensure that the government was not required to fully fund all of its colleges, encouraging this growth of private universities (Thelin and Trollinger 2014). Thus, the early to mid 1800s saw an increased interest in private giving by wealthy individuals and formal associations to higher education, even though much of it went to private institutions (Thelin and Trollinger 2014).
With the advent of legislation such as the 1787 Northwest Ordinance and the 1862 Morrill Land Grant Act, public institutions were founded and funded throughout the country by the U.S. government (Thelin 2011). This work by the government was instrumental in opening up higher education to women and minorities, beginning the movement toward conceptualizing post-secondary education as a public good (Thelin 2011).
Starting in the 1920s, philanthropic support for universities began to funnel through foundations, which are institutionally affiliated public charities that raise money separately for a university (Council for Advancement and Support of Education). Since public universities have to follow state regulations with funds received from the government, such as salary caps for coaches, they began to create their own organizations to fundraise and provide money to the university (Thelin and Trollinger 2014). Much of this support was gathered via growing alumni associations, especially at state universities (Thelin and Trollinger 2014). Then, after WWII, another shift in public education occurred: the Council for Financial Aid pooled money from individuals, corporations, and foundations to make a large contribution toward financial aid for students who could not otherwise afford to attend college (Thelin and Trollinger 2014). This furthered the accessibility of public higher education and heightened the role of philanthropy in doing so.
The 1980s saw a downturn for all colleges, both public and private, in available funding (Thelin and Trollinger 2014). During this time, it was especially difficult for public institutions to access funds outside of the government because a) some foundations did not donate to public colleges and b) some public colleges did not have dedicated development/fundraising efforts yet, since they had relied so heavily on government funding (Thelin and Trollinger 2014). Thus, in the 1990s, public universities began to hire fundraising teams to rival private colleges; during this time, the University of Virginia conducted the first capital campaign (Thelin and Trollinger 2014). Again, during the more recent Great Recession of the early 2000s and 2010s, there has been less public funding, causing tuition rises, but this time private donations have stayed more or less steady at almost one third of overall funding (Government Accountability Office 2014).
Importance to Society
A quick glance at a timeline of the history of philanthropy makes it clear that giving to higher education has had a strong root in American history (Burlingame 2004). Even though America emphasized the use of private funding to create less state-centric universities (Thelin and Trollinger 2014), public colleges have been created and maintained to provide an important public good. These universities do so at a more affordable cost and a much higher rate than other universities: public institutions educate more than 11 million students each year, far more than the combined 5.5 million in private and for-profit colleges (Government Accountability Office 2014). Thus, public higher education is critical to carrying out the ideals of our country.
The sources of donations to higher education are varied, but in 2015, the breakdown was as follows: foundations (28.8%), alumni (26.9%), non-alumni individuals (19.9%), corporations (14.3%), and other (10.2%) (Council for Aid to Education 2016). Universities benefit from philanthropy not only to cover financial aid and operational costs, but also to subsidize tuition, reduce the burden on the government, increase access to college for traditionally underserved populations, fund research, and improve the overall quality of education (Mitchell 2014; Peterson’s). Critically, philanthropy in higher education has a long history of providing access to groups of students who are at a disadvantage to attend college—such as African Americans and low-income students—thus providing improved economic outcomes and strengthening our country (Thelin and Trollinger 2014).
Ties to the Philanthropic Sector
Nonprofit organizations (NPOs) and foundations are the organizational unit of philanthropy (Anheier 2014). By one theory, these NPOs exist to meet the needs of people when the government and the market fail. Philanthropy for public higher educations institutions can help meet the needs of the institutions when government funding is not enough (Thelin and Trollinger 2014). Yet, giving to public institutions is also a way of circumventing the market failure that occurs when private colleges cannot educate all for reasons of size and cost (Thelin and Trollinger 2014).
Philanthropy in higher education has evolved from individual donors to organized giving—with the latter occurring mainly through two philanthropic vehicles, foundations and endowments. University foundations allow for more flexibility than the government allows with public funds, which is especially important for public universities. Thus, university-affiliated foundations allow institutions to invest donated funds, make specific purchases (i.e. purchases of land), and start a for-profit business, from which all profits may go toward the university (Thelin and Trollinger 2014). Endowments, on the other hand, are large donations given to a university with the expectation that only interest will be spent so that the principal will remain and continue to sustain the university (Burlingame 2004). To be a good steward of an endowment, universities usually spend less than 5% of it each year (Thelin and Trollinger 2014). Following the trend that public universities receive less donations than private colleges, endowments at public universities tend to be smaller than those for private institutions: in 2012, the top private endowment was at Harvard, of $30.2 billion, while the top public endowment was within the University of Texas system, at $18.2 billion (Thelin and Trollinger 2014).
Key Related Ideas
Alumni Giving: Alumni, especially at the large state schools, began to organize and donate more in the mid-1900s, forming the first university-affiliated foundations, such as the IU Foundation (Thelin and Trollinger 2014). Even today, alumni provide the second largest philanthropic contributions, after foundations themselves (Council for Aid to Education 2016). At the same time, alumni giving may be affected by many factors, including how “needy” their alma mater appears (Stiffman 2016).
Concentrated Wealth: Almost 30% of all donations to public and private universities went to only twenty universities (Council for Aid to Education 2016). As such, criticism is mounting that elite universities, especially those with an already large endowment, are enjoying some of the biggest donations, though they may not be the institutions with the most need (Koenig, 2016).
Restricted vs. Unrestricted Giving: Donations to college and universities can be either restricted, in which they are designated for a specific purpose, or unrestricted, which does not have a specified purpose by the donor (Burlingame 2004). This concept is particularly important when considering university donations, given the large variety of things that a single donation could be used for, from purchases of books for a library to a new athletic scoreboard (Seltzer 2016).
Important People Related to the Topic
Oseola McCarty (1908-1999): Ms. McCarty was an African American washerwoman who donated her life savings—$150,000—to the University of Southern Mississippi. The contribution was specifically meant to provide scholarships in order to advance education for African Americans at a public university (Burlingame 2004).
Robert Morin (1938-2015): A University of New Hampshire librarian who passed away in 2016, Mr. Morin donated $4 million to his former employer in his bequest. This donation sparked controversy, however, when it was used in large part to fund a new scoreboard for the university, reigniting age-old questions about how universities should spend donation money (Seltzer 2016).
John D. Rockefeller (1839-1937): One of the foremost philanthropists of his time and throughout history, Rockefeller was one of the most committed to education and educational access. In addition to his donations to countless colleges, most of which are private, he put forward the money to start the General Education Board, an organization with the mission to expand access to higher education for all students, regardless of race or other minoritized identities (Thelin and Trollinger 2014).
Related Nonprofit Organizations
American Association of State Colleges and Universities: This is an organizing association for public colleges and universities, in order to advocate for their work, provide information for their continued improvement, and provide leadership to the 420 colleges and universities that are members (http://www.aascu.org/).
Lumina Foundation: This is a young foundation, created in 2000 and based in Indianapolis, with an endowment that is larger than $1 billion to improve higher education attainment. They are working toward Goal 2025, which says that “by the year 2025, 60% of Americans will hold high-quality degrees, certificates and other credentials” (https://www.luminafoundation.org/).
Top fundraising public universities in 2015 (Council for Aid to Education 2016):
University of California - San Francisco, Berkeley, Los Angeles
University of Washington
University of Michigan
Are you planning to go to college? How does learning about the way that higher education is funded affect your view on going to college and whether you would prefer a private or public university?
If you’re planning to go to college, do you think you will donate to your alma mater afterward? Why or why not?
- American Association of State Colleges and Universities. Strategic Plan 2015-2020. http://www.aascu.org/strategic-plan/VisionandMission/ html (accessed December 13, 2016).
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- Chronicle of Philanthropy, January 27, 2016, https://www.philanthropy.com/article/US-Colleges-Raise-40/235059/.
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Mitchell, Brian. “College Fundraising: The ‘Haves’ and ‘Can’ts’.” Huffington Post, November 2, 2015, http://www.huffingtonpost.com/dr-brian-c-mitchell/college-fundraising-the-h_b_8450814.html.
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