A Fortunate Spike in Higher Ed Giving, Plus Five Other Takeaways from the Last Fiscal Year

Yale university. Winston Tan/shutterstock

For those of us who study trends in higher ed fundraising, Christmas comes in February when the Council for Advancement and Support of Education publishes key findings from its Voluntary Support of Education (VSE) survey. The annual study looks at how much universities raised the previous fiscal year, where the support is coming from, how funders earmarked the money and other valuable metrics. It’s the go-to source for those looking to diagnose the philanthropic health of the sector.

The big takeaway from the 2021 report was how fundraisers deftly navigated an opportune window of stock market growth and low inflation. So the big question for the last fiscal year (beginning July 1, 2021 and ending June 30, 2022) was whether that opening would continue or slam shut.

CASE just published its findings, and while we know now that the economy took a downward turn, the timing worked out well for fundraisers. According to the VSE survey, voluntary support of U.S. higher education institutions totaled $59.5 billion — a 12.5% increase over the previous fiscal year. Kaplan attributed this to the fact that donors made their end-of-year gifts in 2021 just as the stock market was peaking. “Most large gifts are made at the end of the calendar year, which is midway through the fiscal year, and the stock market was through the roof at the end of December 2021,” she told me.

The market began to cool off in 2022, but the diminished performance across the second half of the fiscal year (January to June) had a minimal impact on the aggregate returns since donors already dug deep during what Kaplan called “the prime giving months” of November and December 2021. Fundraisers couldn’t have drawn it up any better.

There’s a catch — there usually is — and it’s that the markets haven’t rebounded to December 2021 levels, which suggests we shouldn’t expect another record windfall in next year’s report. If anything, we should cautiously brace ourselves for a year-over-year decline. Meanwhile, data in the latest report also suggests that certain reliable — although not necessarily welcome — giving trends were back in full force after some irregularity.

Time will tell how it all plays out, but until then, here are five key takeaways from the CASE report for the most recent fiscal year.

The markets peaked at the ideal time

At the beginning of 2021, the Dow Jones Industrial Average (DJIA) was 30,627. On December 31, just after universities made their big end-of-the-year fundraising pushes, the average was 36,338 — an 18.6% increase over January. The NASDAQ Composite, New York Stock Exchange Composite and Standard & Poor’s 500 rose 20.7%, 17.6% and 26.6%, respectively, during the same time period.

The stars had aligned, creating optimal conditions for savvy, affluent donors to sell high. “If somebody is poised to make a gift or donate stock, they’re going to do it when the stock is worth more so the tax advantage is strong,” Kaplan said.

But as 2021 turned into 2022, the markets began to drop. By June 30, 2022 — the end of the fiscal year — the DJIA was down 15% from the end of the previous year. Fortunately for fundraisers, most donors don’t make big gifts during the second half of the fiscal year (January to June). Instead, Kaplan said, “they think in calendar terms.”

Individuals continue to lead the way 

Of the $59.5 billion raised by universities in the data set, 61.3% came from organizations, which includes foundations, corporations and DAFs; followed by alumni (22.7%) and non-alumni individuals (16%). Giving from all sources increased year-over-year.

The report placed foundations — including family foundations — and DAFs under the “organizations” category because, legally speaking, the money flows from a 501(c)(3) financial services firm or community foundation instead of an individual’s checking account. That said, many family foundations and noncorporate DAFs are basically proxies for individual giving. Given these considerations, Kaplan said that individuals’ collective support for institutions is considerably higher than the combined 38.7% of giving from alumni and non-alumni individuals.

Restricted giving is “leveling off to the norm”

After some blips in the data, the latest release reaffirms the overwhelming preference among higher education donors to make restricted gifts. The survey said the increase in giving “was concentrated in restricted endowment gifts, followed by restricted gifts for current operations. These are the two most common purposes to which donors direct their gifts.”

When it comes to restricted endowment gifts, funders’ top five priority areas were student financial aid (40% of support), “other restricted purposes” (20.3%), academic divisions (15.7%), faculty and staff compensation (14.9%) and research (5.7%). As for current operations gifts, funders prioritized research (29.9% of support), “other restricted purposes” (27.1%), academic divisions (21.7%), student financial aid (10.3%) and athletics (8.4%).

Funders’ penchant for restricting giving is the least surprising finding in the survey. As our white paper on higher ed giving notes, the sector’s dominant funding strategy is restricted support, citing the TIAA Institute, which classified 7% of dollars donated to higher education from 1988 to 2018 as unrestricted. Kaplan said CASE puts that figure at 6.3%. “Unrestricted gifts are a very small slice of the pie, and they always have been,” she said. “A lot of entities make unrestricted gifts, but they’re not big because once you get to a certain level, donors probably have an interest in a specific outcome.”

Last year’s CASE survey cited a 30% increase in unrestricted gifts, suggesting that a paradigm shift could be in the works. However, a closer look at the data attributed the figure to — you guessed it — MacKenzie Scott. As for the most recent fiscal year, Kaplan said, “there was a decline in unrestricted gifts this year, but that appears to be a leveling off to the norm.”

Giving for property, buildings and equipment surged

Last year’s report found a 1.1% decrease over the previous fiscal year for property, buildings and equipment. This suggested that universities’ remote or hybrid arrangements and urgent financial aid needs compelled funders to deprioritize “shovel-ready” gifts.

In some of the most startling statistics in the report, Kaplan told me that among the 781 institutions that replied to the survey for two consecutive years, new gifts for property, buildings and equipment rose 32.4% in 2022. Thirty-eight institutions raised over 1,000% more in 2022 versus the previous year.

Kaplan said while it was plausible that the sector is reverting back to its pre-pandemic footing, it would be inaccurate to imagine universities going on a vast, donor-fueled building boom, since the category includes assets like land, scientific equipment and pharmaceuticals. “We don’t ask for that kind of breakdown, so we’re not sure how much of it is brick and mortar,” she said. Nonetheless, the larger takeaway still stands. With the pandemic receding, universities raised more money earmarked for property, buildings and equipment over the previous year at an impressive clip.

Navigating ebbs and flows

Next year’s report will look at the fiscal year July 1, 2022 to June 30, 2023, so I was curious to see where the Dow stood at the end of 2022. At the time of this writing, with four months left in the fiscal year, the Dow is down approximately 12% over December 31, 2021. 

In other words, we shouldn’t be surprised if next year’s report finds that fundraisers raised less money over the previous fiscal year. “People give from a position of wealth,” Kaplan said. “How I’m feeling in terms of my wealth, either logically or psychologically, affects how I give.”

Ultimately, Kaplan encouraged fundraisers to avoid getting caught up in the market’s short-term ebbs and flows and instead think in five-year increments. “The reports captured events that happen in a specific economic environment that advancement officers can’t control,” she said. “You just have to keep forging positive relationships with individuals and organizations that might support your institution so when the timing is right, you’ve already laid the groundwork.”