Following a multi-decade slide in state appropriations for higher education, University development officials are increasingly working to make up the difference with private donations.
State funding to public universities has decreased significantly in the last few decades. In the 1970s, state funding accounted for roughly 75 percent of the University’s operating budget. Today, that figure is 16 percent.
Data from the University, as well as the Council for Aid to Education national survey, indicate that the University is one of the top 20 fundraising schools in the country. Despite a dip in giving surrounding the 2008 recession, total donations to the University have continued to increase over the past couple decades.
The University is currently in the middle of its sixth major fundraising campaign, called Victors for Michigan. Campaigns are a period of redoubled fundraising efforts where the administration identifies specific areas that need funding. Those specific goals are used to advertise to donors and attract more giving.
As the University continues to bring in more donation dollars, it finds itself subject to many of the same trends faced by schools across the country that are also turning to private money.
Perhaps one of the most notable trends has been the transition from alumni donors to non-alumni donors. In fiscal year 2014, more than half of all the University’s donors were non-alumni.
Numbers provided by the University’s development office display this shift over the past five years. In FY 2010, 53.4 percent of the 103,753 donors giving less than $25,000 were alumni; last year only 44.6 percent of the 119,168 donors were alumni. This is significant given the fact that the majority of donors give within this range.
Additionally, over the past decade the University’s alumni participation rate has declined. While total donations have continued to rise, the percentage of alumni that donate each year decreased from 15.2 percent in 2005 to 9.9 percent in 2014.
Michigan is not alone in this trend. In fact, nearly all schools in the Big Ten have seen a decrease in alumni participation since 2004, with the average dropping from 13.8 percent to 10.1 percent over 10 years.
Megan Doud, director of the University’s Annual Giving program, spends most of her time looking at these numbers. Doud explained that the University has focused more attention on groups affiliated with the University who are not necessarily alumni. In particular, individuals tied to non-degree granting units — such as the hospital, libraries, botanical gardens and others — have been an increasing source of funds.
“A shift to broader perspective on population and then more emphasis on these areas that are really more community-based, or almost more like a separate nonprofit even though they’re from the University of Michigan, has really increased that non-alumni support,” she said.
Tom Baird, assistant vice president of development and campaign strategy, said some donors within that category are also attracted to the “marketable” work done at the hospital. The prospect of curing a disease is particularly enticing to donors, he said, and is able to attract donors with little prior connection to the University.
“Research is huge,” Baird said. “People make gifts to help facilitate patient care; there’s a whole variety of things people can give to.”
Doud added that this year’s Giving Blue Day also played a large role in donation totals for the year.
Of course, alumni still provide a large portion of the donation base. Of the University’s total alumni, 46.3 percent have given at least once in their lifetime. Of those who have donated, 39.9 percent live in Michigan. California holds the next largest group of donating alumni with 8.17 percent; Illinois has 5.52 percent, New York 4.77 percent and Florida 3.42 percent. By region, the Northeast holds 18.15 percent of donating alumni, the West 15.41 percent.
Additionally, according to Judy Malcolm, senior director of executive communications in the Office of University Development, the University has a 70 percent donor retention rate — meaning 70 percent of donors from the previous year gave again. Malcom said this is the highest retention rate in the Big Ten.
Further examination of the University’s donation data by the Daily shows the school ranks among the highest in the country in terms of total dollars raised. Since 2004, the earliest year data was available from CAE, the University’s alumni donation totals has placed it in the top 20 amounts of all colleges, except for 2011.
The University’s donations have increased by almost 71 percent since 2004, whereas the median donation total for the top 20 has increased by 61 percent.
Ann E. Kaplan, the Voluntary Support of Education survey director of CAE, said while alumni participation is generally declining across the country, average gift sizes are increasing — this year by 7 percent.
Kaplan said public institutions are increasingly joining the ranks as top fundraisers. She added that while public universities have had to catch up to private schools, which have historically relied more on philanthropy for funding, all large schools have the capacity to become top-tier fundraisers.
“A lot of the increase in giving in this particular year was due to a resurgence of major gifts for positions of wealth,” Kaplan said. “So that’s where you might see fewer donors but you’ll see more contributions at greater values.”
The Daily’s data analysis focuses on 2013, the latest available year. The University was 14th highest in donations that year, bringing in more than $351 million. To understand how different factors correlate with donations, the analysis compares donations with each of the 20 college’s U.S. News and World Report rankings, holistic sports ranking and student body.
One area lacking variance was academic prestige; almost all schools on this list are renowned for their scholastic and research excellence. U.S. News and World Report ranking of each school was measured to assess the school’s academic quality. These rankings account for undergraduate academic reputation, student retention, faculty quality and other features.
Being a top-20 fundraiser puts the University among the company of schools with higher academic rankings. The median U.S. News ranking for a top 20 donor school in 2013 was 14, comparable to Cornell or Northwestern. The University is 29th — the 15th lowest among the top 20 donors.
Most schools with lower academic rankings were in the bottom half of the top 20 list. Six of the top 10 donor schools were also in the top 10 of U.S. News rankings — such as Harvard University and the University of Pennsylvania — while only two of the bottom 10 schools were in U.S. News’ top 10.
Finally, notable differences exist among public and private colleges. Eight public schools were on the top 20 list, and all were in the bottom 10. Their U.S. News and World Report median score was lower, and their athletic score tended to be higher. The median public school donation in 2013 amounted to $338 million as opposed to $490 million for private schools.
Among public schools, the University’s donation amount in 2013 was 4 percent higher than the median public school, but 28 percent lower than the median private school amount.
That could signify that the University, despite its lowered state appropriations, still has more in common with public rather than private schools when it comes to funding.
As state funds have experienced declines over the past couple decades, the University has had to reevaluate the role of state and private money. Still, Jerry May, vice president for development, said while it’s “conceivable that for some reason (the University) decides to ‘go private’ ” somewhere down the line, there is no point in exploring that route right now. He said the idea was discussed decades ago, but is not a topic today.
May explained that any money coming from a source like donations can be used to help fund operating costs like scholarships, which frees up state funding for other areas. The state of Michigan currently only provides 16 percent of the University’s general fund budget, which May described as an unrestricted endowment.
Malcolm said the University would need an additional $700 million added to the current $9.7 billion endowment to offset the loss of state funding if it were to indeed go private.
May said the reason private money has become so important is because of the University’s increased efforts to provide scholarships. He said scholarships should help slow the increases in tuition rates, and that the University has made a dent in that effort over the past few years.
“We put our first amount of money on in-state tuition for in-state students. We now can guarantee that we will meet the need of an in-state student,” May said. “We’re probably $12,000 short per-student to be able to meet the need of an out-of-state student.”
Still, May said, given the status of state appropriations and the financial goals of the University, the development office will be full steam ahead for the foreseeable future.
“We will always need buildings, we will always need to replace buildings,” May said. “We will always have new program ideas and technology will change us so that we’re teaching you something different.”