Charitable Giving to Higher Education Stabilizes in 2003; Gifts from Alumni Rebound After a Sharp One-Year Decline

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March 11, 2004

Contributions to colleges and universities in the United States remained level during 2003, stabilizing following a decline a year earlier that was the first reported since 1988, according to an annual survey released today by the RAND Corporation’s Council for Aid to Education (CAE).

Private gifts to higher education amounted to $23.9 billion for the fiscal year that ended June 30, 2003, according to the study. Alumni contributions rebounded from the sharp decline of the previous year, while non-alumni individuals gave less in 2003.

Gifts for capital purposes, such as endowments, buildings, and equipment, declined by 4.3 percent, the second yearly decline in a row. In contrast, current operations giving, which has increased every year over the past three decades, increased by 4.0 percent, a healthy improvement over the 1.6 percent increase the previous year, according to the report.

The study also found that Harvard University raised more money from private donors than any other university, amassing $555.6 million in gifts. Harvard was followed by Stanford University, which raised $486.1 million, and the University of Pennsylvania, which raised $399.6 million.

The findings are from the annual Voluntary Support of Education survey, which has tracked giving to higher education and private K-12 schools for more than 50 years. The survey includes about a quarter of the nation’s 4,000 institutions of higher education, which receive 85 percent of the voluntary support to colleges and universities annually.

“Overall these results are positive news for colleges and universities because the downturn in giving to higher education did not persist,” said Ann E. Kaplan, director of the survey. “But the future is still uncertain.”

Voluntary support is an important component of higher education funding, but it has accounted for only about 8 percent of expenditures over each of the past five years. In 2003, giving brought in 7.8 percent of institutional expenditures, down slightly from 8.0 percent in 2002 and 8.3 percent in 2001, which was the highest recorded level in at least three decades.

However, among some types of universities, voluntary support plays a bigger role. Private liberal arts institutions, for example, raise 22.3 percent of expenditures from voluntary support. Among all colleges and universities, the percentage began to rise above 6 percent in 1996, and increased to its high of 8.3 percent in 2001.

“The data suggest that voluntary support is not likely to offset declines in other funding sources,” Kaplan said.

Endowment income is another source of funding for higher education. While endowments have grown slowly or declined at most institutions in recent years, institutions that responded to the CAE survey reported a 4.3 percent average increase in the market value of their endowments in 2003.

“While not a dramatic increase, given the erosions of endowment in the recent years, this increase is a sign that institutions may have a better year in 2004,” Kaplan said.

The assets of individual and institutional donors also impact university receipts because large gifts often are made from assets. In 2003, gifts of securities continued to decline in both number and value, though at slightly slower rates than the previous year. The number of such gifts declined by 17.3 percent in 2003 and 20 percent in 2002. Their value declined by 21.2 percent in 2003 and 35.0 percent in 2002.

These gifts are important because they tend to be among the larger gifts an institution receives. In 2003, the average gift of stock reported on the survey was $34,219. In 2000, the value and number of such gifts reached a high point. That year, the average stock gift was worth $42,066.

Historically, alumni and foundations are the biggest sources of voluntary support of higher education. Last year, foundation giving surpassed alumni giving for the first time in 25 years, but this year’s strong increase in alumni giving put both sources on equal footing, according to the CAE study. Both alumni and foundations gave $6.6 billion or 27.6 percent of total voluntary support to higher education. Foundation support increased 4.8 percent during 2003, but alumni giving grew by 11.9 percent.

While alumni giving increased, alumni participation declined slightly. Giving increased because of an increase in the value of the average gift, not because more alumni gave to their alma maters, according to the study.

Non-alumni individual giving dropped by 15.7 percent, the steepest decline in at least three decades. Giving from non-alumni individuals was $4.6 billion, just slightly above its value five years ago of $4.5 billion.

Corporate support of higher education declined, by 2.7 percent to $4.3 billion. “In the same year, corporate pretax income increased slightly, but sometimes there is a lag in an increase in income and an increase in voluntary support, as commitments are typically made a year in advance,” Kaplan said.

Also, it is important to note that a large part of corporate support of higher education is not “charitable” in nature, and so is not reported on the Voluntary Support of Education survey. Examples of such support are clinical trials, contracted sponsored research, and certain partnership programs in which corporations and institutions work together.

Gifts from religious organizations to higher education remained at $360 million, and gifts from “other organizations,” including donor-advised funds, United Ways and other federated funding entities declined by 1.9 percent to $1.5 billion, according to the survey. Last year, giving from other organizations grew by 8.3 percent, more than any other source during 2002. This leaves such giving higher than 2001, but lower than 2002.

The nation's 10 top fund raising universities, in the order of dollars received, are: Harvard University, Stanford University, University of Pennsylvania, the University of Arkansas, Johns Hopkins University, UCLA, Cornell University, University of Washington, University of Texas at Austin, and the University of Southern California.
Kaplan said the rankings of universities may change slightly in the 2004 survey, when CAE officially adopts new industry reporting standards that have been endorsed by both the Council for Aid to Education and the Council for Advancement and Support of Education (CASE), the international association of professionals who advance education institutions.

The new standards value deferred gifts, such as charitable remainder trusts, pooled income funds, and charitable gift annuities, at the value the donor may declare as a tax-deduction — the present value — rather than at “face value.” Present value measures the monetary impact the gift will have on the institution in the year the assets are likely to become available for use.

It should be noted that Stanford University has been reporting only present value on its annual survey for a number of years, but its ranking for both 2002 and 2003 would not have changed, even when the new standard is applied to all universities. Rankings are shown both ways for this year’s top 20 institutions.

RAND's Council for Aid to Education 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.


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