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Business Officer Magazine

Insights: John Lippincott on the Future of Giving

John Lippincott, president of the Council for Advancement and Support of Education, discusses current fundraising challenges and giving trends changed by the recession.

By Craig Bazzani

*Like a number of his grade school classmates, John Lippincott wanted to become a fireman when he grew up. How he wound up in his current role as president of the Council for Advancement and Support of Education (CASE) entailed “a circuitous route”—one Lippincott says began in college where he “became drawn to the noble purposes of higher education.” Even today institutional advancement remains something of a hidden profession that many happen upon, often as students or in volunteer roles with their alma maters, he says. In this interview, Lippincott discusses fundraising challenges and new giving trends that are emerging as a result of the recession.

For more of this conversation and a list of CASE resources, go to "The Case for Institutional Advancement" in Business Officer Plus.

How has this recession in particular affected giving to colleges and universities?

For starters, it has been historic in its dimensions and in its impact on fundraising for higher education and other charitable sectors. If you look at giving to higher education over the past 20 years, it was growing an average of 7 percent per year. For the fiscal year that ended June 30, 2009, giving declined nearly 12 percent. We're talking about a nearly 20 percent swing against what was the normal pattern of growth in giving. To put that in perspective, in the two previous recessions, the declines were less than 4 percent.

As we begin to experience some evidence of recovery in the overall economy, do you foresee a return anytime soon to prerecession giving?

We are predicting modest growth in FY10 and in calendar year 2010 compared to the previous 12-month periods, but it won't be at that 7 percent level. I think it's going to take at least three years to get back to the giving levels we enjoyed before the recession, and that's without adjusting for inflation.

Is the current type of giving similar to what we've experienced historically? Or, if people are tightening their hold on their philanthropic dollars, would you expect to see more deferred gifts, for instance?

In the advancement field we are facing a new normal that will favor certain sources and types of giving and gifts. The area that I believe shows the greatest promise in this environment is deferred giving or planned giving, because of the obvious benefit to the donor of providing some sense of financial security for the long run and because of the tax advantages provided to the donor.

I also think we will be as reliant, or more reliant, on the individual donor. I don't foresee a significant uptick in corporate giving, and foundation giving is likely to decline in the near term since the payout for most foundations is based on a 12-month rolling average of the value of their endowments.

We're all aware that the baby boomers are soon set to exit the workforce in large numbers. While on the one hand they are considered to have a strong philanthropic mind-set, they're also the group whose postretirement plans have probably been most affected by this recession. How will their behavior likely play out in terms of giving patterns and levels?

The sheer size of the boomer generation makes them enormously important in terms of fundraising potential. Many are entering their prime giving years, since most people tend to provide their largest gifts during their 60s. There is also evidence that the boomers are inclined to be generous, especially toward higher education. And many boomers are currently experiencing the transfer of wealth from their parents. Those are the upsides, for which there is reason to be optimistic.

And yet, the impact of the economic downturn provides a mixed picture with regard to the boomers. Many of them have recently retired or soon will. As they've watched their hard-earned investments take a beating, they may be more reluctant to make any major commitments until their portfolios recover. Any other significant shock to the system such as a double-dip recession would make it all the more difficult for individuals to regain their confidence and willingness to make sizable gifts.

There are other cautionary notes. Among them are several developments on Capitol Hill that could jeopardize that strong tradition of giving among boomers, including an effort that has surfaced several times to place a cap on the tax deductions they can take for charitable donations. If this passes, it could depress or at least curb the incentive for boomers to give. There is also enormous uncertainty right now regarding the estate tax, which will jump from zero this year back to pre-2001 levels of 55 percent next year. That will certainly influence decisions about bequests to alma maters.

The area that I believe shows the greatest promise in this environment is deferred giving or planned giving, because of the obvious benefit to the donor of providing some sense of financial security for the long run and because of the tax advantages provided to the donor.

Over the years, it seems that many public institutions have been slow to engage a fundraising model that views private dollars as a building block in terms of their diversity of funding sources. Are large publics in particular going to have to place greater emphasis on philanthropy going forward?

There is no question that public and private institutions alike will need to view philanthropy with far greater interest. Having said that, let me add that fundraising should not be viewed as a substitute for state funding. Most gifts received by colleges and universities are restricted and can't be used to plug holes in the operating budgets left by state budget cuts. That's why some, what I would call enlightened, state legislatures are not allowed to take private giving to public institutions into account in their funding decisions.

Most donors give based on what they feel passionately about, and they want their gifts to make a lasting difference. They are not interested in contributing to an institution whose future may be unclear because of uncertainties about state funding. Public institutions must work very hard to make a strong case for state support, which in turn can help leverage private funding and bring added benefit to the state's taxpayers.

Five years ago, hardly anyone in higher education would have expected the large spike that has since occurred everywhere in tuition. Whether in the process of normal development activities or in the midst of capital campaigns or other special fundraising campaigns, how can we approach supporting traditional academic areas in ways that also account for an increased need to raise money for scholarships?

Our most recent annual survey on fundraising campaigns demonstrates a shift on the part of donors away from capital projects toward student scholarship funding as a preferred purpose of their giving. So we are already seeing that pattern emerge, and I think this will continue to trend upward. What that suggests is that as institutions contemplate campaigns, they may want to consider a very targeted campaign, perhaps with a shorter time frame and a more modest goal, though clearly focused on raising money for student scholarships. Donors understand that need, and they can see the real and immediate impact of their gifts when they give to student scholarships.

This may be one area where explaining the need for this kind of generation-to-generation support would resonate with alumni in particular.

Exactly. And I think this is a place where you can tap into some strong sentiment on the part of the baby boomers, who from their own experience recognize the value of helping students realize their dreams of a college education. There is another benefit for institutions to consider these more targeted or narrowly focused campaigns, and that is that it takes the emphasis off the huge dollar figures that have characterized some of the mega campaigns we've seen. I am not suggesting that campaigns should not be ambitious, but for the purpose of public dialogue, targeted efforts shift the emphasis to a discussion of the number of students helped versus the number of dollars raised. I think it's important that in this economic environment we as a community talk about the enormous impact of giving in those new terms.

On that point, what do you see emerging as a trend in gifts directed toward permanent endowment versus current use?

I think it's understandable that some donors are skittish right now about gifts to endowments. A donor, who may have created an endowment three years ago, may now be looking at a fund for which the value is less than the original gift. So, I think we will see a greater receptivity on the part of donors to current-use gifts than we've seen in the past. That said, I would urge that neither donors nor institutions give up on endowments and on the long-term value they provide. While many of us took hits to our retirement savings recently, we continued to invest in those accounts. As with a well-managed retirement account, a well-managed endowment would have produced impressive returns over the past six months.

When many of us who are chief financial officers began our careers, fundraising and advancement were not areas of concentration within the traditional business office. What should be our understanding going forward?

I would underscore the fact that we're all in this together. These are challenging times for our institutions, and like the CFO, advancement officers are deeply committed to helping their institutions succeed. Like the CFO, they see their efforts as contributing directly and indirectly in vital and strategic ways to the university's ability to fulfill its mission and achieve its vision.

CRAIG BAZZANI is senior advisor to the president, University of Illinois Foundation, Urbana, and a former chair of the NACUBO Board of Directors.