College and University Giving Rises 1.7%

Growth in charitable giving to colleges and universities slowed markedly in 2016 as increased giving from corporations, foundations and other organizations counterbalanced a slowdown in personal gifts and a drop in giving to the country’s largest fund-raising institutions.

Colleges and universities drew $41 billion in giving in the fiscal year ending in June 2016, up slightly from $40.3 billion the year before, according to results from the Council for Aid to Education’s annual Voluntary Support of Education survey released today. That’s a growth rate of 1.7 percent, sharply lower than the 7.6 percent growth rate recorded from 2014 to 2015.

The growth rate comes to 0.4 percent after adjusting for inflation using the consumer price index, said Ann E. Kaplan, who directs the annual survey. It represents a decline of 0.1 percent using the Higher Education Price Index, which is designed specifically to track costs for higher education.

A decline in personal giving set the stage for the flat overall growth rate. Even without adjusting for inflation, alumni giving fell 8.5 percent, to $9.9 billion, in 2016. Gifts from individuals who were not alumni dropped 6 percent, to $7.5 billion.

The year-over-year decline in individual giving came as the stock market struggled -- large personal gifts generally fluctuate along with market performance as wealthy donors find their funds drying up or multiplying. The decline also comes a year after individual giving rose drastically, with alumni giving having jumped 10.2 percent and nonalumni individual giving having spiked by 23.1 percent in 2015.

“Because personal giving was so high the year before, that’s often a very hard benchmark to meet,” Kaplan said. “And then the stock market really plays a role.”

Sue Cunningham, the president and CEO of the Council for Advancement and Support of Education, cautioned against reading too much into a single year's drop in individual giving. CASE sponsors the Voluntary Support of Education report.

"It is important not to draw sweeping conclusions from one year of data," Cunningham said in a statement. "For example, although personal giving declined in 2016, as the Council for Aid to Education notes, personal giving to higher education actually grew 6.7 percent between 2014 and 2016."

Even while personal giving fell, stronger stock market performance from 2015 likely helped drive up giving from organizations in 2016. Many of those organizations would have made giving commitments for the future back in 2015 based on their finances at the time.

Organizations increased their giving in 2016, the Council for Aid to Education found. Corporate charitable giving to higher education rose by 14.8 percent, to $6.6 billion. Foundation giving increased by 7.3 percent, to $12.5 billion. Giving from other types of organizations added 9.8 percent, to $4.5 billion.

That’s notable because foundations are the largest source of charitable support for higher education, accounting for 30.4 percent in 2016. Alumni are the second-highest source of support at 24.2 percent.

Over time, giving has been shifting away from individuals and toward organizations, Kaplan said. Individuals often use organizations as vehicles for their personal philanthropy, notably utilizing closely held companies and donor-advised funds.

The CAE survey asked 223 of 950 institutions it surveyed for more information on contributions from such closely held organizations. It found that counting their contributions as personal gifts would result in responding institutions’ recorded personal giving being 10.9 percent higher.

“Personal giving is definitely shifting into organizations,” Kaplan said. “It has been for some time. Donor-advised funds are increasingly the way. You don’t have to have the same means as somebody who forms a foundation.”

Tilted Toward the Top

College and university fund-raising continued to be top-heavy in 2016 -- the top 20 fund-raising institutions took in a whopping 27.1 percent of the $41 billion raised in total by all institutions. But top-20 fund-raisers lost ground slightly. They raised $11.2 billion in 2016, down from $11.36 billion in 2015.

The number of large gifts also dropped. Just two gifts eclipsed $100 million in 2016, a $102.3 million individual gift to the University of California, San Francisco, and a $109.1 million foundation gift to Stanford University. In 2015, institutions reported eight gifts of $100 million or more to the survey. Many of the gifts last year were in the form of art or other tangible property, however. Bringing in those types of gifts takes time and resources.

“That can’t happen every year,” Kaplan said. “It takes a long time for that type of gift to occur, because you can’t just accept it. You have to have the building to display it in.”

Charitable contributions are an important part of university budgets. Yet they have only represented about 10 percent of college and university expenditures in recent years. That’s down from a peak of 15.7 percent in 2000.

The decline happened even as a large portion of donations are earmarked for current operations. Gifts for current operations were 61.3 percent of total giving in 2016, roughly the same as the year before.

The data show donations alone cannot fund colleges and universities, Kaplan said.

“Even if it were all current operations, you’re going to have to find money somewhere else,” Kaplan said. “You’re not going to keep the lights on with charitable gifts.”

Donors restrict much of their support for research, which represented the largest share of earmarked support in the survey. The amount restricted for student financial aid has inched up in the last decade. It was 15.9 percent in 2006 and 16.8 percent in 2016.

This year’s Voluntary Support of Education survey comes at an uncertain time for the fund-raising field. Individual giving to colleges and universities would seem likely to increase in 2017 if the stock market can hold onto or build on recent gains. But organizational giving, which typically lags behind market performance, could be hurt by the same 2016 market that hit individual giving.

At the same time, the potential for changing tax policy introduces another level of uncertainty. Lowering top marginal tax rates or limiting charitable contribution deductions -- two policies discussed by Republicans in power in Washington -- are considered likely to depress charitable giving over time, according to the Council for Aid to Education. But those same changes can also shift giving forward and backward into tax years that are more or less advantageous for donors.

The Council for Aid to Education surveyed 950 institutions for its 2016 report. Comprehensive results from the Voluntary Support for Education survey will be released this spring.

The survey is one of several wintertime reports that provide glimpses into higher education finances. An annual Grapevine survey released Monday found a small increase in aggregate state support for higher education across the country. A National Association of College and University Business Officers survey released in January found a negative endowments return in 2016.

2016 Top Fund-Raising Institutions