Zywicki on Smarter Alumni Giving

In an article in the National Review, Professor Todd Zywicki urges college and university alumni to approach the concept of giving to higher education as a venture capitalist might.

"There are many fledgling institutions that have ambition and vision but are starved for resources," says Zywicki, citing Boston College in political sciene; George Mason, Florida State, and Clemson in economics; and George Mason and Notre Dame in law as "centers of excellence committed to supporting the principles of a free society."

"Rather than try to turn the direction of giant barges like Harvard and Yale, which will accept your generosity only on their terms, why not donate to these upstart programs, which are grateful for even modest investments?" he proposes.

Zywicki says at the beginning of 2008, 76 colleges and universities had endowments estimated to be $1 billion or more. He believes that huge endowments have adversely affected the traditional relationship between universities and their supporters, resulting in decreasing ability of institutional supporters to effect changes in curriculum and related areas and less accountability in campus leadership.

Zywicki encourages earmarking donations for specific purposes, but he admits earmarking funds is of limited usefulness as long as the majority of alumni continue to give reflexively to a general fund. "Money is fungible, so, while earmarking will make you feel more comfortable that your donation is going to be used productively, it isn't sufficient to end the shell game that is the essence of university finances," Zywicki says.

Check that checkbook: a guide to smarter alumni giving, National Review, October 5, 2009. By Todd J. Zywicki.

"Your alma mater will not always be controlled by your friends. Recent years have seen a spate of donor-intent lawsuits and controversies, most notably the litigation over gifts to Princeton and to Trinity College in Connecticut. Such disputes are likely to become more common in coming years, especially if endowments are slow to return to their formerly high-flying valuations. In both cases, gifts were established for specific purposes long ago. As the gifts grew, the institutions redirected, or sought to redirect, a portion of them to purposes other than those that the donor intended. This prompted lawsuits from family foundations. The dispute at Princeton was settled on terms that appear highly favorable to the university, suggesting that its strategy of asking forgiveness rather than permission was wise.

"Alumni should keep in mind that colleges and universities have teams of lawyers devoted to creating and exploiting loopholes in donor-intent agreements. Even if the current university administration is trustworthy, that will not necessarily remain so. Donors are especially vulnerable when they establish perpetual gifts, as in the Princeton and Trinity cases."

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