Yesterday’s Wall Street Journal reported on how Trinity College is facing scrutiny from the Connecticut Attorney General over its plan to use part of a $9 million endowment from the late Shelby Cullom Davis to fund scholarships for international students. Both Davis’s daughter and the professor who holds the Davis chair believe that Trinity’s plan violates the restrictions that Davis placed on his gift.
The Journal article states that “[r]estricted gifts can account for as much as three-quarters of a university’s endowment.” It is true that specific universities or colleges might have an endowment in which three-quarters of the funds are restricted. But data from the National Association of College and University Business Officers shows that 45 percent of endowment funds at private institutions are unrestricted. Furthermore, universities can exert considerable influence over whether gifts are restricted and the precise terms of the gift.
Universities spend lots of time and money cultivating donors and helping shape their giving preferences. This is one of the functions of so-called “named gift opportunities.” The cultivated gifts often pay for expenditures the institution would have made even without a gift, thereby allowing the university to redirect funds to current expenses or into the endowment itself. Research has also shown that corporations, foundations and alumni each favor different sorts of projects. This means that a university can help determine the sorts of gifts it is likely to receive through careful allocation of its development staff.
This is not to suggest that all donors are malleable. Some have very definite ideas. Mr. Davis, for example, said no when Trinity asked whether it could use the endowment as it thought appropriate “as conditions evolved and opportunities arose.” But simply focusing on the amount of restricted funds overstates the extent to which donors tie the hands of universities.