Colleges hide donors who seek influence. Will virus make it worse?
Long before the coronavirus hit the United States, cashstrapped public higher education systems looked to private donors to offset the steady decline in public funding, sometimes with significant secrecy and strings attached.
Critics fear the economic downturn could give donors more leverage to quietly influence curriculum, hiring and scholarships. Open government laws in many states already allow donors to demand that the public – including students and faculty – be kept in the dark.
The pandemic has presented universities a triple whammy: Reduced tax revenues slashing government support, onlineonly courses gutting dormitory and cafeteria revenues, and – with more students and families out of work – less ability to offset that loss with tuition increases.
“They are going to be desperate for funding,” said Douglas Beets, who teaches accounting at Wake Forest University, and has studied nearly two decades of university donations and donor demands.
Linda Durant, vice president of development for the Council for Advancement and Support of Education (CASE), said she has seen some encouraging signs that those donating to public universities now are simply being generous during trying times.
In May, the University of Virginia reported a $2 million unrestricted gift to help ease fallout from the pandemic. It was part of a larger gift by alumnus and businessman John L. Nau III, who gave $27.5 million specifically to support the university's Democracy Initiative.
“We are not seeing the same type of restrictions or requests that make the funds much tougher to use,” Durant said. “They understand the magnitude of the needs of students and the variety of needs.”
But, with funding shortages likely to intensify in the coming months, Beets said vigilance is crucial. Donors, he said, may feel emboldened.
“There will be cables attached to it. `You have to play our game, put together a center and institute and hire the people we want you to hire,' ” he said. “You are ending up with a curriculum and faculty that has a debt to a corporation. What kind of education will you end up with?”
In one touchstone case, BB&T Corporation, a major banking company, began donating a series of gifts in 2002 through its foundation to at least 60 universities, many of them public. Details were scant, but Beets found the gifts averaged $1.1 million to teach a course based on objectivism and the “morality of capitalism.” Ayn Rand's “Atlas Shrugged” was among the required texts.
At Florida State, a promise of a gift of at least $1.5 million from the Charles Koch Foundation to the economics department included establishment of a Koch-appointed board to scrutinize research funding, the hiring of five professors and review professors' work to ensure it followed the board's “objectives and purposes” – or risk losing the money. Since the controversy, which erupted after the 2008 agreement was revealed in 2011, the Florida Legislature has made it easier, not harder, to conceal donor agreements by exempting university foundations – often the conduit for gifts – from open government laws. The Legislature renewed that law last year.
Universities that lunge at money now could find themselves struggling later.
Donors such as the Charles Koch Foundation often make gifts over a period of years, many with the understanding that they can withdraw the remainder of the donation with as little as two weeks' notice if the university has not complied with terms.
If faculty hired with such donations are tenured, a withdrawal would leave the university on the hook to pay their salaries.
“Especially after hiring tenure-track or tenured professors and creating the infrastructure and publicity related to a new center or institute, an unanticipated contract severance would be very expensive and embarrassing to a university,” Beets wrote in an examination of Charles Koch Foundation contracts with several universities.
A growing pattern of secrecy
Efforts to shield donors from public scrutiny have increased in recent years as public funding for universities became less reliable. About a dozen states have taken steps to change that but so far they are the exception.
Secrecy about donors to public higher education is legal in a majority of states through loopholes in state open government laws that allow open government laws to be circumvented by private foundations, booster clubs and other nonprofits affiliated with public universities.
These organizations, usually set up as private nonprofits, are designed to collect and distribute money for the public universities. While funds often are designated for specific programs, the foundations also raise money for general scholarships and other needs for low- and moderate-income students.
The secrecy issue doesn't arise as often at private universities because they are exempt from state open government laws and don't have to reveal information about their donors.
Recently, MacKenzie Scott, an author and the former wife of Amazon billionaire Jeff Bezos, signed the Giving Pledge to donate the bulk of her fortune. Six historically Black universities received major gifts. The universities – all private – voluntarily announced the donations, confirming they have flexibility in how they will use the funds.
Fundraisers tend to make an equity argument, saying that if information becomes public, that can push donors to private institutions where they and their intentions can remain anonymous.