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As donations fall, colleges think long-term

The legions of fundraisers colleges hired during the boom years have a new mission for these tough economic times: Go easy on the hard sell, think long term.
/ Source: The Associated Press

The legions of fundraisers colleges hired during the boom years have a new mission for these tough economic times: Go easy on the hard sell. Talk about financial aid, not shiny new buildings. If prospects can't give now, lay the groundwork for when the economy recovers.

Victoria Gorrell, the head fundraiser at Kalamazoo College in Michigan, recently visited a Chicago attorney who'd been a generous supporter, hoping to persuade him to keep up his $5,000 annual gifts. He cut back to $1,000 instead.

"But I know he cares and he'll continue to give as he's able, and someday when things improve that will (go up) again," Gorrell said. She's optimistic but admits more people are telling her, "Gosh, you must have a really hard job."

A survey released Wednesday shows colleges raised a record $31.6 billion in the fiscal year ending last June 30 — an apparent sign the massive fundraising engine of American higher education was revving even as the economy slowed.

But nearly 27 percent of that went to just 20 institutions, led by Stanford ($785 million), Harvard ($650 million) and Columbia ($495 million). Taking out those 20, fundraising fell 4 percent last year.

And now, to many colleges trying to replenish drained endowments, even that modest decline feels like a painfully out-of-date postcard from a now-departed golden era of college philanthropy. This year's numbers will almost certainly be worse, as colleges postpone big campaigns to avoid watching them fall short, and renegotiate some pledges to spread them over more years.

Donations 'hit a wall'
One sign of the drop: In the last six months of calendar 2008, Indiana University's Center on Philanthropy identified 444 announced gifts of $1 million or more to higher education — 14 percent fewer than the same period in 2007. The combined value of those gifts was $3.5 billion — down 40 percent from the year before.

"There's no sugarcoating the fact that it's not going to be a good period," said Ann Kaplan, who directs the annual Voluntary Support of Education survey for the New York-based Council for Aid to Education. Informally, colleges have reported to her donations "hit a wall" last month.

Historically, college giving holds up well in recessions under 8 months. But this one is 15 months and counting. And long bear markets not only hurt donors' wealth but lessen the tax incentive to donate appreciated securities. Stocks were at six-year lows this week.

For college fundraisers — a profession that has grown exponentially — the economic meltdown means a delicate balancing act. Their institutions are facing urgent budget shortfalls. But long-term, they can't afford to alienate donors by looking greedy.

"The first thing we do when we sit down with people is we acknowledge we know times are tough," said Michael Stitsworth, vice president for advancement and college relations at St. Olaf College in Minnesota. These days, his pitch is, "I'd like to have dinner with you and I promise I won't ask you for any money.'"

St. Olaf's annual fund is down a modest 5 percent compared to last year, Stitsworth said. Luckily, the school is between campaigns. It's focused on engaging more alumni in college life, hoping they'll donate later. One project brings alumni in business to campus to work with students in a finance club. While visiting, they have lunch with the president and meet faculty.

The Indiana University Foundation, which took in $408.6 million last year, was one of eight at public universities to make VSE's Top 20. This year, its sites are lower: President and CEO Gene Tempel is hoping the number of donors will decline by no more than 10 percent. (Indiana alumni will be among those finding the annual fundraising phone call less pushy this year; the foundation recently changed the script callers read to start with an acknowledgment times are tough).

Charitable annuities
Still, the news isn't all bad. After nearly completing a $1 billion campaign, Indiana recently announced plans to raise another $100 million in the next 18 months. Earlier this month the business school there received $15 million.

While stock gifts are down, charitable annuities — which offers donors reliable income — have become relatively more appealing. Donors give up front, take a tax deduction, and receive interest income for the rest of their lives. After their deaths, the university keeps the principal. The pace of such gifts at Indiana has doubled compared to last year.

Bucknell University in Pennsylvania may lengthen a $400 million campaign now scheduled to finish in 2014, said Sam Lundquist, vice president for development and alumni relations. But pledges this year are up 48 percent.

"Everyone understands why we're coming and they're not refusing appointments," he said. "But they ask for us for signals we're sensitive to the situation, and we signal right away we absolutely are."

Gorrell, from Kalamazoo, says while some donors have cut back others have given more, like a Philadelphia businessman who recently offered $20,000 on top of his regular gift.

For colleges, development offices are tempting targets for budget cuts (Indiana's foundation employs 200 people in fundraising and endowment management). But that could hurt in the long run. Kalamazoo is cutting its college magazine from three issues a year to two to help avoid cutting staffers.

"If you ignore donors during this time, they'll become disengaged," Indiana's Tempel said. "They'll see that and notice you don't care."