The Gift of Giving: Philanthropy in US Higher Education

bridges vol. 36, December 2012 / Feature Articles

By Ursula Brustmann

Generous giving to universities has a long tradition in the US. Donations by alumni and donors boost university resources significantly, in some cases up to 30% of their total budgets. Philanthropy is both an integral part of the US higher education system and a thriving industry in itself, with a spectrum ranging from academic research on philanthropy to for-profit philanthropy consulting companies. In Austria, where most universities only recently began to develop stronger relationships with their alumni and with donors, the US philanthropic culture represents an interesting case study from which lessons can be learned. Despite the fact that some framework conditions such as tax or legal regulations are different, it is worth looking in particular at the history of US higher education philanthropy to better understand what it takes to create a culture of giving.

In the US, the very roots of higher education are linked closely to philanthropy: People like Johns Hopkins in Baltimore, Leland and Jane Stanford in Palo Alto, and John D. Rockefeller in Chicago were all famous university founders and invested a considerable part of their fortunes in educational institutions. Rockefeller, for example, committed $600,000 to founding the new University of Chicago, a gift worth some $14.6 million in today's currency. Harvard, the oldest university in the US, was named after the College's first supporter, John Harvard of Charlestown, who left his library and half of his estate to the institution.

philanthropist small

Today, funding for US universities comes from a variety of sources. Private universities get their money from their endowments, which they own, and tuition fees as well as philanthropic sources. State universities obtain portions of their funds from the state in which they are located. Both private and state universities compete for federal funding intended for research and development. An overview is available on the Web site, the National Science Foundation's (NSF) grants management system. Universities also collect revenue from commercializing their academic research: For fiscal year 2011, those earnings totaled more than $1.8 billion. More information can be found in The Chronicle's article: Universities Report $1.8-Billion in Earnings on Inventions in 2011.

Philanthropy plays a significant role in the money mix. According to the Voluntary Support of Education (VSE) survey, published annually by the Council for Aid to Education (CAE), more than 30 billion US dollars were donated to US institutions of higher education in 2011. However, most of the money raised goes to a small number of institutions: Of all the universities and colleges in the survey, the top 25% raised 86.3% of the overall sum of $30.3 billion in 2011; the next 25% raised 9.2%, the third 25% raised 3.5%, whereas the bottom 25% raised only 1.0% (see Figure below).

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"American Higher Education is built on philanthropy," states Michael J. Worth, professor of Nonprofit Management, Trachtenberg School of Public Policy and Public Administration, George Washington University. He is principal of Michael J. Worth & Associates, a company that provides fund-raising consulting. Worth confirms the survey's findings, adding, "American universities raise huge amounts of money, but it's very concentrated. There are some four thousand institutions in the country, but the vast majority doesn't receive significant philanthropy. It is very concentrated in the big universities and the prestigious colleges with long traditions and an established tradition of giving."

So what does it take to establish such a "tradition of giving"? The short answer is: commitment. Rick Sherman, who serves as chief advancement officer at the Carnegie Institution for Science in Washington, DC, recognizes vast differences between most European countries and the US attitude towards giving to universities. "The thought of 'I want to give back' is just not part of the thinking of, say, a successful graduate of a [European] university. Whereas in the US, many people feel that if they have been successful and make a lot of money, they want to give back to the university."

For US universities that do not have that long-standing tradition of philanthropy, raising money and establishing a culture of giving can prove to be challenging. Patricia G. Wang, director of Gift Planning & Estate Administration at the University of Maryland (UMD), states that "one of the most important financial achievements with regard to the UMD is that we have moved from a 'state-supported' institution of many decades ago to the 'state-assisted' higher education institution it is today. In the mid 1980s, state funds represented approximately 35% of the university's budget, whereas the current proportion is closer to 18%. Philanthropy has made a huge difference in bridging the gap, however, due to successful change or cultural shift over time."

Patricia Wang explains how this cultural shift took place: "Because we are a public state university, for many years citizens of the State of Maryland and even many alumni and friends of UMD believed they were 'supporting the university' by paying state taxes alone. So, in their minds, there was no case for philanthropic giving."

Fast facts: University of Maryland

founded in 1856

Sources of Funds for FY 2012:

  • Research and Grants 45%
  • Clinical (Patient) Care 22%
  • State Funds 18%
  • Tuition & Fees 11%
  • Auxiliary Fees 4%

Total: $1 billion

Total Employees: 7,652

[Source: UMD at a Glance]

Total students on campus Fall 2010: 37,595

[Source: UMD College Park Portrait]

In the 1990s recession, UMD – like many other universities in the US – was impacted negatively through mandatory reductions to their general operating budget. The university was challenged to communicate its plight effectively to the general public as well as to its constituents, who had the financial capability to assist the institution through private gifts. All of this came to a standstill when then-President Kirwan left the university and cited the State Legislature's lack of financial support for the campus as one of his reasons for leaving. The Board of Visitors of UMD stormed Annapolis (capital of the US State of Maryland) and advocated for the University. Patricia Wang recalls: "It was the first time the university realized that our constituents were willing to go to bat for the university. Under immense public pressure from alumni and friends, the State awarded the university one-time supplemental funding. We also completed our first campaign – Bold Vision Bright Future – and successfully raised $475 million toward a $350 million goal."

In the late 1990s, former President C. D. Mote Jr. joined the university. His saying, "If you want to be a great university, start acting like a great university," dramatically twisted the fate of UMD. Patricia Wang remembers the advice of the president "to begin looking at UMD's academic aspirational peer institutions, such as Berkeley, Michigan, UNC, etc. and see what types of things they are doing and who is giving them private gifts. Then figure out how to emulate those programs at Maryland and get the same funders to fund Maryland." President Mote was also a great advocate for merit-based scholarships to attract and retain the best students to MD; this in turn would attract great faculty for research and teaching, which in turn would generate faculty research grants, etc. Patricia Wang sums up the successful change management: "People began to see the domino-effect nature of how a university operates."

Brief History of Philanthropy in Higher Education

Terms & Definitions: Philanthropy versus Fundraising

"Philanthropy concentrates on giving from the perspective of donors, while fund raising concentrates on managing donor relationships from the perspective of receiving organizations."

Source: Kathleen S. Kelly, "The State of Fund-Raising Theory and Research" in: Michael Worth, New Strategies for Educational Fundraising. 2002

In Chapter 3 of the highly informative book New Strategies for Educational Fundraising by Michael Worth, one can browse through the striking history of philanthropy in higher education. The first known action in raising money for higher education was the delivering of 500 Pounds for Harvard in 1641. Not a proper success story at that time, but a first and initial step. The 18th and 19th centuries were full of trial and error in fund-raising methods and primitive by today's standards. The early fund-raising tools consisted of various brochures, prospect lists, and strategies for campaigns like those of Benjamin Franklin, which Peter Levine summarizes in his own (modern) words in his Blog for civic renewal:

  • Don't fund-raise for other people
  • Try to get other people's lists
  • Don't share your own list
  • Give advice; it's cheap
  • Make giving seem cool
  • Ask everyone.

The first organized fund-raising programs in higher education are assumed to have been Alumni Annual Givings. The first formal alumni associations in the US were founded all over the country in the early 1800s, with their alumni funds seen primarily as "living endowments."

The turn of the 20th century gave rise to the first modern fund-raising campaign – although carried on outside the academic world, it is seen as the starting point of fundraising in higher education. In 1902 Pierce and Ward, two fund-raisers, started a campaign in Washington, DC, to collect money for a new YMCA building. Their techniques – careful records, reported meetings, prepared list of prospects, a campaign "clock" to keep pressure on to reach the goal, plus a definite time limit – became standard methods for future practice. In 1913 the University of Pittsburgh, for example, reached the goal of a $3 million campaign thanks to Ward's successful campaign methods. The decades from 1919 to 1965 are called the "era of consultants"; the complete strategy of campaigns was elaborated to sophisticated levels by professionals, often from the for-profit world, whereas the actual fundraising was performed by volunteers and institutional leaders of the higher education institutions.

This origin of development officers in the for-profit consulting world, and thus outside the academic environment, is contrary to the roots of the early Alumni secretaries. The alumni relation officers or secretaries typically were institutional figures, served for long times, and were highly committed to their organizations. Development or advancement officers have since risen to the most senior ranks of university administration and usually play a significant role in the overall management, yet cultural differences between alumni relations officers and fund-raising professionals still remain today.

Research on Philanthropy

Philanthropy in America book coverThe early philanthropists were dedicated supporters of knowledge creation and innovation as important foundations to economic growth and social progress, as described by Olivier Zunz, Commonwealth Professor of History at the University of Virginia, in his book Philanthropy in America. The new wealth created by industrial tycoons and oil magnates promised the means for reform, even if it meant reducing the funds available to charity. American universities greatly benefited from impressive philanthropic investments in education and science. In scientists, philanthropists had found people with the expertise and ability to put the money to work for their interests.

Research has always constituted an essential part of philanthropy, as has research on philanthropy itself. One well-known example is the The Center on Philanthropy at Indiana University, part of the Indiana University School of Liberal Arts at Indiana University-Purdue University Indianapolis. Founded in 1987, this was the first fund-raising school in the country. The Center provides a research program and academic programs related to philanthropy and nonprofit management. The Fund Raising School is an international, university-based, education and training program for fund-raisers. Giving USA is a prominent branch of the Center on Philanthropy at Indiana University and edits the annual Giving Report, a report much used by the professional community.

The Stanford Center on Philanthropy and Civil Society (Stanford PACS) is another renowned research institution, dedicated to developing and sharing knowledge on philanthropy, civil society, and effecting social change. The Stanford Social Innovation Review provides information on policy and social innovation, philanthropic investment, and nonprofit practice. In addition to scholarly journals in the field of philanthropy, several Research Awards in Philanthropy for Educational Advancement have been offered since 1989 by the Council for Advancement and Support of Education.

Professionalization of Fundraising

The Council for Advancement and Support of Education (CASE) was founded in 1974 as a professional association serving educational institutions and the professionals who work on their behalf in alumni relations, communications, development, marketing, and allied areas. Ron Mattocks, vice president for

Terms & Definitions: Conceptual distinctions

Fund raising is episodic – development is continuous.

"Institutional Advancement" is used for the broader concept of which they are parts.

Source: Michael Worth, New Strategies for Educational Fundraising. 2002

marketing, membership, and external relations at CASE explains the concept: "What we teach is advancement. And by advancement we include marketing communications, alumni relations, and fundraising. The idea is that if you group those three functions together through some common management control, you will get a much better return on your investment than if you have them separated and reporting into different parts of the institution. If we look at our membership today in the US, that model is common, probably predominant, but it's certainly not to 100%. When we look at internationals or we look at community colleges, which haven't been as engaged with us, it's much more fragmented, and it's much more like that those three functions report to different parts of the university. So as they progress, they realize that there is some synergy between them and bring them together."

Philanthropy and the nonprofit sector constitute about 10% of the US labor force and about 5% of the gross domestic product annually. There are more than 1.4 million nonprofit organizations nationwide and, according to a study by The Bridgespan Group, these nonprofits will need to hire an additional 640,000 senior executives by 2016.

What Does It Pay to Be a Donor?

How do the philanthropic dollars get into the higher education system? Philanthropy for US Higher Education puts rules in place both for donors and for the receiving institutions. The legal framework for the recipients focuses on the definition of organizations whose purpose allows them to be tax exempt (approved in the Sixteenth Amendment to the United States Constitution in 1913). Most universities are defined as organizations with educational purposes and thus are exempt from Federal income tax, as donations given to them are assumed to have a public purpose.

Federal and most state income taxation policies in the US provide considerable incentives to give donations for charitable purposes. Income is taxed at progressive rates at both the federal level and state level. Thus, contributions of money or property made to qualified organizations (provided by IRS - Internal Revenue Service's Web site, an official United States Government System) result in tax deductions.

Generally the 50% limit (of the annual adjusted gross income) is the only limit that applies. Adjustments to the gross income include items such as a deduction for IRA contributions (Individual Retirement Account), for student loan interest, or tuition and fees. Each year, the IRS offers a publication with detailed information for use in preparing the paperwork for the income tax return. So, if someone has an annual adjusted gross income of, e.g., $50,000, s/he is able to deduct up to $25,000 in contributions made to universities (for example). Carryovers are also possible for the next five years.

Fingers holding box wrapped in a twenty-dollar US bill; green bow on the top. (image source: philanthropists are also able to obtain an enormous amount of information so that they can give in a well-informed way. The Charity Navigator is only one of many hands-on tools that offer detailed advice to potential donors, enabling them to choose their recipients in an informed way and then "give smart." The Charity Navigator provides overall ratings and institutional details, scoring financial performance, accountability, and transparency. Donors have easy access to information like fund-raising efficiency or total functional expenses. The compensation of leaders (presidents, CEO's) is also available at a simple click of the mouse, as are the profiles of other charities performing similar types of work.

In comparison, an Austrian donor could only save up to10% on taxes – in addition to the fact that Austrian income taxes are generally much higher, e.g., 50% on all income over €60,000. A list of qualified organizations is provided by the Austrian Federal Ministry of Finance, but there are no tools like a Charity Navigator to find additional information. The most striking difference from the US, a relatively free-market economy, is that the Austrian government (following the concept of a social-welfare state) provides most of the funding for the universities. In FY2010 (University Report 2011), 76% of the revenue of Austrian universities was federal appropriations, 9% from research and grants, and 4% from tuition fees. A public US university like the University of Maryland (as mentioned above) obtains 18% of its budgeted revenues through state funding, 45% from research and competitive grants (mostly government-sponsored programs), and 11% in tuition fees.

Giving in Austria

Total 2010 donations to charitable organizations in Austria were €460 million (based on the current Giving Report 2011 – "Spendenbericht 2011"). Compared to the US, with a per capita donation of €683, per capita donations in Austria were a quite modest €54. The amount of this money given to universities or other research institutions rose from 3% in 2008 to 10% in 2011 – almost the 13% proportion of donations in the US given to education (Neumayr and Schober, Giving in Austria 2012).

Michael Meyer, vice-rector of Human Resources at the Vienna University of Economics and Business and a leading expert on nonprofit management, explains: "For the average Austrian private donor, research and science or universities are not the area they want to give money for. Only medical research is probably able to raise some awareness and sometimes even money, triggered by individual distress over illness in the family." Summing up, Michael Meyer says that the leaning towards philanthropy for universities is not part of the giving culture in Austria and most other European countries: "There is a strong belief that, amongst other institutions and services, higher education has to be funded by the government; donations are given elsewhere."

The Exception Proves the Rule

IST Austria breaking ground smallOn the Web site of IST Austria, President Thomas Henzinger states: "If someone decides to make a considerable donation to us, I see this primarily as proof that we are on the right track concerning the development and the basic principles of IST Austria." The Institute of Science and Technology (IST Austria), founded in 2009, is a Ph.D.-granting research institution in Lower Austria near Vienna dedicated to establishing high-quality basic research in the natural and mathematical sciences. IST Austria encourages Austrian companies and foundations to make donations. Among the donors are major Austrian companies like voestalpine, Raiffeisen, and OMV. The "big gift of all time" was a donation worth €10 million from the Invicta foundation of Austrian entrepreneur Peter Bertalanffy. To acknowledge this donation, the first laboratory building of IST Austria was named the "Bertalanffy Foundation Building."

Oliver Lehmann of the Communications & Media Relations Department at IST Austria points out that it is crucial to show one's appreciation to donors in an appropriate manner and, in so doing, probably encourage others to follow their model. He tells the story of the initial steps of the fruitful cooperation with donor Peter Bertalanffy: "When we asked him how he came across IST Austria, he told us that he had read about our institution in the newspapers and had become interested. ... This is evidence of the fact," says Oliver Lehmann, "that fundraising has to be recognized as a completely integrated part of the overall image management of an institution. It should not be understood as one isolated task among many different activities like public outreach or cooperation with schools or 'classic' public relations; it has to accomplish an interrelated and consistent mission."

The Volunteering Alumni

Fast Facts: University of Vienna

founded in 1365

€509.7 million operating budget

Sources of Funds:

  • Federal Funds: €412.4 million or ~81%
  • Tuition & Fees: €10.6 million or ~2%
  • Other Profits (Research & Grants) €86.7 million or ~ 17%
  • Total Employees: 9,361
  • Total Students in 2011: 91,362

Source: Facts & Figures 2011/12

Ingeborg Sickinger, managing director of the Alumni Association of the University of Vienna, one of the oldest universities in Europe (founded in 1365 by Duke Rudolph IV, the "Founder," as "Alma Mater Rudolphina Vindobonensis") explains their approach to involving alumni and getting them closer to their Alma Mater. First of all, a "Culture of Volunteering" is going to be established. This commitment of the alumni to give their time and knowledge for free should form an even stronger basis for further activities. For the 2015 celebration of the 650th anniversary of the University's founding, ideas are being discussed about involving all alumni in celebrating the jubilee of their Alma Mater – and perhaps also asking for financial support.


"Many universities have no experience in the area, and fund-raising pioneers often have to overcome internal resistance, sometimes at the highest level of leadership in an institution. Academic leaders need to take ownership and responsibility for philanthropy on their individual campuses." This statement, from a 2007 Report by a European expert group on "Engaging Philanthropy for University Research," makes one wonder about the slow and ponderous steps taken in Europe, but Michael Worth takes a pragmatic approach: "It's hard to say, 'Where do you start, to get to where Harvard is now within the next five years?'– and you won't, it takes time." It truly will take a lot of time to change a whole culture regarding the need for educational and research philanthropy and, in addition, an environment of high taxes and a long tradition of public spending for education and research.

As shown by the achievements of IST Austria, their approach appears to be a promising one, but there is also a strong need for committed leadership and responsibility on the part of those in charge. In addition to establishing a common culture of giving, it appears that powerful leadership and enthusiastic role models – philanthropists like John D. Rockefeller or university leaders like President Mote of UMD – will be needed to make the first moves forward.


The author, Ursula Brustmann, has been working with the BMWF since 2000. Until 2003 she served on the Steering Committee at the Austrian Federal Ministry of Science and Research concerned with implementation of the University Act 2002.


Further Reading

The Chronicle of Philanthropy


Fundraising Verband Austria. Spendenbericht 2011. Wien: Fundraising Verband Austria, 2012.

Giving USA 2012. "The Annual Report on Philanthropy for the Year 2011." 57th Issue. Giving USATM A public service initiative of The Giving Institute, The Center on Philanthropy at Indiana University, 2012.

Jansen, S. A., and T. Sandevski. Matching Funds – Staatliche Strategien für private Wissenschaftsförderung. Eine internationale Vergleichsstudie mit Empfehlungen für Deutschland. Friedrichshafen: Zeppelin University GmbH, 2009.

Murray, F. E. "Evaluating the Role of Science Philanthropy in American Research Universities" (June 2012). NBER Working Paper No. w18146. Available at SSRN:

Neumayr, M., and C. Schober. Giving in Austria. Einflussfaktoren auf das Spendeverhalten der österreichischen Bevölkerung. Wien: Abteilung für Nonprofit Management WU, Wirtschaftsuniversität Wien, 2012.

"Voluntary Support of Education. Report for FY 2011." New York: Council for Aid to Education, Press Release, February 15, 2012.

Worth, M. New Strategies for Educational Fundraising. Westport, CT: Praeger Publishers. Kindle Edition, 2002.

Zunz, O. Philanthropy in America: A History. Politics and Society in Twentieth-Century America. Princeton, NJ: University Press. Kindle Edition, 2011.