Big-Money Donors Move to Curb Colleges' Discretion to Spend Gifts

From the Wall Street Journal:

For generations, wealthy alumni have donated big money to their alma maters with near-religious devotion. But some blue-chip donors are no longer willing to give merely on faith.

In an initiative to be announced today, several philanthropists -- including Bernard Marcus, the billionaire founder of Home Depot Inc., and investor John Templeton, who made a fortune running mutual funds -- are launching a nonprofit that will advise donors on how to attach legally enforceable conditions to their gifts.

The new Indianapolis-based Center for Excellence in Higher Education aims to curb colleges' discretion in spending donors' contributions. The three foundations backing the center -- those founded by Messrs. Marcus and Templeton and the John William Pope Foundation -- have about $1.25 billion in assets and have made $585 million in gifts over the past five years.

Several current high-profile battles over gifts have inspired the effort. A donor's family wants to take away from Princeton University a 1961 gift now valued at $840 million. Tulane University in Louisiana and Randolph College in Virginia are also fighting with the descendants of donors over gift terms.


U.S. colleges last year received $28 billion in donations, 9% of the nation's giving. But only 11.9% of alumni are now giving annually, down from 13.8% in 2001.

In addition to the three foundations, which together with the Marcus family have given $57 million to colleges in the past three years, the Center for Excellence says it is working with a number of other donors who are taking its advice on attaching strings to gifts. Frederic Fransen, the center's executive director, says these donors are planning about $50 million in gifts over the next year. He eventually hopes to advise donors giving several hundred million dollars a year.

At the outset, Mr. Fransen expects to work with those having $1 million or more to give, though he hasn't established a firm minimum. Among the techniques the center favors to hold schools accountable: parceling smaller gifts out over a set time, rather than giving a larger sum to an endowment. A donor might also set up a gift as an annuity within a trust, overseen by a third-party trustee, who can decide annually whether the gift's intent has been met. Instead of endowing a professor's chair in perpetuity, a donor might provide financial backing to a single professor only for his or her lifetime, guarding against a successor who might drift from the subject matter the donor wants taught.

Mr. Templeton, known for philanthropy seeking to reconcile religion and science, has long been skeptical about giving to colleges. "Anybody who trusts a university on a handshake is a fool," says Charles Harper, the Templeton Foundation's senior vice president.

The group expects to use one Templeton gift as a template. In 1998, the foundation gave $120,000 over three years to fund courses for undergraduates at Duke University that explored "visions of freedom," such as the underpinnings of U.S. democracy. Now backed by gifts and pledges of $1.3 million and seeking to raise $1 million more, the program is well established, with about 200 students taking classes.

"Crucial to all of this was maintaining control" at the time of the gift, says Duke political science and philosophy professor Michael Allen Gillespie, who helped to establish the program.

Campus fund-raising officials far prefer unrestricted gifts, which they can use for pressing needs such as repairs and power bills. Efforts to dictate the terms of gifts also raise concerns over academic freedom.

Robert Kreiser, senior program officer with the American Association of University Professors, says his organization is "very worried" about donors placing tighter conditions on gifts, especially those that pressure instructors to adhere to a particular philosophy or political point of view. "It raises basic questions about academic freedom and institutional autonomy," he says.

The new group includes the Pope Foundation, which has made gifts to conservative and libertarian groups such as the Federalist Society and the Cato Institute, as well as gifts to universities including the University of North Carolina at Chapel Hill. The Center for Excellence says it will work with donors of all political backgrounds.

Some recent disputes are making both donors and colleges nervous. At Princeton, the Robertson family, heirs to the A&P supermarket fortune, claims a 1961 gift to the Woodrow Wilson School of Public and International Affairs was earmarked for a single purpose: training students for federal government service, particularly in foreign relations. In a lawsuit pending in Mercer County Superior Court in Trenton, N.J., the current Robertson generation claims that the university has used the money for other projects. The Robertsons are suing to take the money, now about 6% of Princeton's $14.8 billion endowment, from the university and donate it elsewhere. The university says that it has been faithful to the terms of the gift and that the dispute hasn't hurt giving.

In New Orleans, Tulane University dissolved its all-female Newcomb College in a major reorganization after Hurricane Katrina. In a case now before the Louisiana Fourth Circuit Court of Appeal, descendants of the school's founder, Josephine Louise Newcomb, say the change violates the terms of her gift. Tulane, which will maintain an institute for women's education and other programs to recognize Ms. Newcomb, says it has honored her intent.

Randolph College, in Lynchburg, Va., is asking a local court whether it can sell paintings bought under the 1928 will of Louise Jordan Smith, the school's first art-history professor. The school says it is being careful to win legal authority and needs the money to avert a financial crunch. The donor's descendants and others say the sale violates the wishes of the late Ms. Smith, who sought to establish a permanent art collection at the college.