Why Now Is Not the Time to Cut Foundation Budgets

By David Rowe October 26, 2020 May 11th, 2021 Blog Post

Opinions expressed in AGB blogs are those of the authors and not necessarily those of the institutions that employ them or of AGB.

With public health expenses soaring and tax revenues shrinking, state funding for universities is at least as imperiled as it was during the Great Recession. With unpredictable enrollment and rising technology and professional development costs, many universities have already initiated austerity plans using all tools at their disposal, from furloughs to program elimination.

When it comes to reducing expenses, higher education is notorious for making quick across-the-board cuts that lack strategic intent.

Despite their corporate independence, some foundations are reliant on university budgets for salaries and operations. Even if completely independent, university norms and expectations often shame foundation CEOs into “doing their part.”

Here’s three reasons why that’s a bad idea, especially now:

  1. Most university revenue streams are strangled. State funding will be reduced, athletics gate receipts are almost nonexistent, students’ ability to pay is decreasing, and net auxiliary revenues are either mothballed with empty residence halls or overextended by expensive health safety accommodations.
  2. Fundraising ROI remains virtually unchanged. The asset donors who can make the biggest difference when the university needs it most are still able to give. As of the end of September, the Dow had climbed back to last year’s value.
  3. Alumni need their universities in new and demanding ways. Navigating this troubled economy, recent grads, especially, will pressure alumni engagement programs to transform into alumni empowerment programs, featuring reskilling, strategic networking, and personal branding.

While making this case, foundation CEOs should also look internally to be sure they are credibly making the case by restructuring major and principal gift programs to run as efficiently and productively as possible, by systematizing annual giving using the latest technology, and by reducing “friend-raising” activities in favor of efforts that yield direct financial results.

Cutting foundation budgets right now may be one of the least strategic moves a university could make. Charitable giving constitutes the one revenue stream that can grow midyear and that, so far, has demonstrated some level of immunity to the pandemic.

David Rowe is an AGB senior consultant and business modeliInnovation practice leader and is  the principal and CEO of The Development President
For information about how AGB can help your foundation advance productivity and align dwindling resources to help you meet ballooning goals, contact Consulting@AGB.org.

Related Resources

The owner of this website has made a commitment to accessibility and inclusion, please report any problems that you encounter using the contact form on this website. This site uses the WP ADA Compliance Check plugin to enhance accessibility.