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
mdwilliams@kcstar.com