Fiscal 2016 was a banner year for college and university fundraising. Institutions in the U.S. hauled in a record $41 billion of donations, according to data from the Council for Aid to Education cited by Bloomberg. Harvard University led the class with $1.2 billion raised, but investment losses and spending of principal at Harvard totaled $2 billion, the same February 7 article notes. Harvard’s situation is not unique, however, as university endowments fell in value by 1.9% on average, according to another survey cited by Bloomberg. (For more, see also: Subpar Returns Spur Layoffs at Harvard Endowment.)

Biggest Fundraisers

Harvard is among other universities in recent years that took larger risks with their investment portfolios in search of bigger gains, leading to erratic financial performance at many schools and staggering losses in the case of Harvard, which is drastically restructuring and downsizing its investment operations. 

After Harvard, Stanford was the second-biggest fundraiser in fiscal 2016, bringing in $951 million. This is the first time since 2004 that Stanford was not the top fundraiser. Like Harvard, Stanford also used part of its donations to cover losses on investments in fiscal 2016. 

The next biggest donation tallies for fiscal 2016, as reported by Bloomberg, included the University of Southern California (USC) at $667 million, Johns Hopkins University at $657 million, the University of California-San Francisco at $596 million and Cornell University at $588 million. Columbia University and the University of Pennsylvania brought in more than $500 million each.

Overall, Harvard, Yale University, Stanford, Princeton University and Massachusetts Institute of Technology have the biggest endowments in the U.S.

Cutting Tax Deductions

Those large donations have become a focus in Washington. A proposal in Congress to restrict the tax deductibility of donations to the wealthiest 100 colleges and universities has raised alarms among these institutions and their rich donors, according to a January 5 article in Bloomberg. Representative Tom Reed (R-NY) wants to ensure that institutions whose endowments top $1 billion are using those war chests to fund deep tuition discounts for low and middle-income students, rather than vanity projects for rich donors. He proposes that tax deductions for donations to these rich colleges be limited unless at least 25% of the funds raised go to student financial aid. A more radical proposal, not yet floated in Congress, would be to subject large endowments to a tax. 

Fall In Individual Donors

And it's harder to universities to attract individual donors. While donations hit a new record, 8.5% fewer alumni and 6% fewer non-alumni individuals gave versus the prior year, per Bloomberg's citations from the Council for Aid to Education report. This decline in individual support was more than offset by a 15% gain in corporate donations, plus increased giving from foundations and other organizations. The decrease in alumni and other individual support may suggest these donors' growing dissatisfaction with rapidly escalating higher education costs, but the Bloomberg article does not comment on this matter.

Some alumni want their dollars focused on scholarships, not investments that are perceived as risky. In 2016, longtime consumer advocate and Harvard Law School alumnus Ralph Nader joined a highly-publicized dissident slate of candidates for Harvard's Board of Overseers (board of trustees), which is elected by the alumni. Calling themselves Free Harvard/Fair Harvard, they charged that Harvard's massive endowment (then $38 billion) had turned it into one of the world's largest hedge funds, albeit one claiming tax-free charity status. Among other things, the dissidents argued that this massive endowment should fund 100% of tuition, for all students. They lost, but sparked a 36% increase in voting turnout, according to The Boston Globe. Harvard did not disclose how many votes individual candidates received.

 

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