Yale University. Winston Tan/shutterstock

In a recent post laying out some key findings from our white paper on higher ed giving, I mentioned that the sector appeared to be reverting to its flush pre-pandemic state.

It was an admittedly low-risk prediction. While the Council for Advancement and Support of Education (CASE) had yet to publish its industry-leading report on higher ed fundraising in the fiscal year beginning July 1, 2020, and ending June 30, 2021, a surging stock market and plentiful anecdotal evidence pointed to a robust recovery. The only open question involved the breadth of the recovery.

I’m happy to report that the wait is over. CASE’s Voluntary Support of Education study examining data collected for the 2020–21 academic fiscal year just went live and, as expected, the field’s fundraisers bounced back in a big way. CASE found that colleges and universities raised a record-breaking $52.9 billion—a 6.9% and 6.7% increase over 2020 and 2019, respectively. Throw inflation into the mix, and the 2020–21 increase over the previous year was 5.1% in real terms.

To be clear, the rising tide didn’t lift all boats. “Many institutions reported a decline, and it was only because the increases were so large that we had the overall increase in support,” said Ann Kaplan, the study’s author and CASE’s senior director. “It’s a mixed environment that the larger numbers don’t reveal.”

The environment also included an increase in giving to restricted endowments, which are often earmarked for financial aid, and an influx of support to two-year colleges and historically black colleges and universities (HBCUs). And in what may be the most intriguing data point of them all, CASE reported that unrestricted gifts rose by 30.2% over the previous fiscal year. The authors called this “an unprecedented level of growth for this type of donation,” although, as we’ll see, it came with a familiar MacKenzie Scott-sized asterisk.

Alumni lead the way 

The 2021 CASE survey collected data on charitable gifts and grants raised from private sources for the fiscal year beginning July 1, 2020, and ending June 30, 2021, with a few institutions reporting on different fiscal calendars.

The study states that 864 U.S. higher education institutions participated in the survey and reported receiving a combined $41.5 billion. The report also factors in estimated support to non-participating institutions, resulting in the $52.9 billion total raised in the fiscal year. Of this amount, the top source of funding was foundations at 33.1%, followed by alumni (23.2%), non-alumni individuals (16.6%), other organizations (13.9%) and corporations (13.2%).

At first glance, it may seem as though private foundations are the sector’s dominant charitable force, but a closer look shows that individual donors are calling the shots—combined giving from alumni and non-alumni made up 39.8% of the total.

In addition, CASE’s foundations category includes family foundations, while the “other organizations” category consists of giving from donor-advised funds (DAFs). Both vehicles are basically conduits for individual giving, with Kaplan specifically citing a big increase in funding from DAFs. (CASE will track DAFs as a separate donor category in next year’s study.)

Lastly, while each funding source gave more than the previous fiscal year, alumni led the way with an increase of 10.8% in giving—or 8.9% when adjusted for inflation—over the previous year.

Key takeaways

The CASE study confirmed the age-old truism that as the market goes, so goes charitable giving.

When the fiscal year began on July 1, 2020, the S&P 500 Index stood at 3,105.92. As the summer unfolded and the index climbed, we began to notice an upsurge in big gifts, as if donors were at long last shaking off their market-induced doldrums. By the fall, order seemed to be restored to the sector, with some experts envisioning an “infinite growth horizon” for university development teams. When the fiscal year ended on June 30, 2021, the S&P clocked in at 4,297.50—a 38.4% increase over July 1, 2020.

So how did funders allocate their support during this period? The top three areas of support cited by the 864 reporting institutions were restricted gifts for current operations (52.4%), restricted endowments (27.5%), and property, buildings and equipment (10.7%).

It shouldn’t come as a huge surprise that the top areas of support are all restricted in nature. Two big themes from our higher ed giving brief were the ubiquity of restricted giving, whereby a donation is earmarked for a specific purpose like a medical institute or an MBA program, and funders’ enduring support for renovation or construction projects that can attract high-performing students, boost the school’s profile, and catalyze economic development.

But a closer look at CASE’s data reveals some encouraging degrees of nuance. For example, alumni giving for the broader “capital purposes” category jumped 23.4% over the previous year—a figure that Kaplan called “staggering.” Most of that increase was driven by a surge in giving for restricted endowments, which are often earmarked for financial aid. Put it all together, and “alumni are stepping up to the plate to primarily fund scholarships and not buildings,” Kaplan said.

In fact, the $4.4 billion institutions raised for gifts earmarked for property, buildings and equipment in the 2020–2021 fiscal year represented a 1.1% decrease over the previous one, which included the first four months of the pandemic (March–June 2020).

This suggests that universities’ remote or hybrid arrangements and urgent financial aid needs compelled funders to deprioritize “shovel-ready” gifts. That could mean that the drop was a pandemic-related anomaly. And yet, the $4.4 billion figure is 6% less than the $4.7 billion universities raised for property, buildings and equipment in pre-pandemic 2019, when 913 institutions participated in CASE’s survey.

Such figures suggest that funders have been incrementally dialing back their support for new facilities over the past three fiscal years.

The MacKenzie Scott Effect (yet again)

Perhaps the most interesting data point is one that applies to an area of support that generated tepid interest from funders. CASE found that only 7.4% of charitable dollars were earmarked as unrestricted gifts for current operations—a pretty underwhelming figure until you realize that it did jump 30.2% over the previous fiscal year, representing the largest increase by support area in the study.

Could it be that higher ed funders finally came around to the inherent flexibility and utility of unrestricted giving? Well, at least one funder did.

Since CASE’s survey did not prompt respondents to list donor names, Kaplan would reach out to a responding institution whenever she saw an abnormally large giving increase and ask for an explanation. “Virtually all of the institutions I contacted pointed to MacKenzie Scott,” she said. “We knew that her gifts would start to show up in the study, but we didn’t think it would swing things to such a surprising degree.”

We’ve seen this movie before. Around this time last year, the Center for Disaster Philanthropy and Candid published a report analyzing COVID-related giving. Authors labeled 39% of dollars and 21% of gifts to specified recipients as unrestricted or flexible. However, when Scott’s gifts were removed from the data set, flexible support reflected only 9% of all dollars awarded to named recipients.

Kaplan made a point to underscore the novelty of Scott’s approach. “These donations had absolutely no restrictions, and that’s a pretty rare occurrence, since larger gifts tend to be driven by a specific interest on the part of the donor.” Scott was also the driving force behind the increase in support to two-year college and HBCUs, though they also netted some big gifts from Michael Bloomberg.

It’s worth remembering that even with Scott’s gifts included in the mix, unrestricted donations still represented only 7.4% of “current operations” support. Moreover, CASE found that giving to unrestricted endowments, which constituted 1.2% of the total amount raised by participating institutions, actually dropped 1.7% over the previous year.

Pondering the data, I couldn’t shake the idea that if a pandemic, the longest bull market in history, and Scott’s paradigm-shattering philanthropy didn’t galvanize funders to revisit their long-standing propensity for restricted giving, perhaps nothing will. Kaplan, on the other hand, provided a more sanguine take.

“There is such a thing as leadership in philanthropy,” she said, “and like-minded philanthropists may take up Scott’s approach over time.”

Keep calm and carry on

Kaplan called the previous fiscal year a “perfect storm” for university development teams, citing major growth in the major stock market indices and low inflation. “If you’re stewarding donors properly, you’re going to receive significant gifts with those kinds of conditions,” she said.

Speaking of “significant gifts,” I’d be remiss if I didn’t mention the rocket fuel of the higher ed fundraising space. CASE’s key findings show that super-mega-gifts to what Kaplan called “the usual suspects”—research and doctoral institutions—are alive and well. Nine institutions received single contributions of $100 million or more, totaling $1.46 billion—a 45% increase over 2020’s report.

All of which brings us to the present moment, when rising inflation and a volatile stock market point to a precarious short-term economic forecast. Kaplan doesn’t dispute the fundamentals, but reminds development officers to keep these ebbs and flows in perspective. “We need to look at five-year patterns,” she told me. “There’s nothing inherently wrong with a correction, it just means we’re heading back toward the mean a little bit.”

In the meantime, Kaplan encourages higher ed fundraisers to keep their heads down and stay the course. “You continue to make the case and build relationships, even if the fundraising environment is terrible, and when means are there, those individuals will want to connect because you laid the groundwork.”