FAQ: Advancement and the Economy

CASE, in consultation with members of the CASE Commission on Philanthropy and the National Committee for Institutionally Related Foundations, developed commonly asked questions about the recent economic downturn. Both groups included senior-level educational fundraising professionals from a range of institution types. These questions have been updated to reflect the lingering effects this downturn has had on fundraising.

• What are the continuing effects of the economic downturn on fundraising?
• How have institutions adjusted their fundraising activities?
• Are fundraisers working with donors differently now than they would in a strong economy?
• Are institutions that were planning campaigns changing their plans, and are those in the midst of campaigns changing scope?
• What has the economic downturn done to the value of institutional endowments?
• What should institutions do regarding the payout rates on their endowments?
• Will endowment managers change their investment approaches either now or at the end of the fiscal year?
• How are institutions talking with faculty, staff and constituents about the impact of the economic downturn?
• Are independent schools eliminating or cutting back on events or other projects related to stewardship in this economic downturn?

Fundraising

What are the continuing effects of the economic downturn on fundraising?
In 2008-09, private giving to higher education declined by 11.9 percent; the following year, however, saw a modest increase of .5 percent, according to the Council for Aid to Education's annual Voluntary Support of Education Survey.

"This suggests that it may take two or three years, or longer depending upon the pace of the economic recovery, to reach or exceed the high point of $31.6 billion in philanthropic support in 2007-08," said CASE President John Lippincott in an early 2011 statement.

While fundraisers are optimistic about institutional giving in 2011, the severity of the economic downturn suggests that further predictions are risky.

How have institutions adjusted their fundraising activities?
Fundraising is based on long-term relationships and long-term returns. During these difficult times, fundraisers should plan on spending more time with current and prospective donors, not less. Institutions should plan on maintaining their support for fundraising efforts. Successful fundraising programs are those that are sustained and built over time, not stopped and started based on current economic conditions.

Are fundraisers working with donors differently now than they would in a strong economy?
Yes, many fundraisers have changed their approaches with donors. Because different donors are affected by economic changes in different ways, fundraising approaches will change on a case-by-case basis.

Fundraisers are listening even more carefully to donors’ interests and concerns and adjusting their approaches accordingly. If donors are taking a wait-and-see attitude, for example, conversations may be futuristic in nature and focus on donor interests once the economy rebounds. Some fundraisers may be making fewer asks, focusing more on stewardship of current and prospective donors so relationships will remain strong.

Senior fundraisers offered these additional suggestions:

• Consider talking about planned or deferred gifts with donors who were once considering major gifts.
• Consider talking about lengthening pledge periods.
• During annual fund drives, consider asking for a gift similar in size to ones made in the previous year rather than asking for a larger gift.
• Consider challenge gifts, “which offer an incentive for additional donors to give, and can make people feel they are getting (and giving) more for their money.”*

Most importantly, fundraisers agree that it’s important to keep asking as people have historically demonstrated an ability and willingness to give in difficult economic times. In addition, most donors will remain committed to the gift, even if they have to make it at a different time or in a different way than they initially envisioned.

Campaigns

Are institutions that were planning campaigns changing their plans and are those in the midst of campaigns changing scope?
Campaigns are by their nature long-term, running over the course of seven or eight years or more, so they often weather fluctuations of the economy. Fundraising becomes even more critical during difficult economic times, and the need for education and strong educational institutions becomes even more important. Most institutions will move forward with planned and current campaigns, even as they may reconsider goals and approaches.

Endowments

What will this economic environment do to the value of institutional endowments? While it might seem like the worst of the economic downturn has passed, there might still be a negative effect on endowment returns and, in many cases, on the actual value of those endowments. University endowments have generally outperformed the market, so they may not be as adversely affected as other investment portfolios. Institutions should, of course, carefully and regularly monitor their investments but, but barring dire circumstances, they should maintain a long-term view when it comes to their investment strategy.

What should institutions do regarding the payout rates on their endowments?
Most endowment managers recommend sticking with a well-established and well-reasoned payout rate. Indeed, the very purpose of having a payout policy is to avoid reacting to swings in the stock market. For example, an endowment “payout” rate might be based on a rolling three-year average of investment returns, smoothing out the impact of cyclical economic conditions. That said, some institutions may face a special situation causing them to increase payout rates to offset other revenue losses or to reduce payout rates to restore the long-term buying power of endowments hit particularly hard by the downturn.

Will endowment managers change their investment approaches either now or at the end of the fiscal year?
Endowments by definition are meant to provide support in perpetuity, so endowment managers make decisions with the long term in mind. Most have widely diversified portfolios to minimize long-term risk. While they are paying close attention to quarterly and annual performance, they are focusing on the long run. They typically monitor fund managers closely regardless of the economy, adjusting the mix as needed, so significant action at the end of the fiscal year would be unlikely. In short, endowment managers are not panicking, and those confident in their investment strategies are not likely to abandon them during uncertain economic times.

* “Fund Raisers Share Their Secrets for Raising Money in a Tough Climate.” Chronicle of Higher Education, Oct. 9, 2008.

Communications

How are institutions talking with faculty, staff and constituents about the impact of the economic downturn?

Many institutions are actively reaching out to employees, students, alumni, donors, parents and other constituents with information about the potential impact even as they assess how serious it might be. Presidents, school heads and other campus leaders are sending letters and emails, posting messages on websites, and blogging to keep people informed and build understanding about how the institution is anticipating and addressing budget shortfalls.

Some examples:

• News release from Duke University
• Message from the University of North Carolina-Chapel Hill chancellor
• Budget and legislative outlook statement from the University of Minnesota president to faculty and staff
• The Dartmouth University president's messages to the community about the Dartmouth budget
• The University of Pennsylvania president's statement on the economic impacts of 2010
• California State University's Budget Central blog, featured on its public affairs site

• Progress report and endowment statement from Cornell University's president
• Budget update from the Stanford University provost, predicting a surplus for 2011
• Missouri State University's president's page features a section on budget statements and updates
• Northwestern University President's video conversation about the state of the university

Stewardship

Are independent schools eliminating or cutting back on events or other projects related to stewardship in this economic downturn?

Thanking donors for their gifts remains a vital part of a fundraiser’s job. Many CASE members say they will never stop saying thank you to donors—regardless of the economic climate—but will simply try to be more creative and frugal in their appreciation.

Senior fundraisers at independent schools offer these suggestions to cut costs:

• Scale down events. One popular idea is to move “thank you” events from an off-campus, formal dinner to a more informal event on campus, such as in a gym, dining commons or student center.
• Combine two events into one. One school whose fiscal year ends June 30 holds a donor event in the fall as a thank-you event for the previous year as well as the kick-off to next year’s campaign.
• Ask for donations of space and food. Don’t be afraid to ask donors and community businesses to donate space and food for some of the events. Current and prospective donors may have access to meeting spaces that could be used for donor meetings and other events. When it comes to food, one fundraiser suggested asking staff members to tap into hidden skills and hobbies to bake cakes, bread and cookies.

What if you decide to eliminate a particular event or program? One approach is to ask a volunteer—the annual fund chair, board president or development chair—to call each attendee and explain the reason for the event’s cancellation. It’s also a good opportunity to reassure donors that their support is greatly appreciated and remains vitally important to carrying out the school’s mission.