Colleges and universities regularly complain about the growing share of the donations they receive that are "restricted." When alumni or other donors tell a university where they want their money to go -- whether it be to a building or a scholarship or an honorary chair for faculty -- administrators get annoyed. Why not just let us spend it the way we see fit?
One reason is that they may get more money by allowing donors to restrict their gifts. That seems to be one lesson to be learned from Boston's Jewish federation, which has recently embraced the idea of allowing donors to direct their giving, and has reaped significant benefits. According to the Chronicle of Philanthropy:
Other Jewish charities are now considering whether to follow Boston’s lead. Allowing donors more say in where their money goes is a key reason the Boston federation has been thriving in the slow economic recovery while those elsewhere continue to face a tough time. In Boston, donations rose more than 80 percent last year to $132 million, helping Combined Jewish Philanthropies rise to No. 163 on the Philanthropy 400, up from No. 256 last year. And in the fiscal year that wrapped up in June, giving surged another 60 percent. The federation is now raising twice as much as it did in 2007, before the recession took hold.
Boston is almost alone in its strategy of working with donors to figure out where they want their money to go. The president of the Boston federation, Barry Schrage, says "that what bothers him about that long-held tradition [of unrestricted giving] at the federations is that it favors the same 'entitled institutions' year after year and is 'generally empty of vision and purpose.'"
This is a useful observation. When donors give to a general pot, the people in charge will keep directing money to certain places. They will pick the winners and because the winners get more money, they will keep winning. But donors can provide an outsider's perspective. They can say that other causes are valuable, causes that are getting overlooked.
It's not surprising that when people have more say about where their money goes, they're more willing to give. A representative of LDS Philanthropies, an arm of the Mormon church that encourages large charitable donations, told me that they have adopted a similar strategy.
There are other reasons that donors to higher education want to restrict their giving. Namely they have taken to heart the lessons of the past. They have seen the vast amounts of waste on campus, the steady administrative bloat, the slow expansion of recreational facilities, the launching of new programs -- each more bureaucratic than the last, each less related to the core educational mission than the last.
But donors may also have some positive ideas for new programs or changes to old programs that are worth hearing. Their desire to restrict their giving may mean that the same "entitled institutions" or the same entitled departments or programs won't get the support they want. But maybe it's time for universities to pick some new winners on campus anyway.