Gifts To Higher Education Drop For The First Time In 15 Years; Decline In Giving By Alumni Shows Biggest Drop

Contributions to colleges and universities in the United States dropped slightly during 2002—the first decline in giving to higher education in more than 15 years, according to an annual survey released today by RAND's Council for Aid to Education (CAE).

Private gifts to higher education declined 1.2 percent to $23.9 billion for the fiscal year that ended June 30, 2002. The drop was fueled primarily by a sharp decline in gifts from alumni, according to the annual Voluntary Support of Education survey. The survey has tracked giving to higher education for more than 50 years.

Traditionally the bedrock of higher education support, alumni giving dropped by 13.6 percent—about $1 billion—during the period, even while contributions from sources such as corporations and foundations remained stable. Researchers say they found a decline in giving for capital projects such as new buildings and endowments, and an increase in giving for current operations.

“The declining stock market and weak economy are the two primary factors that contributed to the decline in contributions,” said researcher Ann E. Kaplan. “Unfortunately, this decline in giving comes at a time when higher education institutions are seeing an overall retrenchment from other income sources as well.”

The survey by RAND's Council for Aid to Education also found that the University of Southern California raised more than $585 million during the 2002 fiscal year, allowing it to surpass Harvard University to become the most successful fund-raising university in the nation. USC had ranked 11th last year. Harvard, which ranked first in the 2001 fiscal year, reported raising about $478 million in the 2002 fiscal year.

The nation's weak economy and stock market have depressed other revenue streams that institutions rely upon. The poor performance of the stock market lowered endowment values. At the same time, the downturn in the overall economy put pressure on state budgets, leading many states to cut their support for public colleges and universities. These same factors also make it difficult to make up budget shortfalls through higher tuitions.

Researchers say that charitable support, while of great value to institutions, is not a primary source of revenue even in the best of times and will not pick up the slack from other declining revenue sources in any economic environment. Voluntary support of higher education accounted for 8.1 percent of higher education expenditures during the 2002 fiscal year, down from 8.7 percent in 2001 and 8.8 percent in 2000.

Contributions of appreciated property—real estate, art, stocks and other non-cash assets—declined in both number and value between 2001 and 2002, with securities showing a particularly sharp decline. The number of gifts made with securities such as stocks declined on average by 20 percent and the value of those gifts was down by 25 percent. Contributions made with stocks or other securities tend to be relatively large gifts that combine philanthropy and tax planning.

Contributions from alumni and foundations are the two biggest sources of gifts to higher education. In the 2002 fiscal year, foundation support (26.4 percent and $6.3 billion) surpassed alumni support (24.7 percent and $5.9 billion) for the first time in more than 25 years, according to the survey.

Foundation giving increased by 5 percent, a modest rise compared to the double-digit increases seen from 1996 through 2001. During economic downturns, foundation giving tends to taper off more slowly than other sources of support because grant commitments are often for multiple years and are based on past-years asset values. Also, foundations have the option of drawing down on their assets to stabilize grantmaking. Foundation formation can also lead to increased foundation giving. It is important to understand that up to a third of foundation support of higher education is from family foundations that are headed by alumni and other friends of the recipient institutions, according to researchers.

During 2002, giving to colleges and universities by non-alumni individuals increased by 3.8 percent to a total of $5.4 billion, and contributions from corporations grew by less than 1 percent to $4.4 billion. Gifts from fund-raising consortia such as United Way increased by 8 percent to $1.6 billion, while contributions from religious organizations dropped 2.7 percent to $360 million.

The nation's 10 top fund raising universities, in the order of dollars received, are: USC, Harvard, Stanford University, Cornell University, the University of Pennsylvania, Johns Hopkins University, the University of Wisconsin-Madison, UCLA, Columbia University, and Duke University.

RAND's Council for Aid to Education (CAE) conducts research on higher education policy, develops assessment and planning tools for colleges and universities, collects and disseminates data on private giving to education, and promotes effective corporate support of education.