Foundations, DE&I, and the Supreme Court Race-Based Admissions Decision

As a foundation board member, what questions should I ask about the Supreme Court’s affirmative-action-in-admissions ruling? How do the changes in justice, diversity, equity, and inclusion programs in some states change the consideration of race-based donor-funded scholarships?

While the recent United States Supreme Court cases addressed race-based admissions practices, many believe the principles stated in the Court’s ruling deciding both cases will be applied to race-conscious financial-aid and other programs at private and public institutions.

The ruling should be considered in the context of a broader wave of state-level anti-DEI legislation. According to the Chronicle of Higher Education, anti-DEI legislation has been introduced in 40 states and has received legislative approval or become law in 14 states.ⁱ We are beginning to look at affirmative action and justice, diversity, equity, and inclusion (JDEI) differently in 2023 in the wake of the Court’s decision and this new statutory landscape. In addition to the Court’s ruling, foundation board members are asking probing questions: How does the Court’s decision affect donor-funded race-conscious scholarships and other programs? Does my state’s law limit our ability to pay for JDEI staff positions or programs using gift funds? Should our board request reviews into existing scholarships and other gift agreements to determine if any may be at odds with new state law or revised institutional policies? Should we explore alternative ways to frame gift agreements to enable donors to fulfill their philanthropic objectives related to JDEI without running afoul of enacted or potential anti-DEI legislation? And, what’s next on the horizon?

Admissions Case

It’s clear from the recent Supreme Court opinion that in regard to admissions institutions may no longer use race as a plus factor. The Court said considering race would be a violation of the Equal Protection Clause of the U.S. Constitution, which says, “No State shall deny to any person within its jurisdiction the equal protection of the laws.” Private institutions would be considered under Title VI of the Civil Rights Act of 1964, which is analyzed under the same standards.

The Court held that in order to be successful with challenges to the Equal Protection Clause, an institution’s consideration of race requires strict scrutiny. That means an institution must identify a compelling interest to justify its consideration of race and must show there were no race-neutral alternatives. The Court said, for the first time in decades, that diversity is no longer a compelling state interest.

Race-neutral factors may be used in admission decisions so long as “that discussion is concretely tied to a quality of character or unique ability that the particular applicant can contribute to the university.” For example, the university may consider applicants’ personal statements describing how they overcame racism or the effect of race on their lives. These types of wholistic reviews are complicated and time-consuming but may be the only alternative that can withstand the Court’s strict review.

Many foundations have already reviewed their race-conscious funds and worked to adjust them using the Uniform Prudent Management of Institutional Funds Act or are working with donors to remove restrictions. Others have donors who insist upon contributing to race-conscious scholarships or other programs.

Biden Administration Guidance

We will know more as guidance is given by the state and federal governments and as future cases are decided. At President Biden’s request the Departments of Education and Justice provided guidance on which practices and programs remain lawful. The departments said, for example, institutions could use race in recruitment and retention of students. They also referred to personal statements relating to overcoming racism. However, the departments did not mention financial aid. In September, more guidance is expected on strategies institutions may use.

JDEI and Other State Laws

Foundation boards will need to look beyond the Supreme Court’s recent decision when considering how to increase diversity under new legal principles. Immediately following the Harvard/UNC decision, the Missouri attorney general told its public and private colleges and universities to end the use of race or ethnicity in awarding scholarships. Other states have enacted laws making affirmative action illegal, as well as eliminating or scrutinizing JDEI programs. As of July 14th, of the 40 state bills introduced to restrict colleges’ diversity, equity, and inclusion programs, seven have become law, seven have passed the legislature, 29 were tabled, failed to pass, or were vetoed.

So, what questions should you ask to fulfill your fiduciary responsibility as a foundation board member to analyze risk and position the foundation for success? Here are some examples:

A. Due Diligence Questions

1. Does our general counsel have an opinion on whether the admissions cases will likely be extended to financial-aid or other programs?
2. What is our state law? Did our state weigh in on the restriction of race in admissions?
3. Have state officials expanded restrictions to financial-aid or other programs?
4. What is our written mission and policy for race-based financial-aid programs?
5. Do we accept donations for financial-aid or other programs that use race as a factor?
6. If so, do we adequately document the awards in a way to demonstrate we can pass the strict scrutiny test? For example, are any race-conscious scholarships or programs narrowly tailored, and did we show there were no race-neutral alternatives?
7. Have we undertaken an audit of existing donor-funded aid and other programs that use race as a factor? If so, what is our approach to existing donor funds for this purpose?
8. Have we and the institution undertaken a risk analysis for our approach?
9. Do our policies and procedures address:
   • Gift agreement language,
   • Legal review of gift agreements, and
   • Data collection and retention relating to awards?
10. What types of training do we provide for advancement employees and others who engage in advancement, such as deans?
11. The Court said the universities failed “to articulate a meaningful connection between the means they employed to achieve diversity and their stated goals.” What is our communications strategy? How does it align with the institution’s strategy?
12. If we use race in any way for aid or other programs, do we have an endpoint for its use?
13. Does preference language for a student of a particular race or ethnicity work?
14. Should the broader political tone of our state influence our decisions? What about the 2024 elections?

B. Questions about Foundation Independence

1. May we argue the foundation is separate from the university and not subject to the admissions ruling?
2. Compared to other foundations, are we considered dependent, interdependent, or independent of the institution? How does that analysis affect whether the admissions cases or state law apply to us?
3. Does our foundation have a contract with the institution or other relationship such as shared employees or funding that may lead a court to decide we are not independent? (See, the 2005 Iowa State case, Gannon and Nichols v. Iowa Board of Regents.)
4. Do we award our own financial aid directly?
5. How are programs handled that can’t be administered by the foundation itself?

C. Questions in Support of Opportunities for Seeking Diversity

1. Does the pool and match approach work for us?
2. Didn’t the Supreme Court case only apply to admissions?
3. May we use categories such as students who study a discipline or participate in a club or are first-generation that do not use race?
4. Should we consider the institution’s eliminating legacy admissions?

D. Questions Seeking to Limit Affirmative Action

1. Isn’t this stereotyping?
2. Doesn’t the plain language of the Equal Protection Clause prohibit this approach?
3. As Justice Roberts said, admissions is a zero-sum game―who is being disadvantaged by preferential treatment?
4. Does our history of awards indicate the use of proxies that are just a substitute for race?

This will be an evolving process. We will all have to ask questions, review and change policies, measure impact, and expect that there will be additional litigation, legal guidance, or new legislation―and we once again will have to adjust.

Margaret Jarrell-Cole, JD, is a senior consultant at AGB Consulting. She recently retired from her position as the associate vice president for administration and legal counsel for the University of Central Florida and earlier served as legal counsel at the University of Florida Foundation.

ⁱ https://www.chronicle.com/article/here-are-the-states-where-lawmakers-are-seeking-to-ban-colleges-dei-efforts/