December 12, 2016
The Cassells Report identified a €1 billion gap in operating and capital budgets for Irish universities and institutes of technology (ITs). Its solution for higher education structural reform – increased state funding, increased student fees, or enterprise and employer fees – will stabilise funding in third-level education, but contained within the report are a few sentences and a handful of statistics that highlight where universities must seek funding for growth and venture capital.
Funding reform will stabilise the ship – and this is essential – but it won’t solve other problems. Universities and ITs need more diverse funding streams to provide financial breathing room for operating budgets, as well as venture capital for new programmes and seed funding for capital projects. Fundraising can do what state funding and student fees cannot.
Most universities and ITs have some degree of fundraising in place, but few have fully mature programmes. “Big game hunting” for very large major gifts is a partial answer, but it’s not a well-rounded, long-term solution to better university funding. So what should Presidents, CFOs, and Heads of Foundations look for? There are three keys to making philanthropy work for your university or IT.
1. Diversify your annual operating funding streams. When a university primarily depends on just two revenue sources – fees and state funding – then it’s vulnerable to changes in either. Philanthropy brings two solutions, one short term and one long term.
The short-term solution is the annual fund. Donors give from their current accounts to the university or IT current account. Donations go straight to work. These tend to be smaller gifts from €10 up to €1,000, or in some cases €5,000.
The long-term solution is to build an endowment. Gifts to endowment are usually larger and can vary from unrestricted (supporting the operating fund) to very restricted (supporting an endowed faculty chair). Universities can spend a portion of the endowment (usually around 3-4%) from income every year.
Both annual gifts and endowment income add extra legs to the revenue stream. They cannot replace fees and state funding, but they relieve pressure and offer new ways to fund recurring expenses.
2. Build a major gifts programme that ranges from smaller major gifts to mega-gifts. Thanks to some big wins, Irish universities have concentrated on the top end of the gift pyramid, but building smaller major gifts – donations of €10,000 to €50,000 – paves the way for future funding.Major gifts differ from annual gifts because major gifts are larger and they fund projects instead of operations. They are the venture capital funds for ITs and universities. They might fund a special programme, a Visiting Professor, fellowships, or even a new building. But in Ireland, we need to think of the continuity of major gifts from €10,000 to €10 million.
Major gifts provide flexibility to university leadership and innovative scholars in a way that state funding and student fees cannot.
3. Legacies build strong institutions for generations to come. Although they are often the last facet of fundraising to receive attention, legacies are incredibly powerful. No, you probably won’t get cash in the door today. Annual giving is cash for today; major gifts are cash for special projects. Legacy gifts are for our grandchildren.Legacy donors typically have strong ties to your institution. They are alumni from long ago or even from fairly recent years, once they have written their wills. You may or may not know about their intentions, and the gifts come from all walks of life – from librarians as well as investment bankers – and the gifts can be small or transformational.
Some institutions outside Irish third-level education do this and do it well. They have created intergenerational security for their organisations. Most of these gifts are used for lasting impact – endowments and buildings. Universities and ITs would be wise to devote some resources to legacy giving.
The Cassells Report supports philanthropy, but not as a solution to the big, structural issues in Irish higher education. That’s entirely right. Philanthropy isn’t here to resolve the fees debate. Philanthropy is here to deliver financial flexibility, to provide venture capital, and to create long-term financial security. Philanthropy makes a grand vision possible.
– Chris Massi, Senior Consultant