SHAWN CHENG/YH

Fundraising: for Yale, for Yale, and for Yale

After five years of planning, revision, and deliberations, the moment Yale's science programs had been waiting for arrived. On Thurs., Jan. 20, Yale University President Richard Levin, GRD '74, unveiled to New Haven Mayor John DeStefano Jr., Connecticut Governor John Rowland, and the world at large an ambitious $500 million plan to bolster Yale's science and engineering programs. A few blocks away, Yale's Development Office was plugging away to make it all possible.

The office, whose chief purpose is to raise funds for the University, is being called upon to raise one-third of the total cost of the plan over the next eight to 10 years, according to Vice President for Development Charles Pagnam. "Our goal would be to raise a third of it," he said. "We'd like to raise more than that."

This confidence is the product of Yale's recent success in fundraising. Its latest campaign, dubbed "...and for Yale," ended on June 30, 1997 as the most lucrative higher-education campaign in history at the time, having raised $1.7 billion. Yet less than three years later, Yale's Development Office is gearing up for the next campaign, which will probably commence officially in 2002 or 2003, according to Pagnam. In contrast, the "...and for Yale" campaign began almost 15 years after the previous campaign had ended.

Pagnam's staff of 185, including 42 front-line fundraisers, does not exactly rest between campaigns. Before the science program was announced, Development was already busy raising funds for the 10 remaining residential college renovations, Phase II of work on Sterling Memorial Library, new art facilities, and further work on Payne Whitney Gymnasium, as well as numerous other special projects and the annual fund drive for the operating budget and for the endowment. So how are these fundraising activities different from those of an officially-designated campaign? "We don't have the banner of a campaign hanging over our head," Pagnam said.

So why is Yale considering another campaign? And why are campaigns in general happening more frequently? Development's ultimate aim is to maximize the total giving to projects designated as University priorities, even beyond maximizing contributions to any one particular project. Any gift that pays for a project to which the University is already committed to funding frees up that money for Yale to spend as it wishes. This allows for greater budget flexibility. For example, if a donor endows a professorship that already exists, the University can shift the money that it would have spent on paying that professor's salary to some other priority.

Because Development is currently shifting some of its efforts to science, other fundraising efforts may suffer. "What we're trying to do is maximize total giving to our priorities. By having the science fundraising as a priority, it's possible that people will give to that instead of giving to residential colleges," Pagnam said. But, he added, if they are more interested in science, then they are likely to give more than they would have to residential colleges.

John Malone's, TD '63, $24 million gift kicked off Yale's science fundraising campaign. COURTESY OFFICE OF PUBLIC AFFAIRS

Development has enjoyed great success in recent years at this aim of maximizing total giving. In the last two years, gifts to the University have averaged $219.6 million, compared with $144 million in fiscal 1992. Yale has benefited from the recent windfall of philanthropy to institutions of higher education. From 1993 to 1998, total gifts to these institutions increased by 44.7 percent, adjusted for inflation. This increase in financial support has been caused partly by a greater frequency of major fundraising campaigns in recent years. All eight Ivies have had campaigns in the 1990s. Together, their campaigns raised more than $11.5 billion, and all campaigns, including the two that are still ongoing, exceeded their goals.

A more fundamental reason for the increased frequency of campaigns is that they work—not only by reaching their short-term fundraising goals, but also by bringing annual giving up to a higher level that is sustainable after the close of the campaign. Yale has accomplished the latter during the five years of the campaign, annual gifts received averaged $183.1 million, and in the two years since, gifts have averaged $219.6 million. "A campaign allows a university to raise the profile of fundraising," Pagnam said.

Because universities are effectively competing with other nonprofit organizations for philanthropy dollars, a campaign can be important in capturing the attention of potential donors. "A campaign sets goals and deadlines, gives a sense of urgency, and creates a greater awareness of the university's needs," Bill Hardt, Princeton's director of annual giving, said. "We understand that many donors are going to be in some sort of rotation [between beneficiaries of their donations]. During the five years of the [Princeton's] anniversary campaign, we're asking donors to give a high priority to Princeton and work that into their planning."

Williams is another college that, like Yale, has sustained annual giving rates since the end of its campaign in 1994. During the campaign, donors gave an average of $21.9 million annually; since then, annual giving has fluctuated between $20.5 million and $37.4 million, and Stephen Birrell, vice president for alumni relations and development at Williams, predicted that this year's fundraising total will be the highest in the school's history.

Birrell did acknowledge that frequent campaigns may exhaust donors. "You have to be very careful about that," he said. "We try to approach people individually, taking into account their history of philanthropy to the college. We try to be careful about how often and how intensively we approach our alumni. Nonetheless, the fundraising must go on."

...And for science

In order to ensure that the fundraising can go on and that the University will have budgetary flexiblity, Yale must be able to point out to donors a specific, pressing need among its many priorities. The science and engineering initiative is based on just such a need, as Yale must compete with other universities in science and technology or risk falling behind. University Provost Alison Richard, GRD '86, said, "It was manifest to all of us that Yale needed to be serious about science and make an investment in science and engineering." This was also apparent to many alumni. "There is certainly a subset of alumni who particularly believe, in the broad area of technology, that Yale should be making investments," Richard said. "We've been hearing that for some time."

Yale's strategy in this campaign, as in others, will be to target donors who are likely to be interested in the campaign's goals, and then articulate to donors the importance of the fundraising drive. Roman Kuc, professor of electrical engineering, said that Levin's announcement did this effectively. "The important thing is that this project provides a vision for Yale so that in contacting a donor, we no longer have to make a case for having good sciences at Yale," Kuc said. "The president making this announcement means that we have a vision."

Barry Chaiken, M.D., PC '72, who contributed to the renovation of Sterling Library during the "...and for Yale" campaign, already understands the importance of that vision. "I think the project is great," he said. "Anything that is going to help Yale's stature in the country is worthy of support. I was a pre-med at Yale, and while the sciences were fine, they were always second fiddle to the humanities."

The other key to the fundraising effort's success is to target donors capable of making large gifts. Development began to focus more on large gifts during the "...and for Yale" campaign, and the strategy was a success. The top 0.1 percent of potential donors contributed more than a quarter of the funds raised during the campaign. "It was clear that there were alumni scattered around who had the capacity to make major gifts," Pagnam said. "Our making contact added inclination to that capacity."

The science project was jump-started by a $24 million gift by John Malone, TD '63, for a new engineering facility. Pagnam plans to structure the science fundraising effort around other large gifts. "For each building, we will be talking to donors in the $10 to 15 million range," Pagnam said. "We'll then use that as a challenge to other donors."

Finding the right fit

If donors do respond to the challenge, and Development is successful in meeting the fundraising goal for the science project, then Yale will not have to fund $167 million of the project. But Yale has already committed to spending $500 million on the project, regardless of how much Development raises. So any donations that Yale gets for the science project, or other items that the University has already committed to fund, are in effect unrestricted funds that Yale can spend as it pleases.

Occasionally, rather than responding to a university's solicitations for contributions to a priority project, donors approach universities about donating to other projects. "Generally speaking, you can take donors' interests and a college's needs and broker effectively, but not always," Birrell said. In such cases, a university does not gain budgetary flexibility from the gifts, and so it may choose to reject them.

This has happened on two notable occasions at Yale in recent years. In 1995, the University returned $20 million to Lee Bass, SM '79, which he had donated for the study of western civilization four years earlier. In 1997, Larry Kramer, BR '57, offered to donate $5 million to Yale and bequeath his entire estate to the University on the condition that Yale endow a professor in gay studies or build a gay-and-lesbian student center. Yale declined his offer.

Yale's Vice President for Development Charles Pagnam spearheads Yale's successful fundraising machine. COURTESY OFFICE OF PUBLIC AFFAIRS

Rejecting such gifts carries the risk of alienating other donors who might have otherwise given to Yale's priorities. William Rubenstein, MC '82, a UCLA law professor and former director of the Lesbian and Gay Rights Project of the ACLU, rescinded a pledge he had made to Yale when he heard about the University's rejection of Kramer's gift. "There are plenty of things Yale is currently raising money for that I would support, but their actions with Larry's gift were just so unprincipled," Rubenstein said. "It's not about the money."

However, despite these two instances, Yale is open to certain specific gifts that are outside the University's major priorities. Richard Shaw, Yale's dean of undergraduate admission and financial aid, would like to see donors endow financial aid for international students. "I think it will happen," he said. Shaw estimated that a switch to need-blind admission and financial aid for 100 percent of international student need would cost roughly $1 million per year. This would require an endowment of $20 million—approximately the amount Development aims to raise for science each year for the next decade. But Shaw does not see the science project as a competitor to a possible endowment of international student aid. "[The science project] will excite the international community more than anything in recent history," Shaw said. "Science is very important to the international community."

Developing the future

Currently, Development is not focusing on solicitations to endow financial aid for international students, nor to raise money to keep tuition flat, nor to expand the faculty greatly. The University has articulated clearly that it feels its biggest need is in the area of facilities.

During the '70s and '80s, Yale postponed maintenance on its buildings in a policy now euphimistically referred to as "deferred maintenance." Now the University is in a rush to catch up. Last year, Yale spent $216 million on facilities, and this year the budget calls for expenditures of $305 million. Yale will likely continue to spend an unusually high amount on facilities for at least the next decade.

However, Yale soon will be able to shift some of its fundraising efforts from facilities to other projects. Gary Sax, Director of the Office of Budget and Planning, said that this year's budget will likely represent the peak of spending on facilities. In the long term, he estimates that annual depreciation of the value of Yale's buildings will be roughly $50 million (in 1994-95 dollars)—much less than the University is currently spending each year on facilities. Yale plans to pay for $15 million of that sum with gifts and $35 million directly from the operating budget. While the $50 million figure does not include the construction of new buildings, nor renovations which are so drastic that they change the purpose of an existing building, it is clear that Development will soon be able to refocus its staff and resources that are now raising funds for buildings to other projects.

What will these other projects be? When asked, Pagnam's first reply was, "Endowment, perhaps." During the last campaign, Yale aimed to raise $500 million in each of three categories: endowment, current use, and facilities. Even as the endowment has grown from $1.32 billion in June 1985 to $7.18 billion in June 1999, and the ratio of endowment to budget has grown from 3 to 6.3 during that same period, the endowment remains a major fundraising priority. "The majority [of universities] are shifting to endowment campaigns," Trish Jackson, vice president for education at the Council for Advancement and Support of Education, said.

That is partly because it is difficult to give appropriate recognition to a donor who makes a current-use gift that is unrestricted, i.e., one that has no strings attached. Most universities lump all such gifts together in the operating budget. The contents of "Trustees of an Ideal," the 52-page brochure sent to alumni to appeal for donations to the "...and for Yale" campaign, reflect this difficulty of honoring donors who make such gifts. The brochure included only two pages focused on current-use gifts, while providing numerous examples of naming-gift opportunities for endowment and facilities donations (e.g., getting an endowed professorship or a residential college common room named for someone).

Yet despite the limited possibility for recognition for unrestricted current-use gifts, universities have been successful at raising such funds. Last year, unrestricted gifts to the Williams alumni fund accounted for more than a quarter of all gifts, and the annual alumni fund has grown by roughly 40 percent over the last four or five years. Princeton's alumni fund has also been successful, raising $32.3 million last year. "People understand that universities need operating funds," Hardt said. "I don't sense that people wouldn't want to give in that way, nor that they would only want to give in a way that only memorializes their name in a highly visible way."

New York University's (NYU) $1 billion fundraising campaign, which lasted from 1985 to 1995, was notable for raising funds almost exclusively for current use and facilities. According to John Beckman, NYU's senior vice-president for public affairs, the campaign was a success because of the leadership of the university's trustees. "The trustees were well-known businesspeople, and they made a businessman's argument: the place where money is needed is in the institution, not in the institution's endowment," Beckman said. Today, NYU's budget is $1.4 billion and its endowment is roughly $1 billion. Undergraduate applications to NYU have tripled since 1991.

Whether Yale decides that raising for current use is both attractive and feasible, or shifts some of its focus to the endowment, or even finds new kinds of building projects to pursue, all indications are that the Development Office will continue to turn Yale's goals into reality, whether or not those goals match those of its donors.

Ted Diskant contributed to this article.

Back to News...