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DECEMBER 20, 2004
Rich College, Poor College Fever-pitch fund-raising at top-tier universities leaves the others way behind With an endowment of $3.6 billion under his control and a faculty that boasts seven Nobel laureates, University of Chicago President Don M. Randel should feel on top of the world. But from his office in the heart of Chicago's neo-gothic campus, Randel spends a lot of his time fretting about the university's future. "We are in relentless and ferocious competition with institutions you could name on the fingers of one hand," he says, including Harvard, Yale, Stanford, and Princeton. "And all of them are wealthier than we are." To keep pace, Randel in 2002 launched a $2 billion fund-raising drive -- three times as much as the university raised in its previous campaign, which ended in 1997. Randel has plenty of company in what has become a frenzy of fund-raising among the nation's leading universities. A generation ago, a $100 million campaign was big news. Today, 22 universities are aiming to raise at least $1 billion, and plenty more blockbuster campaigns are on the drawing boards. Experts say that every Ivy League college is planning a $1 billion-plus campaign. Harvard's next drive "will quite likely be the largest ever," predicts Donella Rapier, vice-president for development at Harvard University, which raised $2.6 billion in a seven-year campaign that ended in 1999. The betting is that it could reach $5 billion, nearly twice anything going on now. The trend is driven largely by an increasing concentration of wealth in the U.S., which has swelled the ranks of the most affluent Americans. With so many more assets to their name, they have doubled annual giving to higher ed in the past decade, to $24 billion last year, according to the Rand Council for Aid to Education, a nonprofit group. The figure could double again in the next decade, and maybe again by 2020, as affluent Americans bequeath their accumulated assets -- estimated at $41 trillion -- to future generations. "There are only so many yachts your heirs need, which leads lots of us to believe we are on the cusp of seeing tremendous growth in how much is given away," says Scott G. Nichols, associate dean of Harvard Law School, where he heads fund-raising. YAWNING CHASM While all the money is a boon to the nation's elite universities, it also widens the already-deep chasm between them and the rest of the country's 3,000-plus colleges. This in turn exacerbates the inequality gap between the mostly affluent students who attend the elite schools and the middle-class and poor ones who mostly enroll in less prestigious colleges. Last year, just 20 institutions received $6.2 billion, or more than a quarter of all higher ed donations. No surprise, Harvard led the pack, with $556 million, which works out to a staggering $28,300 for each of its 20,000 students. At the opposite end of the spectrum, 22,000-student Palm Beach Community College in Florida, a typical community college, raised just $800,000, a paltry $36 a head. So while gifts and endowment earnings cover 37% of Harvard's $2.6 billion annual budget, donations alone provide just 8% at the average U.S. university, and less than 3% at community colleges. "Higher education is becoming more and more a two-tier system in which the top universities turn away 10 applicants for every one they accept, while universities further down are struggling just to fill seats," says Robert H. Frank, an economics professor at S.C. Johnson Graduate School of Management at Cornell University. Even for the elites, some critics worry that the obsession with fund-raising is fueling an arms race that's driving up the cost of a top-tier education. Already, a startup package for junior science faculty members at a top college can run into the hundreds of thousands of dollars, while it can take millions to recruit senior scientists. Increasingly, this leaves less affluent colleges behind. "The market for talented professors is as competitive as it is for star athletes," says University of Michigan President Mary Sue Coleman, who in May launched a $2.5 billion drive. In this environment, the top private universities are counting on fund-raising to provide their margin of excellence. In the past, sponsored research -- primarily paid for by the federal government -- made up two-thirds of the budget at Massachusetts Institute of Technology. Today "it's only 37%, so we've become much more dependent on private giving," says Charles M. Vest, who retired as MIT president on Dec. 6 after leading a $2 billion fund-raising drive. Similarly, one-third of Yale University's $1.5 billion budget comes from donations and the endowment, double the portion of a decade ago. SOARING COSTS All the new cash funds some laudable initiatives. One key objective is keeping up with the explosion in science. While MIT has long been a leader in engineering, it's now enhancing its brain- and cognitive-sciences department, thanks partly to a $350 million gift from alumnus Patrick J. McGovern, founder of International Data Group. MIT also finally consolidated its world-renowned computer-science department, which had been scattered around Cambridge, Mass., into a new $300 million Stata Center, named for Analog Devices Inc. (ADI ) Chairman Ray Stata, who gave $25 million to help build it. Similarly, the University of Chicago has earmarked fully half of its $2 billion fund-raising goal for science, including a $200 million research building. The pressure to tap private donors is particularly acute at leading public universities, where state aid hasn't kept pace with soaring costs. Already, gifts and endowment income outweigh state appropriations as a share of the budget at both Michigan and the University of Virginia. No wonder public universities are conducting 12 of the country's 22 billion-dollar campaigns. The University of California at Los Angeles, for example, has raised $2.6 billion -- the most ever by a public university. "Without this campaign, we wouldn't be able to compete with private universities of comparable stature. We wouldn't even be close," says UCLA Chancellor Albert Carnesale. While the gushers of donor cash mostly help the rich colleges get richer, there are a few exceptions. In the early 1970s, Boston College, a Jesuit institution, was in the red and nearly insolvent. A series of campaigns, capped by a $441 million drive ending last year, helped to boost the endowment from $5 million to $1.25 billion, which in turn allowed BC to recently recruit professors from MIT and Harvard. For the most part, the wealth of the private sector is likely to flow to those that already have the most. Such aid helps the country's top schools continue their global leadership. The majority of American students, meanwhile, will be left further and further behind.  By William C. Symonds in Chicago
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