Virginia Tech on a Fund-Raising Tear

Virginia Tech collected more than $162 million in donations and commitments in the last fiscal year, blowing through its previous record of $101.45 million. Almost 35,000 donors, up from 32,000 the previous year, gave money, reports the Roanoke Times. The money will help the Virginia Tech Foundation meet its goal of growing its endowment to $1.6 billion in the coming years. The endowment at the end of the fiscal year was $843 million.

“We asked our alumni and friends to help Virginia Tech have a bigger impact on the world. Their response makes it possible for us to grow as a global university, launch new programs, serve more students and communities, and create productive environments for learning and research,” Tech President Timothy Sands said in a written statement.

Bacon’s bottom line: I’m of mixed minds. On the one hand, state support is inconsistent. Given past history, Virginia Tech has every reason to fear future cuts. No one can blame the university for trying to buffer itself from budgetary vagaries. Further, I’ll say that Tech has done a better job than Virginia’s other research universities of restraining its tuition increases. I’m not sure how Tech did it, but the university has managed to grow its research base without shifting costs to students as sharply as peer institutions have done. Finally, plowing money into Tech augments its ability to function as an economic-development engine for Southwest Virginia.

On the other hand, building big, fat endowments shifts power within the university to the school administration by insulating the feudal empire of presidents, deans, deanlets, provosts, assistant provosts, and associate assistant provosts from market forces (collecting tuition from students), oversight (the General Assembly), and even the faculty. As Benjamin Ginsberg argues in his 2011 book, “The Fall of the Faculty,” big endowments free the administrative bureaucracy to pursue its own inward-looking agenda, which creates little value for anyone but the administrators themselves.

“Fund-raising represents a more attractive income source than tuition,” Ginsberg writes.

To administrators anxious to generate new revenues, an increased emphasis on fund-raising usually seems a far more attractive strategy than seeking additional tuition dollars. Fund-raising is almost entirely under the control of the administration and requires minimal, if any, faculty involvement. …

Today, thanks to schools’ major emphasis on development, gifts to colleges and universities total about 40 percent of their tuition income. … The larger the endowment, the greater the power and independence of the school’s administration. Perhaps this notion helps to explain why many schools — particularly the wealthiest — hoard the earnings from their endowments, reinvesting a large fraction of their annual endowment income so that their endowment and future income will grow.

I’m not suggesting that the critique necessarily applies to Virginia Tech, which has a relatively modest endowment — but it might. Ginsberg describes a behavioral trope common to the richest institutions that must be guarded against. College development officers are wizards at cultivating a sense of tribal loyalty among alumni (football, basketball, reunions, pageantry, rah! rah! sis-boom-bah!) and crafting sales pitches to maximize giving. Alumni are ripe for the picking, for they typically have no source of information other than what administrators spoon feed them.

A humble proposal: Someone should publish a “Virginia Tech Alumni Donor’s Guide” (and like publications for other institutions) which compiles a wide array of data regarding institutional performance. This series of guides would include data available through the State Council of Higher Education for Virginia (SCHEV) website and other sources documenting, just for starters, the history of tuition increases, student fees, student indebtedness, administrative staff ratios, faculty ratios (tenured-track versus instructors and adjunct faculty) and various financial indicators. One set of indicators would describe how the university is administering its endowment. What percentage of income is spent on programs, and what percentage is reinvested to grow the endowment?

Perhaps an organization such as Partners 4 Educational Excellence @ EDU,  a sponsor of this blog, would find value in such an exercise. Just a thought, guys!

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11 responses to “Virginia Tech on a Fund-Raising Tear

  1. Lord – has this horse been beat to a bloody pulp! it’s like a zombie that the stake through the heart has missed – over and over!

    so let me offer a modest counter proposal to the “let us see your finances so we can better understand and then get the government to dictate what to charge for tuition and “control costs” proposal… which is not exactly a “conservative or libertarian” idea.

    Seems to me that the fact that the govt contributes money towards higher ed but it does not result in satisfactory costs – and then it leads to all kinds of bad “solutions” and what I offer is one where the State and taxpayers do their duty as much as they can afford , but leave it up to purchasers of higher ed to influence prices in a more supply/demand economic environment than having the government doing deciding. What a NOVEL idea in a blog that claims to be “libertarian”! 😉

    Make Higher Ed work more like K-12 funding where the state taxpayers come up with as much money it can afford – and that can vary – then it allocates whatever that amount is to schools based on actual numbers of students – AND is “means tested”

    do this for higher Ed.. slightly modified:

    whatever the state can afford – per budget cycle – allocate it to higher ed on a per student basis… a voucher per student – means tested – and let the student decide where they want to spend their voucher based on their own decision about what they can afford with the voucher.

    If they want “more” then they can add their own money from their parents or from a loan to buy “more”… and if Colleges can offer a basic degree for the cost of a voucher -then GREAT! If not, let the student/parents decide.

    That voucher will NOT pay for room & board nor anything else except for tuition and mandatory fees for things the student must have.

    Get out of the business of people expecting the colleges to provide all inclusive tuition and room and board in exchange for whatever the state can afford …

    get out of the business of some folks asking the state to provide more and/or to get directly involved in decisions about how colleges spend money or charge for tuition – which is – if you think about it -really a call for taxpayers to pay more OR for the govt to dictate prices.. and this is coming from folks who claim to be conservatives and “libertarians”.

    How about it?

    • “Let me offer a modest counter proposal to the “let us see your finances so we can better understand and then get the government to dictate what to charge for tuition and “control costs” proposal… “

      I don’t recall anyone suggesting that government should “dictate what to charge for tuition” and or to control costs.

      I’ve called for more transparency about tuition and costs, but I’ve never suggested that the state should dictate anything. Perhaps you are referring to someone else. Who might that be?

  2. well.. I simply do not believe that once the information is obtained it won’t lead to efforts to get the govt more involved.. and you see that not only in the comments but legislators like Chap Petersen – and others who say they want “controls” as if such controls don’t come from the govt..

    We need to find an approach that allows customers to decide what is too expensive or what they can afford – and not having the govt or others decide that – you don’t need more insight into the internal finances to do that ..

    this would be like having Walmart customers look past the price and into how Walmart does business to “decide” if the price is “right”.

    no self respecting Conservative should want that much less a self-proclaimed Libertarian and I’m shocked – SHOCKED to hear folks say “all we want to do is see your finances”… claim that that’s all they want.. “just to know”.. That’s grade A bullfeathers!

  3. Bacon, I’m at a loss to see what you are even writing about, except to report that Tech is being successful. My response to that is, great. I see no evidence that the donors are uniformed, misinformed or being defrauded. There is no shortage of info available, although much of it is propaganda. Big donors and even small ones can also designate the funds for particular purposes if they wish.

    I on the other hand fully recall suggesting that government should exercise more oversight on tuition and fees, and I am comfortable saying that the endowment at the school should be part of that discussion. These schools are state agencies, with taxpayers owning many of their buildings and ground outright as well as providing annual funding.

    • I think that’s bad policy….if states get to set tuition and fees based on endowments, what’s the point of private donors ever giving?

      What nobody on this blog ever wants to acknowledge is that the vast majority of grads at VPI, U.Va., and W&M end up leading successful lives. Yes, you may know a couple of anecdotes that didn’t end up too well. But the data doesn’t lie. And reams of it leads to the conclusion that all 3 schools do a very good job at producing productive citizens who go on to lead good lives.

      So why does the blog’s author and 4 or 5 commenters keep harping on this? If there was a true problem, you would see alums of these schools at the General Assembly complaining. Instead, all 3 have extraordinarily high alumni giving rates. As I posted this Spring, a Republican member of the General Assembly told me that he received almost zero calls about tuition. It’s simply not a real issue. Sure, anyone can sponsor a poll and people will have an opinion. But actual constituents calling the General Assembly about it? Just doesn’t happen very often. If it was a real issue, we’d see the alums of these schools in Richmond marching on the Assembly and bringing up problems. That just doesn’t exist. Instead the alums are giving 100s of millions of dollars in voluntary gifts every year to the schools.

      • I don’t think the level of endowment should dictate tuition, etc – but I do think it should matter whether the endowment is being used or merely allowed to compile interest and cobwebs. If the school has a large endowment it never spends, that ought to be a considered. I think some pressure should be applied to prevent that.

        Sure the past grads are doing great. But the current grads are coming out with debt, and the current tuition trends should be a concern for everyone.

  4. “I’m not sure how Tech did it, but the university has managed to grow its research base without shifting costs to students as sharply as peer institutions have done.”

    According to the most recent year available on the National Science Foundation website, Virginia Tech funded $219M of its research total with “Institutional” (not external) funds in 2015. I’ve argued before on this blog and won’t go into detail again that a significant percentage of this very likely originates with tuition as there are no other discretionary sources of funds available to the university that could contain that amount of money.

  5. So why not go for complete transparency and require that, in addition to the schools- disclosure of their costs, all applicants for financial aid, like candidates for President, be required to divulge their prior five years’ tax returns to the public?

  6. I think we are still waiting for one year from the current occupant. 🙂

  7. Well, Trump didn’t have to divulge his tax returns either to get financial aid from the Russians . . .

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