UNC-system schools ask for donor support

Schools across the state are anticipating steep cuts and hoping donors will help make up the loss.

UNC-system schools, which face up to 15-percent budget cuts, are deciding whether to push for gifts as a quick fix, or look to long-term endowment funds as a more lasting solution.

Large donations to universities are often turned into endowments, permanent investments that generate revenue for the university, while others are donated as expendable gifts and are usually spent within the year. Universities are struggling with whether to ask donors for long-term or short-term money.

East Carolina University is strengthening focus on the immediate need for short-term gifts. But they will ask donors to contribute to endowments for student scholarships, said Bill Clark, president of the ECU Foundation.

“We will need even more scholarship money,” Clark said. “If anything, we’ll push for donors to help out students because all of the UNC system will have to raise tuition to help with the budget cuts.”

Endowment funds don’t come close to making up for state funding shortfalls, and aren’t meant to, said Nevin Kessler, vice chancellor for university advancement. Because endowments are invested for long-term growth, only a portion of them can be used each year.

N.C. State University received a gift of $40 million in December — $37.5 million of which will go to the school’s endowment funds.

The money invested this year, $10 million of the $40 million pledged, is projected to earn $400,000 in its first year, Kessler said.

“If you look at what $10 million could do right now for this university, some would argue that we should take that now,” he said. “But if you aspire to be here 100, 200 years from today, you want to focus on the long term.”

Donations make the university more flexible in the wake of a budget strain, Kessler said.

Bill Jarvis, managing director and head of research at the Commonfund Institute — a Connecticut-based nonprofit investment firm that serves colleges — led a national study of endowments to universities during the recession.

“Because we don’t know what will happen in the future in terms of investment, fund-raising and development for endowment purposes become even more important,” Jarvis said.

National numbers show that fund-raising for endowments in the last few years has been difficult.

“The challenge has been getting people who are nervous about the economy to make multi-year commitments,” Kessler said.

But the 2010 fiscal year was the third most successful year for gifts in UNC-CH’s history.

Excluding pledges, the University raised $268.4 million. Of that, $52.2 million was invested as endowment funds.

Universities across the country, including UNC, are recovering from poor investment returns.

“Their first task was to stem the bleeding — to stabilize the loss to the endowments,” Jarvis said. “Gifts are going to have to make up a major part of that.”

Geoff Graham, the assistant vice chancellor for gift planning and real estate management at Appalachian State University, said the school’s developers have not stressed the school’s financial strains to donors but may have to do so in the near future.

“There is an assumption that because we’re a state-funded university, we are receiving all the necessary financial support from the state to help cover the basics,” Graham said. “Donors like to give to make an extra difference and not just to help cover the cost of heating bills.”

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