For years, equity advocates have argued that community colleges provided higher rates of economic mobility for more diverse students, and at a fraction of the cost of four-year institutions. Donors were apparently not convinced.
Then a global pandemic hit. Suddenly, community colleges all over the country are seeing a surge in enrollment among the recently unemployed and students no longer interested in attending their four-year universities. At the same time, however, community colleges face significant declines in state funding. After withdrawing pre-COVID-19 promises of higher state support, California Gov. Gavin Newsom’s newly revised proposed budget for 2020-21 calls for a 10% cut in funding for the state’s community colleges.
“It’s a very unusual time,” said Walter J. Dillingham Jr., CFA managing director of endowments and foundations at Wilmington Trust. “This isn’t like the Great Recession. This is systemic; we closed the economy down.” Community colleges, Dillingham told me, will need to continue to build their fundraising and pivot to a stronger plan to expand their endowment funds.
Dillingham’s latest white paper, “Community College Foundations Revisited: The Importance of Building a Strategic Endowment Plan,” explores how institutions can build strategic endowment plans (SEP) to generate the kind of financial stability enjoyed by four-year institutions. It also shares insights gleaned from analyzing the fundraising operations of 191 community colleges in the Northeast. The findings, Dillingham said, can be applied to institutions all across the country.
“They Have to Ramp Up Fast”
Dillingham has spent the last 20 years working with small to midsize nonprofits. His last white paper on community colleges came out in 2013. At that time, schools were setting up foundations and endowments in response to Great Recession-era cuts from states and an encouraging influx of middle class students. One of the key themes of the white paper was the importance of creating and building an endowment rather than “just spending the money you raise,” Dillingham said.
In the last seven years, larger demographic trends have made life more difficult for community colleges and four-year institutions. There were simply few high school grads attending college, and community colleges saw enrollments drop accordingly.
Last year, I spoke with Carol Krumbach, the executive director of the Cerritos College Foundation, about why community colleges tend to lag behind their four-year counterparts on the fundraising front. For starters, many are playing catch-up in terms of building out the requisite fundraising architecture. These schools also lack a deep bench of affluent alumni.
Dillingham agreed. While community colleges ramped up their fundraising efforts considerably in recent years, they remain at a disadvantage simply because they started later. Prior to the Great Recession, community colleges didn’t have to depend on fundraising because they were sufficiently funded by state and federal governments, Dillingham noted. “Now, they have to ramp up fast.”
That said, it’s inaccurate to say that community colleges don’t have affluent alumni. Graduates often do just fine, including many who move on to four-year institutions. The problem, Dillingham said, is that these students often view themselves as alumni of the four-year institution rather than the community college. “It takes a special cultivation effort from fundraisers to remind them that they helped them take the next step,” he said.
A Strategic Endowment Plan: The Basics
A strategic endowment plan, which includes both investment and fundraising strategies, can insulate community colleges from future economic uncertainty. Let’s look at the two main components of an SEP.
The first is the foundation’s investment management strategy. A college’s SEP should lay out the growth expectations of the endowment/foundation and evaluate the endowment’s asset allocation; stakeholders should compare the endowment’s performance versus its peers and ensure the college is receiving value-add services from its advisor.
Investment committee members are famous for their enthusiasm surrounding a fund’s financial performance. But they’ll want to temper their expectations in the months and years ahead, Dillingham said. “The next decade of performance may not be as high in the market,” he said, “so it’s important to look beyond growth in performance and remain focused on successful and ongoing fundraising.”
The second component of the SEP is good, old-fashioned fundraising. This includes activities like planned giving, events, corporate giving, and additional giving options like donor-advised funds and IRA rollovers.
A foundation’s website is especially important. It should include “background information, case statement, board leadership, upcoming events, ways to give, testimonials, and also detail on how to give, as well as other important information about the foundation,” the report states.
As you’d expect, community colleges approach this fundraising piece from different vantage points. Buffalo’s Trocaire College started a $3 million capital campaign for a scholarship endowment, “Fund the Future of Western New York.” Fundraisers at Westchester Community College’s foundation focus on annual appeals, a scholarship program, special events, tribute gifts, special project gifts, leadership gifts and planned giving.
Meanwhile, a representative from Auburn, New York’s Cayuga County Community College Foundation, Inc. told Dillingham that the foundation’s growth will “depend more and more on alumni and friends” who name the foundation in their estate plans.
A Different Kind of Crisis
The issue of estate planning loomed large in our conversation. The pandemic has made donors introspective, Dillingham told me. “They’re concerned about their health and future and are updating their estate plans. People don’t normally want to talk about that, but it’s coming up a lot in conversations.
Dillingham’s point echoes other fundraisers across higher ed. In the early days of the pandemic, Jeffrey Wolfman, Fitchburg State University’s vice president for institutional advancement, told me that he saw a steady stream of inquires about estate planning and the language for a specific bequest in writing a will. “It seems that mortality is now top of mind for many people in a certain age group and with certain medical conditions,” he said.
The pandemic will also force community college development officers to embrace more “digital and virtual events in the short term,” Dillingham told me. “Even though 2019 was a banner year for fundraising, this year will be unpredictable,” he said.
Again, the closest analog community colleges have to draw from is the Great Recession. Enrollment spiked during that downturn, but as the economy improved, enrollments steadily declined every year since. COVID-19 potentially presents a different scenario. Thousands of college-age students will postpone attending a four-year university due to health concerns, rather than the economic upheaval of the last recession. College is also a lot more expensive than it was in 2008. At two-year public schools, tuition and fees are $3,730 for the 2019–2020 school year, according to the College Board, compared to $10,400 at in-state four-year public schools, most of which will conduct courses virtually or partially so this fall.
Community colleges can use this crisis as an opportunity to reverse the post-Great Recession dip in enrollment and roll out an SEP that incorporates the principles of investment management and fundraising.
“In order for community colleges to succeed,” Dillingham said, “they must continue to look at private philanthropy just as four-year traditional colleges have done for many years.”