In the spring of 2002 a small debate roiled within the University over an unlikely topic – the school’s “graphic identity” was at stake.
At the time, the University had four official images; Donald Duck, the interlocking “UO,” the University’s seal and what was then known as the Nike “O.” When the administration announced that the University would make the now ubiquitous “O,” designed in 1999 for the Athletics Department by Nike, Inc., the official logo the reaction on campus was strong.
At University Senate, members of the law school faculty protested replacing the University’s traditional seal with a corporate logo and student leaders said the move would only further the perception that the University was beholden to the whims of private donors such as Nike.
The incident underscored the growing pains of a developing relationship between private donors and a public institution lacking in state funds.
Just over two decades ago, in 1985, 33 percent of the University’s funding came from the state appropriations, 22 percent of funding was from students and 19 percent was from private donors. Funds collected through state property taxes were allocated to build classrooms, underwrite maintenance and fund professors’ salaries.
Today, that equation has reversed dramatically. According to the most recent data available, the University now receives less than 14 percent of its funding from the state, while students now fork over more than 33 percent of the University’s budget
and private sources give an estimated 29 percent.
As state funding for higher education has dwindled both at home, in Oregon and on a national scale, public institutions like the University have supplemented shrinking budgets with gifts from private donors and grants from corporate entities in order to make ends meet. The University is currently more than two thirds of the way through a $600 million philanthropic campaign.
As private gifts and grants have grown and schools have become more dependent on them, it seems appropriate to ask: What happened to state funding of public higher education, and what impact does private funding have on public institutions?
The answers are not simple.
The road to privatization paved by public action
In the short run, the economic downturn after Sept. 11, 2001 had a significant impact on state resources across the nation, causing states to cut back on funding of higher education, said Rae Goldsmith, vice president of communications for the Washington, D.C.-based Council for Advancement and Support of Education.
Though states rebounded and eventually increased investments in education, public higher education was forced to make up for past cuts and keep up with continuing increases in operating costs, Goldsmith said.
“They aren’t catching up,” she said.
In Oregon, the economic problems in the first decade of the 21st century were compounded by a series of major decreases in public funding throughout the last decade of the 20th century, University spokesman Phil Weiler said. The shift toward increased private gifts at the University was first prompted by ballot measures in the ’90s that capped and reduced the property taxes the state could collect.
In 1990 Oregonians passed Measure 5, which established state constitutional limits on Oregon’s real estate property taxes. Property taxes dedicated for funding schools were capped at $15.00 per $1,000 of assessed value, and gradually lowered to $5.
State appropriations to the University dropped from $63,268,735, comprising 31 percent of the total University budget, to $43,970,201, or 15 percent of the University’s
total budget, by 1996.
Measure 50, passed in 1997 lowered property taxes even further. The results were devastating, said Michael Leachman, a policy analyst with the Oregon Center for Public Policy, a private non-political think tank.
Other big-ticket state budget expenditures, like K-12 schools, corrections or medical services have significant political support and are well insulated from state budget cuts because their allocations are often matched by federal funds.
“There are big parts of the budget that are hard to cut,” Leachman said. “Higher education is a likely target – it’s what’s left – because you can raise tuition, and some students suddenly can’t go, but you still have a program.”
A growing base of donors
As state budgets have shrunk and allocations for public universities have dried up, institutions have increased tuition and increased their efforts to court private donors.
“Public institutions are becoming much more aggressive,” said Goldsmith, whose organization monitors higher education on a national level. A ten year study by the council found that public higher education institutions had experienced a 96 percent increase in support from private funds while private institutions experienced only a 53 percent increase.
Nevertheless, Goldsmith said public universities have found varying degrees of success in a realm of fundraising once dominated solely by private institutions, but universally they are approaching private donors more than ever before.
This can pose challenges for public institutions, Associate Vice President for Development, Shane Giese, said.
“The perception of the public is that if you’re a public institution all your needs should be met by the state and the federal government,” he said. “Nationally, public institutions are out there making the case that it takes private funds to have to programs of excellence.”
The donations are a supplement, not a replacement, for state financial support, Giese said. Funding from private donors rarely supports the day-to-day operations of an institution, Goldsmith agreed.
“The challenge is that you really can’t replace public funds with private funds because they are often directed,” she said.
Donors can, and often do, include specifications for how their money is spent, who it helps and what programs it will benefit, Giese said.
Those requests are rarely uniform and often neglect important needs of the University, Giese said
“People want to donate to create a professorship, to building a building or endow a department – something concrete,” he said. “There are just basic services that the state still needs to support.”
The foundation allows donors to make certain specifics about how their donations are used, but Giese said that there are limits and specific boundaries in place.
At the University, an independent and nonprofit corporation – the University of Oregon Foundation – is responsible for “administering the thousands of private gifts donated annually,” according to the organization’s Web site. That means sifting through hundreds of thousands of dollars worth of donations that range from $10 checks, to parcels of land and million dollar gifts, Giese said.
Long-term philanthropic fundraising programs like the foundation’s Campaign Oregon initiative have raised more than $431 million in gifts during the past five years, but despite the impressive intake, very little of it goes directly to the University, he said. Much of it is given as endowments, so the money is invested and slowly dispersed at the rate of 4 or 5 percent a year.
The gifts have greatly supplemented certain inadequacies in state funding: When University President Dave Frohnmayer received a pay raise during the summer of 2006, increasing his annual salary to $445,433, the bonus came from the UO
Foundation, which provides Frohnmayer with a supplement each year. This supplement increased from $158,333 to $224,555, according to documents filed with the state board. The other half of his salary comes from state funding.
At Oregon State University, the university president also received a pay increase to from its private OSU Foundation, raising his total salary to $340,000.
Problems at the source
Public institutions’ dependence
upon large sums from private donors is not without problems. Although it is rare, Goldsmith said sometimes private funds can create very public and embarrassing situations.
In August, officials at Clemson University in South Carolina objected when the International Herald Tribune reported that finalists for two new endowed university positions donated by BMW, among the most well endowed chairs at the institution, were required to be interviewed by BMW executives. The auto manufacturer, which has a major plant in the state, gave $5 million for each position.
Sometimes the funding can come from dubious sources that can tarnish a gift.
Former Enron Chairman Kenneth Lay, who was found guilty of 10 of 11 counts of securities fraud and related charges in 2006, gave millions of dollars for named professorships to Rice University and the University of Houston.
Peregrine System Chairman John J. Moores gave $51.4 million to the University of Houston. His company, which declared bankruptcy in Sept. 2002, came under scrutiny by the U.S. Securities and Exchange Commission and was named in several class-action lawsuits claiming fraudulent accounting practices were used to inflate the company’s stocks.
At the University of Oregon, Grayson Hall, the former law school, was renamed as McKenzie Hall in 2001 after alumni and donor Jeff Grayson, head of investment firm Capital Consultants, was indicted by a grand jury and charged with 22 counts of mail fraud, conspiracy, money laundering, witness tampering and making illegal payoffs to a former union pension fund trustee. In the end, the UO Foundation gave back the $850,000 it received of the $1.5 million Grayson had pledged.
The result is that universities, both public and private, are becoming more restrictive of private donors, Goldsmith said.
“They’re being much more formal. Institutions are starting to build in clauses to contracts with donors,” she said. “It’s kind of like a pre-nuptial agreement where you want to be careful and specific, but you don’t want to be too specific and be offensive.”
That’s because private donors, especially high-profile ones, can also be fickle and temperamental, eschewing a donation for any number of reasons.
The University’s preeminent philanthropist, former Nike CEO and co-founder Phil Knight, whose large gifts have left his name emblazoned on the Knight Library and the Knight Law Center, pulled his support from the University after it joined the Worker Rights Consortium in 2000. The organization that monitors the rights of workers who produce goods for colleges and universities was critical of Nike’s business practices. The University later left the WRC, restoring its relationship with Knight in 2002.
In June, Oracle Corporation CEO Larry Ellison abandoned a planned $115 million gift to Harvard University to create a global health institute at the university, instead giving the funds to his private medical foundation. Harvard was left without their program.
Goldsmith said that ultimately, private funding from individual and prominent donors can be a great benefit to universities, so long as they are careful.
“At any time institutions are cultivating dozens and dozens of donors,” she said. “The problem arises when they put all their eggs in one basket.”
More cuts possible
This fall, state funding is up for additional changes, Leachman said. Measure 48 proposes that state spending for public services in a two-year period cannot exceed the amount spent in the previous two-year period, excluding corrections for inflation and population growth, according to the Oregon Secretary of State’s elections guide.
Leachman said that Measure 48 is modeled closely on a bill passed in Colorado known as “the taxpayer bill of rights” or TABOR. Since that bill passed five years ago, the Colorado public universities faired poorly, he said.
“The heart of what Colorado’s TABOR bill is all about is in Oregon’s measure,” he said. “If you want to know what the impact of Measure 48 is you can talk to the people at the University of Colorado. It quickly became very clear that the bill was undermining their ability to secure any public funds.
“This is really major,” he said, emphasizing that the measure would modify the state constitution making it much harder to revoke than the TABOR bill, which voters suspended five years after it was enacted.
Weiler also said that when Oregonians vote on Measure 48 this fall, they could drastically impact the state funding for the University.
“If these pass, I think it will really impact students,” Weiler said. “This is an issue that has direct consequences.”
Contact the news editor at [email protected]
On whose dime?
Daily Emerald
September 16, 2006
0
More to Discover