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.