In Indiana, the second-largest private foundation in the U.S. is taking a crack at some of the underlying financial, demographic and operational challenges facing the state’s universities.

The Lilly Endowment’s initiative will provide grants totaling $108.2 million to boost the relevancy and sustainability of the state’s higher ed institutions. Most interestingly, in a higher ed space replete with challenges, the initiative focuses on four distinct pressure points: the decline in higher education enrollment in Indiana, competition from job training programs such as apprenticeships and certificate programs, the enhancement and expansion of online learning opportunities, and changes in federal funding policies for higher education.

“Because we believe that innovative approaches will be needed to address these challenges effectively, we have encouraged the colleges and universities to search for new ideas and to consider seriously collaborations with other higher education institutions in Indiana and with other organizations in Indiana or around the country,” Lilly Endowment communications director Judy Cebula told me. “We hope that this initiative will help Indiana college and university leaders investigate best practices around the country for how to increase the quality of their educational and research programs, while reducing their operational costs.”

The new effort complements Lilly’s extensive grantmaking in the higher ed and workforce readiness space, which includes support for the Lilly Endowment Community Scholarship Program, Conexus Indiana, which works to strengthen the advanced manufacturing and logistics sector in Indiana, and Ascend Indiana, which seeks to ensure that Indiana employers have access to the skilled workforce.

The foundation’s work to bolster opportunity in its home state, the focus of much of its grantmaking, has lately been buoyed by a surging endowment. In late December, FoundationMark, a firm that tracks the investment performance of more than 40,000 foundations, reported that Lilly had become the second-largest foundation in the country behind the Bill & Melinda Gates Foundation. FoundationMark pegged Lilly’s assets at $15.1 billion at the end of 2018. Thanks to Eli Lilly and Co.’s 2018 stock price, the foundation’s endowment assets grew 29 percent from 2017 to 2018.

A Three-Pronged Initiative

Lilly’s initiative, Charting the Future for Indiana’s Colleges and Universities, consists of three phases. In the first concluded phase, the endowment made planning grants totaling roughly $6.2 million to all of Indiana’s two- and four-year schools. These grants, according to the endowment, encourage “reflection, research and consultation so leaders can better prioritize the challenges and opportunities” they wish to pursue in the second phase, in which they’ll prepare implementation grant proposals.

Two recipient universities provide clues as to how its leaders plan to approach the implementation phase. Deborah Curtis, the president of Indiana State University (ISU), which received $250,000, said, “ISU will seize this opportunity to plan and pilot initiatives for students who, historically, have faced significant obstacles during the journey to graduation.” DePauw University, which netted $100,000, plans to make the school more transfer-friendly for community college graduates and enable faculty to visit Indianapolis companies to learn more about what companies seek in graduates.

Charting the Future is currently in its second phase, in which universities can apply for implementation grants of $1 million, $2.5 million or $5 million, depending on student enrollment. The endowment is looking for proposals that prepare students for “rewarding employment and to live engaged and meaningful lives,” especially in Indiana. These should result in “economies of scale and other cost efficiencies or otherwise enhance financial conditions of their institutions,” or enable institutions to further their educational missions more effectively in new or innovative ways. Lilly plans to award these grants later this year.

In the third and final phase, Lilly will solicit “concept papers” from invited universities describing the “extraordinarily compelling challenges or opportunities” they seek to address and their plan for addressing them. After reviewing the papers, the endowment will invite institutions to submit full, large-scale proposals of up to $10 million. From these proposals, Lilly will allocate up to $40 million to the winners later this year.

“We expect that the issues relating to affordability and sustainability will be addressed by many, if not all, of the proposals we receive and efforts we fund,” Cebula said. After all, “if colleges and universities are not paying attention to affordability, their long-term sustainability is at risk.”

Tackling the Big Issues

A recent study of higher funding by the Rockefeller Philanthropy Advisors and the TIAA Institute revealed that 92 percent of responding foundations cited “student access and support,” defined as supporting “low-income students and students of color to begin and complete a postsecondary degree” as a top priority. The second-highest priority, at 52 percent, was “policy, advocacy and system reform.” While the study’s authors didn’t explicitly define the term “system reform,” they did write that “changing the system of higher education more broadly to help more low-income and first-generation students succeed is the top goal of many foundations in education.”

In short, respondents believe they’ll generate greater impact by boosting student access versus attempting to bend the underlying cost curve. It’s hard to blame them. The perfect storm contributing to higher ed’s woes and the $1.6 trillion student debt crisis include misdirected federal student financial aid policies, runaway administrative expenses, and ballooning retiree benefits and pension commitments. Lilly’s initiative is refreshing because officials have identified four specific areas where they believe they can move the needle.

The big question is if other funders will tackle the thornier components of the higher ed cost equation in a similarly targeted way. The answer is “probably,” as stark demographic realities may leave them with no other option. Development officers can capitalize on this opportunity. Cebula told me that by having a “deep understanding of the challenges facing their institutions and the strategies that are proposed to address the challenges,” fundraisers can get donors to support initiatives that advance greater affordability and sustainability.

Two months after Lilly announced its Charting the Future initiative, State Farm pledged $30 million to Arizona State University (ASU) for a new online program designed to address the challenges students are facing as emerging technologies transform the workplace. “Technological change holds enormous promise and the potential for job creation. It also challenges employees, employers and students and presents a change we all must adapt to,” said State Farm Chairman and CEO Michael Tipsord.

In a related development, the Council for Advancement and Support of Education (CASE) recently announced that contributions to U.S. colleges and universities reached a record $49.6 billion in fiscal year 2019, an increase of 3.6 percent on a year-over-year, inflation-adjusted basis. CASE attributes this bump to increased support from organizations (including foundations), which grew to 34.3 percent of total giving.

A closer look at the data painted a less rosy picture. CASE attributes the growth in foundations’ generosity to a single gift—Bloomberg Philanthropies’ $1.2 billion gift to Johns Hopkins University. Take away this gift, and total support for higher education would have increased only 3.4 percent, barely keeping pace with inflation, due in part to the fact that overall alumni giving fell 7.9 percent from the last survey period. In addition, support for capital purposes, which tend to magnify the very same affordability-related challenges that Lily and State Farm are trying to address, increased 6.5 percent, adjusted for inflation, over 2018.

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