Tuesday, December 11, 2007


"An Enormous Wave of Philanthropy"

In a story in yesterday's IHE about for-profit companies taking over nonprofit colleges -- the gist of the story was that the 'trend' is tiny and unlikely to grow anytime soon -- a particular quote really jumped out at me.

Palmer also predicted an "enormous wave of philanthropy" as baby boomers move into their 60s and begin to donate to their alma maters. That influx of capital, he suggested, would provide financial stability to institutions that would otherwise find themselves looking for a potential for-profit suitor.

(The "Palmer" in the quote is identified in the article as "Bradley Palmer, the founder and managing partner of Palm Ventures.")

I'll admit, this angle simply never occurred to me. I've read many a piece about for-profit higher ed, and I've worked in for-profit higher ed, and this is the first time I've ever encountered this argument.

I can't decide if it's loopy or brilliant.

Admittedly, part of my blind spot may have to do with working at a cc. One of the frustrations of the cc sector is that our most successful alums generally -- with exceptions -- identify primarily as alums of wherever they went after they graduated. Someone who graduated the local cc and went on to Midtier State for the B.A. will more likely identify as an alum of Midtier State than as an alum of the local cc. This has predictable -- and dampening -- effects on giving. We're working on that, and we absolutely need to improve in that area, but there's a blind spot that's hard to overcome.

(Besides, as someone who was fed the "great wave of retirements" line upon entering grad school, I tend to treat projections like these with a wee tad of skepticism. They have a way of ending in tears.)

That said, the colleges to which the article referred were -- I think -- primarily small, private, economically marginal four-year schools. The recent efforts -- on which the jury is still out -- by alumni to resuscitate Antioch is presumably the kind of thing Palmer had in mind.

Unless there's a pretty drastic change in the way colleges use philanthropic money, though, I don't see this working for colleges in trouble.

First, the most successful fundraisers are the schools that are already wealthy. Nothing succeeds like success, and philanthropists like to believe that they'll be able to see the fruits of their generosity for years to come. If the college is on life support, that may smack of "throwing good money after bad." In one sense, that's perverse, but it's also the way the game is played. You can raise money by showing that you don't actually need it.

Beyond that, though, it's incredibly rare to see donations used for operating funding. Operating funding covers the day-to-day expenses of a college, like payroll and utilities. Donors usually designate their funds for either 'capital' funding -- buildings and suchlike -- or scholarships. (Endowed chairs are a limited exception.) Colleges don't go under for lack of buildings or lack of scholarships. They go under when they can't make payroll. To the extent that a college can offload some of its payroll onto endowed chairs, that could help, but the ratio of 'gift' to 'offset' is much higher than one-to-one, given the nature of an endowment. Endowed chairs can also come with strings that may or may not comport with the mission of the college, as it understands it. (Then again, a financial gun to the head has a way of clarifying matters.)

Until you hit the critical mass of a really massive endowment -- where you can pretty much live off the interest -- philanthropic money will be more cyclical, and even capricious, than money from almost any other source. A college that relies on non-endowed philanthropy to balance the books has to be incredibly assiduous in courting donors, and has to hope against hope that nothing else comes along (a natural disaster, a conspicuous disease, etc.) to divert that money.

I'm guessing that if there actually is an enormous wave of philanthropy, it will actually widen the class divide in higher ed, rather than work to the benefit of the marginal colleges. The colleges that produced the wealthiest alumni have the easiest donor base, and the easiest case to make that the donors will be able to see the fruits of their gifts for years to come. The more marginal schools -- the ones that produce teachers and cops and nurses, rather than financial services gurus and cardiologists -- will benefit much less, if at all. They'll need it more, of course, but that's not what philanthropy is about.

Hint to my well-intentioned, gloriously-wealthy readers: endow some professorships at your local community college. If you don't like that, pay for nursing labs. The human good you'll accomplish with that will far outstrip yet another plaque at Snooty U.

Pardon my up-too-late ignorance, by why aren't nursing degrees, as a professional degree like a JD, charged the actual cost of their program?

Cheers (and g'night).

In the CC world, is there any courting of non-alumni, private donations? That is, people who understand/believe in your mission/role in the educational food chain and are willing to support that...?
I find this line of thinking about future philanthropy unconvincing. I've read plenty of articles that say that boomers as a group haven't invested well, and lost a great deal in the stock market debacles of ten years ago, and so are working longer because they can't afford to retire. The as-yet-to-be-seen wave of academic retirements backs this up. So the suggestion that this group will be wealthy sometime in the near future seems like wishful thinking enough. That they will then use that wealth to save higher ed through intelligent and carefully planned giving seems even less likely.
You know, you've got me seriously thinking about sending off a donation to my community college. The faculty and college made going back to school possible for me. And a donation would go further there than most places, I bet.
One option to pursue would be a donation-sharing program with some of the 4-year schools you're feeding into. As you noted, with a feeder emphasis most of your more successful graduates will end up identifying with (and donating to) their final school rather than the CC which got them the start they needed. A joint program, where transfer students can elect to have a portion of their donation redirected back to the CC would be reasonble, although there are a significant number of negatives to overcome (4-year doesnt' see a reason to help their source of transfers, income is too small relative to the work involved, etc.).
"I'm guessing that if there actually is an enormous wave of philanthropy, it will actually widen the class divide in higher ed, rather than work to the benefit of the marginal colleges."

I generally agree with this observation, for all the reasons you state. But I will point out that there are pockets of affluence in non-glamorous vocations--police and fire, teachers, etc.--who have the benefit of government pensions and sometimes government retiree medical care. And sometimes they have opted for early retirement and started a second career, which can be very lucrative. Some of these folks might well remember their alma maters in their wills, even though they are not the types for organized philanthropy.

Still, this amounts to a hope, not a plan. Articles that project the coming wave of baby boomer wealth transfer tend to overlook the unprecedented costs the boomers will incur as they age.
At the risk of being snarky, this also assumes that the "Me Generation" will actually be generous with their money. This is the same generation that want free medical care and generous pensions, but resolutely torpedoes any increase in premiums needed to finance said benefits, preferring to let the next generation pay for them…
DD, you should blog on the economics of a CC running professional programs such as nursing. It is tough on all levels, from facilities and realistic dummies to faculty that must be licensed in their field. (Imagine trying to hire an MD on an adjunct or even f-t faculty salary and you get the idea.)

Interesting that you should mention that example, however, since our college has had some success doing fund raising for our health programs.

On the larger issue, we got some remarkable stories from local professionals when our well-connected fund-raising chair started talking to alumni as part of a major gifts campaign. Apropos your topic on second chances, stories from prominent locals who owe their lives to our college had a big impact on our image.
Earl, the country needs nurses, there is a surplus of lawyers.

However, allow me to point out that a major problem is deferred maintenance, and in so far one can renovate and name the renovated facility, the needs of donors can be met while improving the viability of the smaller college.

As to targets for fund raising at ccs I would think that local boosters and businesses would be a better target than alumni.
The larger issue is what happens when the elite schools stop charging tuition? See "Harvard for Free" in today's Opinion Journal.


We may be at the edge of a real paradigm shift for higher education.
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