Cornell recently announced the successful conclusion of its five-year capital cam paign, after reaching a record-setting $1.5 billion. The announcement of such a spec tacular achievement generated excitement within the campus community and nation ally. It also elicited questions about exactly how this $1.5 billion will impact university finances and what it will mean to members of the campus community over the short- and long-term.
The Cornell Chronicle spent time with Fred Rogers, senior vice president and chief
financial officer, and Inge Reichenbach, vice president for alumni affairs and devel
opment, to seek answers to the most commonly asked questions about the campaign
and its impact.
Chronicle: Cornell has raised a remarkable amount of money in this campaign. When did we receive it? Where has it gone?
Reichenbach: The Cornell campaign did raise a remarkable amount of money, and by any measure it was an extraordinary suc cess. Before the start of the campaign the university was raising about $150 million in gifts annually. Last year our annual gift total reached $198 million. The flow of gift re sources, which has been steadily increasing since the 1970s, is an integral part of the university's budget.
The $1.5 billion raised by the campaign began in 1988, when the nucleus phase of the campaign was initiated, and payments on outstanding pledges will continue into the next century. Unlike many other cam paigns, where the bulk of the funds raised will not be received by the institution for decades, 78 percent of the Cornell money raised had been received through Decem ber 1995. Most of these gifts already have been expended or invested in the endow ment. New buildings such as the Kroch Library, new spaces such as the Goldwin Smith Lecture Hall D, new financial aid endowments and new endowed deanships and professorships are among the results of the campaign.
The campaign represented a strategic opportunity to accomplish three objectives: a) to increase annual gifts; b) to focus the pattern of giving on strategic objectives, especially endowment, and; c) to expand the pool of potential donors and volunteers.
All three of those objectives have been met. The increased annual receipt of gifts has supported academic programs, finan cial aid, construction and renovation projects as well as many other critical priorities (See Some Campaign Benefits. ) The increased size of Cornell's endowment will be especially helpful in relieving some financial pressures by providing annual income in perpe tuity to support existing faculty positions, student financial aid and other programs. And, the expanded base of donors and volunteers will ensure that the efforts of the campaign continue beyond the end of the formal campaign.
Chronicle: Why, then, do we continue to hear in news reports and across the campus that the university is experiencing financial difficulties?
Rogers: Annual gift revenues represent approximately 12 percent of the total $1.7
billion in revenues needed annually to support the univer
sity. Approximately one-half of those total gift revenues, or
6 percent, support the Ithaca campus operating budget. The
other half goes toward facilities and the endowment.
Gift support represents approximately 10 percent of the $970 million supporting Ithaca operations. Other major sources of revenue supporting Ithaca operations are: tuition and fees, 30 percent; federal grants and contracts, 20 percent; and state and federal appropriations, 15 percent. The remaining 25 percent comes from a variety of sources, such as investment income, with none larger than 7.6 percent.
It's important to remember that dramatic changes have occurred in government funding for higher education while the campaign has been under way. State support for Cornell and similar universities has dwindled. In particular, Cornell's statutory colleges have absorbed $21.6 million in state appropriation reductions over the past seven years, with a loss of more than 300 state-funded positions.
Growth in federal support for financial aid grants and the indirect costs of research also has been significantly con strained. The university itself is lowering the growth rate of tuition, a key revenue source, to reduce financial pressures on students and their families.
The financial pressures on Cornell, and all of higher education, are real and substantial. The need to invest in new and rehabilitated facilities and emerging technologies, the need to maintain competitive faculty and staff salaries and benefits, and the need to fund financial aid from university resources -- to offset declining government aid -- have all increased.
As a result, the university faces significant financial challenges, that will require us to change what we are doing and how we do it. Our circumstances would have been much more difficult without the campaign, but no magical solutions or panaceas will relieve us of the requirement to make further adjustments in the way we do business. Cornell is committed to making these financial and pro grammatic decisions in ways which enhance our core missions of education, research and public service. The campaign has strengthened Cornell as we address the fundamental pressures now facing all of higher education. We are stronger and better able do so because of the campaign. Nevertheless, many of the choices we now confront will be difficult and some will entail sacrifice and substantial change. It is our obligation to utilize all of the strengths of Cornell to ensure its future.
Chronicle: Will the average employee and student see any direct benefit from the campaign?
Reichenbach: Yes. Before the start of the campaign we had 1,030 endowed student scholarships; now we have 2,205. Before the campaign, faculty positions supported by endowments totaled 130; now that number is 248.
The campaign has had and will have an impact on all faculty, staff and students. For some the impact is visible: funding for a faculty member to carry out a specific project, a financial aid scholarship for a student, a renovated facility or new equipment for everyone to utilize. For others the impact may be more diffuse as the budget relief provided by new gifts allows a department to use other funds to maintain the size of its staff, provide salary increases or purchase new computer equipment. Even departments that do not receive gifts directly benefit from the increased flow of gifts to the university.
Chronicle: We keep hearing about the endowment. How has the campaign improved Cornell's endowment?
Rogers: Before the start of the campaign, Cornell's endowment and similar funds was $770.5 million; today it stands at $1.75 billion, as the result both of gift additions and reinvested investment earnings. The campaign has raised $631 million in new endowment gift commitments, $314 million of which have already been received by Cornell. Our endowment per student -- one measuring stick of the finan cial strength of a university -- was $38,652 in 1988. At the end of last fiscal year, June 30, 1995, the endowment per student had almost doubled, to $77,078.
As of Dec. 31, approximately 28 percent of the value of our endowment relates directly to activity generated through the campaign. This includes the $314 million in gift addi tions to the endowment, approximately $93 million of investment growth on those gifts, and $69 million we've received in the form of trust gifts which will eventually be added to the endowment. In the coming years we expect an additional $248 million to be added to the endowment as campaign gift pledges are paid. By increasing the size of our endowment we have improved substantially the long-term financial strength of the university.
Chronicle: How does an endowment work?
Reichenbach: The endowment is the university's in vested capital -- mostly funds given to us by donors with the express stipulation that their original principal amounts not be spent. Ezra Cornell's founding gift of $500,000 was our original endowment, and over the years thousands of donors have added to it. The endowment is invested both to provide income to support the annual budget and to increase in size due to invested earnings. Unrestricted endowments support the university's general operating budgets, while restricted endowments support scholarships, book funds, professor ships, facilities or programs specified by donors. The en dowment is mostly invested in the Long Term Investment Pool of the university, which is operated like a large, internal mutual fund. The Investment Committee of the Board of Trustees oversees the endowment investments and the inter nal and external financial managers who select the invest ment portfolio.
About 4 percent of the value of the endowment is paid out every year for the purposes it supports and the rest of the annual return on the investments is reinvested in the endow ment, less the expenses of managing the investments. Through careful investment policies, the university has been able to increase on a regular basis the amount paid out from the endowment. For example, a gift of $1 million in 1989 to endow a faculty position generated $38,311 in payout the following year, but this year it generated $55,976, thanks to the growth of the endowment. A $1 million endowment gift today would pay out $35,189 next year, and more each year thereafter.
Chronicle: Why did the campaign place so much em phasis on increasing the size of Cornell's endowment? Why not just provide the money raised now to the problems at hand?
Reichenbach: The endowment is one of the principal financial foundations of private higher education. A robust endowment can act as a buffer, lessening Cornell's vulner ability to economic and political change. Despite downturns in the economy, or federal and state budget shortfalls, the endowment payout policy is designed to produce a stable and growing source of revenue, year after year.
Chronicle: Has the campaign helped the statutory colleges, which are partly funded by the state? They have experienced financial difficulties over the past few years as state funds have dwindled. Yet, those colleges all ex ceeded their campaign goals. Does this mean budgetary pressures in the statutory colleges will ease?
Reichenbach: The statutory colleges did exceed their goals. Preliminary figures show the College of Agriculture and Life Sciences raised $138.2 million, or 146 percent of its goal; the College of Human Ecology raised $34.2 mil lion, or 201 percent of its goal; the School of Industrial and Labor Relations raised $22.7 million, or 111 percent of its goal; while the College of Veterinary Medicine raised $46.4 million, or 124 percent of its goal.
However, the magnitude of the state cuts during the period of the campaign has been substantial -- $21.6 million through the end of 1994-95, with additional cuts coming now and in the future. Over half of the state -funded budget for the statutory colleges supports orga nized research and extension programs that serve clien tele throughout the state, and a significant portion of the budget reductions have occurred in those functions. In general, gifts have not been targeted for those activities and, in the absence of other offsetting revenue streams such as tuition, those cuts remain.
The campaign effort has benefited these colleges in several ways, providing them with some degree of flexibil ity in meeting the state budget reductions. For example, the gifts to endow faculty positions will free up funds to meet critical academic program needs. Financial aid endow ments raised through the campaign will aid statutory stu dents faced with increasing SUNY and Cornell tuitions.
Chronicle: How much did Cornell spend to raise the $1.5 billion? Is this a good way to spend our money?
Rogers: The Ithaca campus and the Medical College in New York City had separate campaign budgets. The total cost of just the Ithaca campus development activities was $83.9 million through June 1995. That cost divided by the campaign funds actually received at that time yields an average cost of 8.7 cents to raise each dollar. According to a national study, development costs for institutions similar to Cornell typically range from 11 cents to 16 cents per dollar raised. Looking back 20 years, the average cost for development at Cornell has remained exceptionally stable -- roughly 8.5 cents per dollar raised each year. A 12-fold increase is a good return on an investment. Now that the campaign has ended, the development office is facing a budget reduction along with all other units of the university administration.
Chronicle: What comes next? Since this campaign is judged so successful, does that mean we will stop fundraising for awhile?
Reichenbach: Raising substantial levels of gifts is an integral part of Cornell's financial plan. It is why we undertook the campaign and why we will continue to employ its three strategies -- multi-year goals, focused outcomes and broader involvement of donors and volun teers. The university is fortunate to have so many benefac tors -- alumni and friends -- who have donated both time and money to further the interests of Cornell. Their commitment has contributed significantly to our success and we will continue to depend on their generosity.
We will continue our fund-raising efforts in the years ahead, albeit at a slightly less intensive pace, building on the expanded base that has been built during the campaign.
The Carl A. Kroch Library, dedicated here in October 1992, was completed during the five-year Cornell campaign. Carl A. Kroch, Cornell Class of '35, contributed $10 million toward the $25 million underground structure. University Photography