As Higher Ed Giving Tanks, What Will Happen to Big Capital Campaigns?

School of Public Health at Indiana University Bloomington. IU is in the midst of a $2.5 billion fundraising campaign. Ken Wolter/shutterstock

In late February, UC Berkeley launched the largest fundraising campaign in its history, “Light the Way: The Campaign for Berkeley.” The school hopes to raise $6 billion by the end of 2023.

Leadership had no choice but to go big, argued John Aubrey Douglass, a senior research fellow at the university’s Center for Studies in Higher Education. “Why does a major public university need such a boost in philanthropic giving?” he wrote on UC Berkeley’s blog. “The answer: Largely to help deal with a massive decline in per-student funding from the State of California, but not exclusively.”

It wasn’t going to be easy. In early February, the Council for Advancement and Support of Education found that alumni giving fell 7.9% from 2018 to 2019. Then, on March 5, less than a week after UC’s announcement, the city of San Francisco reported its first COVID-19 case.

Three months later, higher ed fundraisers’ worst COVID-19-related fears began to materialize. Research firm EAB found that more than 40% of institutions are projecting declines of at least 10% for fiscal year 2020, while nearly 45% of institutions anticipate double-digit declines in 2021. Fundraisers planning or in the midst of multi-year capital campaigns have got to be asking, “Now what?”

I posed this question to a variety of experts. While EAB Senior Director Jeff Martin told me “there are still a lot of question marks,” the consensus is that higher ed capital campaigns will proceed, as long as directors are prepared to be patient and make necessary tweaks. EAB’s survey of 110 advancement leaders confirms this consensus.

Of the institutions that were planning to enter the quiet phase of a campaign during the next fiscal year, 77% are still moving ahead. Three out of four of these institutions say they may change the public launch date, and 10% have already done so. Across all institutions currently in a campaign, 45% say they’re “still deciding about whether to delay their closing date.” More than one in 10 have pushed the close date back a year or more.

Despite tanking higher ed giving and the dire economic outlook, what’s most interesting about EAB’s findings is what’s not mentioned—namely, that universities might scrap their campaigns entirely. After all, COVID-19 raises serious questions about the fate of a fundraising model that’s heavily reliant on glamorous campus projects that will attract more students.

And yet, higher ed leaders seem to be staying the course, albeit with some scheduling adjustments. Let’s explore why campaign leaders plan to proceed (more or less) according to plan.

“The Sole Reason for Campaigns”

Prior to COVID-19, Don Hasseltine, a senior consultant and vice president at the Aspen Leadership Group, penned a blog post titled “6 Shifts in Fundraising Practice You Will Not Want to Ignore.” Shift No. 6 was “No end in sight for capital campaigns” at higher ed institutions.

“There seems to be no slowdown when it comes to capital campaigns,” he wrote. Not a single development VP he spoke with suggested that a campaign was “not imminent or that at the closure of their current effort, there would not be another that follows.”

When I asked Hasseltine, who previously led Brown University’s $3 billion capital campaign, if the pandemic has altered this calculus, he said no. “Higher ed is all about ideas, and it needs vehicles to create discipline to support these ideas,” he said. “Leaders have to make choices, and campaigns are one of the only ways to create discipline to have a transformative impact. That’s the sole reason for campaigns.”

Hasseltine echoes the thoughts of UC’s Douglass, who wrote, “Berkeley, like the other UC campuses, has grown significantly in enrollment to help meet the higher education and socio-economic mobility needs of a growing California population and economy—part of its social mandate.”

Douglass’ comment speaks to another reason why public university campaigns will proceed. Many state legislatures never fully restored Great Recession-era public funding cuts. Now, their public universities are facing an existential crisis. Barring an unprecedented boost in public funding, a multi-year campaign is the only tool at leaders’ disposal to pull these schools back from the brink.

As it turns out, California’s state legislature restored pre-recession funding, leaving its schools better positioned to weather the pandemic than states like Alabama, which, not coincidentally, was in the planning phase for its next major, university-wide fundraising campaign as of last April.

A Case Study: Indiana University

There’s another big reason universities are proceeding with their campaigns: Directors believe they can withstand the impacts of a global pandemic. Consider recent developments out of Bloomington, Indiana, where the University of Indiana (IU) is in the midst of its $2.5 billion “For All” campaign.

Like many public universities, IU blew past its goal ahead of its original June 30, 2020 end date. The current windfall is $3 billion and counting. Speaking to Indiana Public Media’s Matt Rasnic in mid-June, IU Foundation President Daniel Smith said, “We will probably see some ripple effect of COVID going forward, but I don’t know that it, for Indiana University, will be that severe, simply because of the enormity of the number of people that are supporting IU.”

Once COVID-19 hit, Smith’s staff successfully pivoted to virtual donor engagement—April turned out to be one of the strongest Aprils of the foundation’s campaign. May was similar to the previous seven years. “We kind of expected that May would fall off the tabletop and it didn't,” Smith said.

Smith and his team also adapted to changing conditions on the ground. During the 2008 recession, IU fundraising dropped by about 20 to 25%. “The foundation used those numbers to adjust future goals for fundraising during the current recession,” Rasnic reported. IU also extended the campaign’s end date from June 30, 2020 to September 30, 2020.

IU’s recalibration underscores the fungibility of long-term capital campaigns in a sector known for its “always-on” fundraising. “The only three people who know you’re in a campaign are the president, the campaign chair and the vice president,” Hasseltine said, half-jokingly. Moreover, campaigns are constructed as long-term endeavors for a reason. The U.S. economy may have sunk into recession, but history suggests that won’t always be the case. “The campaigns are so long, there’s usually some economic disruption,” Hasseltine said.

While time may be relative in the world of higher ed fundraising, IU should nonetheless consider itself fortunate that its end date is quickly approaching. Some of the priorities it set seven years ago no longer seem relevant in a world transformed by COVID-19.

Pre-Pandemic Priorities

Before COVID-19 struck, a growing chorus of commentators questioned administrators’ love affair with capital projects that drove up tuition and fueled the “student debt spiral.” Development officers would argue they had no other choice. It’s their job to raise money. By generating breathless headlines that excite affluent donors, capital projects fuel massive capital campaigns. Just ask UC Berkeley.

The same day the school announced its $6 billion campaign, it announced a $252 million gift from an anonymous donor to seed the construction of a new brick-and-mortar “DataHub.” UC Berkeley plans to raise an additional $300 million to complete the project, underscoring the kinds of pre-pandemic gambles schools made to attract high-achieving students. Just ask Indiana University.

In mid-January, IU student Tom Sweeney criticized IU’s “For All” campaign in the Indiana Daily Student as “large-scale, expensive construction and publicity organized by university leaders in the face of students’ desire to focus on financial assistance and historical commemoration.” Sweeney noted that IU budgeted $407 million since 2015 for eight capital projects while decreasing its annual expenses on student financial aid.

“The large construction projects would not be possible without the Bicentennial Campaign,” he wrote, before mentioning that IU was poised to break ground on a slate of additional projects after the conclusion of the campaign, including a new $100 million residence hall.

A month later, IU’s Board of Trustees approved a 3.5% increase in room and board, with similar increases planned annually for at least four years, adding up to a 15% increase by fall 2023. The board approved the increases without a public hearing.

“Students living or eating on campus will help pay for staggering new expenses” tied to IU’s $3 billion campaign, wrote Sweeney and Abby Malala in another op-ed, “including a $99 million residence hall” and a “$45 million academic health sciences building.”

“It’s How You Stay in the Game”

Now, IU’s halls and buildings stand vacant. But the school’s development team can sleep soundly knowing their campaign eclipsed its goal and will wrap up shortly. Will other campaign leaders navigating a higher ed space transformed by COVID-19 decide to scale back capital projects while ramping up financial support? The jury is still out.

If “higher ed does undergo a massive transformation in which most of a student’s education is online and remote, then the case for investing tens of millions of dollars in campus improvements largely disappears,” EAB’s Martin told me. But if things go back to “normal,” administrators may conclude “that the only way to sustain a high price tag is by making the campus environment a once-in-a-lifetime experience.”

Hasseltine doesn’t envision a seismic post-pandemic shift for two reasons. The first involves demographics. Affluent “top-of-the-pyramid” donors are the lifeblood of the modern fundraising campaign. With a few exceptions, many “don’t have a clue, other than a belief in social justice, about the experience a first-generation student has and the difficulty in paying for college,” he said.

The second reason involves how “top-of-the-pyramid” donors perceive impact. Of the subset of these donors sympathetic to the financial plight of students, many conclude that a major gift wouldn’t have “transformative impact,” Hasseltine said. He offered the following example.

Let’s say a mega-donor wants to create an endowment to support a $200 million financial aid budget. At an annual 5% spend rate, the donor would have to make an initial gift of $4 billion to unlock that funding—all while tuition rates continue to outpace inflation and financial aid needs grow. “Every $100,000 financial aid gift needs to be $125,000 within three years,” Hasseltine said. “It’s always a catch-up game.”

Contrast this with cutting a $30 million check to fund the construction of a state-of-the-art STEM building. Here, the donor is buying what advancement leaders are selling—namely, the school will get “X amount of return by drawing more engineering students who raise your profile and allow you to draw more students,” Hasseltine said. “It’s how you stay in the game, for good or bad.”

The Show Must Go On

All of which brings me back to EAB’s data surrounding the future of capital campaigns. A worst-case scenario will see fewer than half of responding leaders push back their campaign’s end date. That’s a sacrifice most development directors would happily make.

As we’ve seen, capital campaigns remain the best vehicle by which universities can “create discipline”—to quote Hasseltine—and blunt the impact of further public funding cuts or revenue shortfalls. Meanwhile, development leaders like IU’s Smith feel confident money will be there for the taking, especially once the economy rebounds.

Most importantly, “top-of-the-pyramid” donors are “still making money and doing better than the rest of the world,” Hasseltine said. In many cases, “95% of the money raised in a capital campaign will come from 5% of the donors, and 50% is going to come from 30 donors.” Leaders can count on this support, even if it comes in the form of glittering new buildings that may never be fully funded or used to capacity.

In early April, with COVID-19 in full swing, I spoke with UC Berkeley’s Douglass about his school’s $6 billion campaign. He noted that the development team will need to raise over a quarter-billion dollars for its DataHub alone, calling it “a challenge in the short term, with the dramatic economic slowdown and probable recession. But that is the case for the entire ‘Light the Way’ $6 billion campaign.”

A few weeks later, I asked Hasseltine for his take on Berkeley’s campaign. He was a bit more optimistic. “They’ll be fine.”