Global economic crisis presents challenge to Aspire, Annual Giving progress

Editor's note appended

Though the University is still on track to meet its Annual Giving (AG) and Aspire capital campaign goals, the ongoing economic downturn presents a potentially challenging situation, Vice President for Development Brian McDonald ’83 said on Tuesday.

He noted that the University has not yet revised either target, adding that he remains optimistic in spite of the difficult economic climate.

Aspire, the University’s five-year campaign intended to raise $1.75 billion between 2007 and 2012, is still “tracking slightly ahead [of its target], in part due to a sensational first year,” McDonald said. The campaign had taken in $925 million as of late October.

A multiple-year downward economic spiral, however, would lead the University “to reassess whether we can achieve the five-year timeframe that we set for ourselves,” he said.

Because the capital campaign is one of the major sources of funding for the 10-year Campus Plan, a significant change in Aspire’s success would correspond to the University deferring spending on long-term projects, McDonald explained. Funds from the endowment and the operating budget also go toward the Campus Plan.

The University will continue to evaluate the campaign’s progress toward meeting current goals, and would have broader discussions about the economy’s effect on giving if the situation continues to worsen through June 2009, McDonald explained.

“Right now, everyone is still grateful for progress we made last year,” McDonald said, adding that year-to-date, the University has received “more than 6,000 gifts ... and roughly $90 million of new support” to both Aspire and AG.

“The one thing about Princeton donors is they have a way of surprising us in positive ways. I hope we have some wonderful gifts,” McDonald added.

AG contributes some of its unrestricted funds, which are spent in the year they are given, to Aspire, McDonald said, adding that AG has become Princeton’s “hallmark fundraising program” since its inception 66 years ago. Roughly 60 percent of undergraduate alumni donate through the program, which raised a record $54.1 million in the 2007-08 fiscal year.

Last year’s success led AG’s alumni fundraising volunteers to set a target of $56 million for 2009, McDonald said. He noted, however, that this optimistic goal was set during the summer.

“If they were having that conversation today, they might not pick that number,” McDonald said.

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Anthony Lee ’79, a volunteer fundraiser for Aspire, said that based on his recent conversations with alumni, many are having personal financial difficulties that discourage them from donating.

“I think [the University] will have some problems,” he said.

McDonald, however, contrasted the volunteer coordinators’ optimistic target with the conservative estimate for AG income set by the University. There would have to be a “very significant” falloff to miss the budget committee’s projections. Based on analysis of fundraising trends going back to 1982, McDonald does not foresee a shortfall.

In times of recession, total donations for the University and similar nonprofit organizations tend “to drift back between 3 and 7 percent,” he said. The University’s projected AG income is not publicly available.

“I’m optimistic that we will meet or exceed the level of support that the University has included in its operating budget and hopeful that through the work of our volunteers that we will get as close as possible to [their] goal,” McDonald added.

Though AG is likely to meet the budget committee’s target, it is unlikely that it will amass the surpluses that have provided the University with added flexibility in recent years.

The Financial Aid Office has been able to meet $3 to $4 million of unplanned demand for undergraduate aid this year by drawing on AG donations.

The four Cs of diminished giving

Four factors — capacity, confidence, currency and competition — may discourage alumni from contributing in today’s economic climate, McDonald said.

Capacity refers to donors’ personal financial position and their resulting ability to give. Asset classes across the board have plunged in value; the S&P 500, for example, is down 42 percent year-to-date.

Regardless of their wealth, alumni’s decreased confidence in their personal financial positions discourage them from donating, he explained.

Plunging equity values have erased a mechanism that gave alumni an additional incentive to give by allowing them to maximize donation value using stock as a currency.

As capital gains turn to losses for many alumni, donors can no longer maximize the value of their gift by avoiding the roughly 15 percent capital gains tax on stock appreciations. When the University, as opposed to the individual investor, cashes in an appreciated stock, it does not have to pay capital gains taxes because of its nonprofit status.

Additionally, some donors prefer to make equity donations at a time when they feel that their stocks are well-valued. In today’s climate, with equity values near a 10-year low, McDonald explained that donors may wait to give to attempt to maximize the value of their gift.

The University sells all stocks it receives immediately upon receipt, leaving the Princeton University Investment Company to reinvest the cash in accordance with its investment strategy.

Even as the University deals with the first three Cs, it faces increased competition for alumni’s charitable funds. During recessions, nonprofit organizations providing social services are particularly appealing to donors, McDonald explained, since these organizations are stretched by added demand.

Perspectives on giving

Not everyone is responding to the economy by scaling back their giving, however.

University trustee and major donor Dennis Keller ’63 said that, “for those who can, this would be a great year to increase gifts.”

Keller said he plans to increase his AG contribution above his level from 2007, his last non-major Reunions year.

“I’d like to see us get as close as we can to our annual giving target,” he explained, adding that “it doesn’t take a rocket scientist to know that there will be some people who will not be able to increase or hold steady with their donations.”

In addition to giving more to AG, Keller made a $25 million gift this April to facilitate the integration of engineering and the liberal arts as well as to foster other initiatives in engineering and technology. The gift will consist of a combination of cash and stock over a five-year period, and should his equity decrease in value, Keller said that he would boost the number of shares to meet the dollar target.

Shelby Davis ’58 plans to maintain his level of giving. The Davis United World College Scholars program, which he established, provides financial aid for between 80 and 90 Princeton students each year at an annual cost of more than $3 million. While much of this funding comes from the University endowment he established, he maintains the fund’s principal through regular gifts. Davis also provides funding for United World College graduates attending other top universities.

Davis also donated $5 million in 2007 to the University’s International Center, which coordinates programs for international students on campus and was renamed the Kathryn W. and Shelby Cullom Davis ’30 International Center.

Lee, the Aspire fundraiser who gave $4 million to the jazz program last February, said that he plans to make an additional “substantial contribution” in honor of his 30th reunion this June.

Even for those who are “not in a position to make donations to the capital campaign,” he said, “at least maintaining annual giving is important.”

This, though, may be challenging for older alumni who have seen the value of their retirement savings plunge with the equity markets.

A number of alumni celebrating their 50th reunion, a time when alumni historically boost their giving to celebrate the golden anniversary, will be keeping steady or even scaling back their donation this year.

Rhett Pinsky ’59, Jay Siegel ’59 and George Russell ’59 all said that their annual giving donations may be affected by the economic situation.

Frank Rosenberry ’59, on the other hand, said he does not plan to alter his donation as a result of the economic situation.

Perspectives on the University’s financial position

Even at a time when both AG and Aspire could be strained, Keller said he is not concerned about the University’s short- or long-term financial situation.

“We are not under the kind of strain and even crisis mentality that other organizations that are less financially secure are under,” he added.

Keller emphasized the importance of the University projecting the right balance of confidence and thoughtfulness in its message and actions. The University should not “give people the idea that we need to be very worried,” he said, nor should it “give any impression that we’re not thoughtful and doing a responsible job of planning for the downturn that the University is apparently entering.”

Keller said that continuing “business as usual as other organizations slow down” has an “additional advantage of not alarming all of the other people and organizations that ... watch us for leadership.”

“If we look scared, then everyone will think that they should be scared, too,” he added. “We don’t want to contribute to the downward spiral” by projecting panic.

Keller also noted the role that the University plays as an “economic engine of the region.” One important reason for the University to continue as many projects as it can is to help maintain local jobs, he said.

In the long run, the University will outlast the financial downturn even if it suffers along the way, McDonald said.

Lee said that “no one can escape the impacts of the current problems” but that he feels good about the University’s overall situation because of the size of the endowment and because “the endowment ... has been managed in a reasonable way.”

“We need to push forward and look long term,” he added.

— Staff writers Omar Carrillo and Alden Irwin contributed reporting.

Editor's note

The original version of this article contained language that implied there were immediate threats to the progress of Aspire and Annual Giving. Discussions about future changes to Aspire or Annual Giving in this article are based on a hypothetical continued decline in the economy.