Economic crisis may affect U. fundraising

Wednesday, October 8, 2008

Though the Campaign for Academic Enrichment is still projected to reach its goal of $1.4 billion by 2010, the ongoing economic downturn may have a negative effect on the Brown Annual Fund and on donor participation, and a prolonged recession could further depress giving in the future, according to campaign leadership.

Annual Fund revenues have grown by an average of 24 percent yearly since President Ruth Simmons took office, but the current economic slowdown may take its toll. “In a time like this … we’ll see slower growth,” said Ronald Vanden Dorpel MA’71, senior vice president for University advancement.

How the credit crisis on Wall Street will affect University fundraising remains to be seen, but Vanden Dorpel estimated that about 20 percent of Brown alums work in the financial sector – banks, investment banks, financial services and hedge funds. That number, Vanden Dorpel said, is unusually high compared to Brown’s peer institutions.

“Let’s say the entire (financial) sector is affected,” Vanden Dorpel said. “We could see some significant slowing of gifts … a slowing in the rate of growth,” though not a steep decline.

Historically, giving to education has dropped by about 1.1 percent during recession years and .5 percent in years with an economic slowdown, compared with an average increase of 4.6 percent in non-recession years, according to data released by the Giving USA Foundation of Indiana University. The National Bureau of Economic Research defines a recession as two successive quarters with a decline in gross domestic product. The United States is not currently in a recession, but the economy is growing more slowly than it did last year and many economists are predicting one.

The University’s campaign, publicized under the tag line “Boldly Brown,” will almost certainly surpass its goal after finishing fiscal year 2007 at $1.24 billion – 89 percent of the goal raised with a quarter of the campaign’s seven-year duration remaining. The campaign’s goal for the Annual Fund has still increased this year, albeit only slightly — the fund netted slightly more than $35 million last year, and the University aims to raise $36 million this year. Last year, the goal increased by $4 million.

University officials have long expected the campaign to surpass its goal and have proceeded with improvements under the Plan for Academic Enrichment, Simmons’ wide-ranging blueprint for raising Brown’s academic profile, with the expectation that additional funds beyond the $1.4 billion goal will be forthcoming.

“We’re not hearing yet that institutions are facing lower giving rates,” said Rae Goldsmith, vice president for communications and marketing at the Council for Advancement and Support of Education in Washington.

“Historically, in times of economic challenge, giving may drop a little bit … 1 or 2 percent,” Goldsmith added. “While fundraisers are cautious, and of course they know that donors are cautious as well, most of the time the impact is relatively small if there’s an impact at all.”

But the administration is also concerned with alumni participation in donating. Alumni participation rates account for 5 percent of the U.S. News and World Report college rankings. Brown currently ranks sixth in alumni giving rate, up from 13th in 2002 – the highest it ranks in any of the Report’s categories. The University hopes to solicit donations from 34,350 alumni this year, but Vanden Dorpel expressed concern that they may not reach that figure.

“Participation matters in a time of economic downturn and recession,” he added. “Participation does tend to drop off. You tend to lose smaller donors.”

Smaller-donor participation in the annual fund – gifts of $250 or less – declined by about 11 percent last year, though the annual fund returns did not suffer overall because of larger gifts and record-setting reunion giving.

“The concern about smaller donors,” Goldsmith said, “is that they are not as well-positioned as large donors to ride out a downturn.” Larger donors might also have a longer history with the university, she added, since “major gifts are the results of long-term relationship building.”

“That’s why giving usually doesn’t dive as much as people think, because the relationship (between the donor and the university) is already strong,” Goldsmith added. Donors will still make good on pledges during times of economic difficulty, but might repackage their gifts or extend the pledge period for payments.

Though Vanden Dorpel said the campaign would be sympathetic to donors’ situations, its fundraising strategies will not fundamentally change.

“It’s … important not to make this a self-fulfilling prophecy, to go to donors and say, ‘Oh, isn’t the economy terrible,'” he said. “We will continue to ask for money. We will not be shy about it.”