Kansas City Star, MO
08-31-06
Public schools, private funding
As state aid drops, universities are turning to endowment funds.
By MARÁ ROSE WILLIAMS
The Kansas City Star
Call it College Economics 101: Find a dollar and make it grow.
It’s an increasingly popular course these days for public institutions, which in recent decades have learned that raising private funds is crucial for their financial survival.
State aid to higher education has dropped about one-third from 25 years ago, according to the National Association of State Universities and Land Grant Colleges. And tuition hikes alone haven’t been sufficient to cover the surging costs.
Wary of pricing college education beyond the reach of financially strapped students, public schools increasingly are turning to alumni, corporations, foundations and other patrons for funding. As a result, endowment funds at some schools have climbed into the billions of dollars.
Building multimillion-dollar endowments “is definitely a trend” among public institutions, said Damon Manetta, spokesman for the National Association of College and University Business Officers, a nonprofit group that ranks schools with endowments of more than $1 million. “Public institutions are looking at endowments in much the same way that private institutions have always done — as a source of steady income year after year.”
Schools are stepping up their appeals for private dollars, using online explanations of endowment programs and point-and-click donation applications to make giving easier. They have increased fundraising staffs and hired professional money managers who use investment methods that bring greater returns.
Universities and colleges have been wildly successful investing in venture capital and hedge funds, higher education officials said.“What public universities have learned is that for the recruitment and retention of excellent faculty … private endowment is the way you get them and how you keep them,” said Dale Seuferling, president of Kansas University Endowment.
They know, too, he said, that endowments are a way to advance academic programs, pay for better equipment and state-of-the-art facilities and to help create a more diverse student body through scholarships.
Like most public institutions in Missouri, the University of Missouri-Kansas City gets the bulk of its operating revenue from tuition, said John Amato, vice chancellor of university advancement.
Down the road, he said, “with dwindling support from the state, we may no longer be all that different from a private institution.”
In Kansas, state support for public schools remains a little higher than tuition revenue.
“But in the last 10 to 15 years, state aid has been nearly cut in half,” said Kip Peterson, spokesman for the Kansas Board of Regents. “Given the trend of the last five years, in two or three years, students and parents will be contributing more than the state.”
Meanwhile, he said, private support has been growing fast.
Private school methods
A few decades ago, soliciting private donations was linked mostly with private institutions of higher learning, said Lisa Eslinger, chief financial officer for the Iowa State University foundation. Private donations and tuition are the primary revenue sources for private schools.
Many of those private institutions, such as Harvard, Yale and Princeton universities, already have among the largest endowments in the country. For example, top-ranking Harvard’s endowment at the end of 2005 was valued at $25.9 billion, more than the gross domestic product of Tanzania. In the past five years, Harvard’s endowment has grown by $6.7 billion, more than the total endowment for many public institutions, Manetta said.
“Even some of the smaller public schools are beginning to establish endowments, and institutions that have had endowments for many years are now looking at how to grow them,” Manetta said.
Consider Kansas State University, with an endowment foundation that is more than a half-century old. It wasn’t until 1995 that the institution made a real push to boost its endowment. Since then, the endowment foundation staff has grown 33 percent and annual fundraising has nearly tripled, said Alan Klug, vice president of finance for the K-State University Foundation.
More recently, the University of Missouri system’s endowment jumped 11.3 percent, from $762.2 million in 2004 to $848.6 million in 2005. And this year, the University of Missouri-Columbia alone set a fundraising goal of a billion dollars, some of which will come in the form of endowments.
At the University of Kansas in Lawrence, endowment funds increased 12.4 percent from 2004 to 2005. At the same time, the university’s need to spend those funds also rose. The amount KU Endowment paid to the university jumped from $76.6 million in 2004 to a record $103.9 million in 2005.
“It went to pay for scholarships, professorships, books and everything, but the biggest portion was for KU buildings,” said Rosita McCoy, spokeswoman for the endowment foundation.
When donors give to university endowment funds, they usually specify what area — scholarships, faculty, athletics, research, facilities or a particular department — on which they want the money spent. The principal is invested, and a portion of the investment return is made available to the university to support the purpose determined by the donor.
Most endowment revenue goes to three places — scholarships, endowed chairs and campus buildings.
“It’s almost impossible to point to a building that has been built or significantly renovated within the past 20 years without private support,” said Julie Lea, spokeswoman for the K-State foundation
One just has to walk through area campuses to witness the fruits of the giving.
In many cases, buildings are named for donors who contributed large amounts to their construction or to the schools inside. The Hale Library and Fiedler Hall, an engineering building, are examples at Kansas State University. The Hall Center for the Humanities and the Lied Center are examples at KU, and the Hoglund Brain Imaging Center at KU Medical Center. The Miller Nichols Library, Flarsheim Hall and the Henry W. Bloch School of Business and Public Administration are examples at UMKC.
Although it wasn’t an endowment, a gift from Bill Laurie and his wife, Wal-Mart heiress Nancy Laurie, paid for one-third of Mizzou Arena.
Growing programs
While the fundraising arm of the institution assumes most of the responsibility for generating private dollars, university administrators also have taken a larger role in courting donors.
“Deans and directors are realizing they have a role in cultivating potential donors and in helping to steward those donors,” Seuferling said, adding that private philanthropy is one of the few ways administrators can advance programs.
And while competition for charitable dollars is stiff, America seems willing to support institutions of higher learning.
The bulk of the $38.6 billion in charitable giving that went to education in 2005 targeted colleges and universities. Higher education got 66 percent of those dollars, said Sharon Bond, a spokeswoman for Giving USA, which monitors all charitable giving in the United States. How much went to private schools is not known, she said.
But officials expect an increase in public institutions’ efforts to raise private dollars.
“There is no such thing as too much endowment,” Seuferling said.
To contact Mará Rose Williams call (816) 234-4419 or e-mail