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A Message from Penn State's President on the University, the Economy, and Philanthropy
By Graham B. Spanier
It is a sign of the tremendous loyalty of Penn State's alumni and friends that even as many of you have been personally affected by the current economic downturn, you have also taken the time to express your concern about how the University and its students may be impacted. I would like to respond to some of the most common questions that I have heard from Penn Staters in recent weeks. While Penn State, like many other institutions and individuals in our country, will face challenges, our benefactors have helped us to achieve a position of financial stability that will see us through the present economic situation.
1. In general, how has the current economic downturn impacted Penn State?
Thanks to policies designed to preserve the University's assets over the long term, Penn State remains on firm financial ground. Our endowment portfolio is widely diversified, and while the investment return for our endowment reflected an 11.7 percent decline over the twelve months ending September 30, 2008, this is significantly less than the losses experienced by the financial markets as a whole. Over this same period, the S&P 500 index returned -22.0 percent. The economy has impacted some other budget sources for the University: in September, Pennsylvania's Secretary of the Budget asked Penn State to prepare for a $15 million rescission in funds from the Commonwealth, and our access to some short-term investments was temporarily limited by Wachovia Bank due to issues specific to that financial institution. Penn State has always been notable for our success in doing more with less, however, and our programs and departments have already responded with measures that will reduce costs and effectively answer these challenges, while minimizing changes to the education we offer. At times like this, we are exceedingly grateful to our donors for their past and current support. Now, more than ever, private giving helps maintain both the quality and the accessibility of a Penn State degree. Scholarship and faculty endowments are helping us to keep ambitious students and accomplished teachers in our classrooms, and unrestricted support from alumni and friends is allowing us to respond to the most urgent needs across the University.
2. In what ways might the downturn be impacting Penn State students and families?
Penn State was established more than 150 years ago to offer higher education to students of modest means, and even today almost a third of our undergraduates are the first generation in their family to attend college. The present economic situation has profound implications not only for these students but even for those whose families might have considered themselves financially secure a few months ago. Whether their household has experienced a job loss, a foreclosure, or a dramatic drop in the value of their college savings funds, many of our students are facing tough decisions about their education and their future. Scholarships can make the difference, and donors who choose to support these endowments may have a greater impact on the lives of students than ever before.
3. Has the economy impacted giving to Penn State this fall?
History has shown that during times of economic crisis, Americans continue to respond to the needs of their fellow citizens. Philanthropy in the United States has been remarkably resilient during recessionary periods. Only once over the last forty years (1966-2006) did overall giving in America decline from one year to the next. Since our new fiscal year began on July 1, Penn State has seen a rise in both the number of our alumni donors (4 percent) and total number of gifts (3 percent) over last year at this time. We have also seen an increase in online giving through our Web site www.givenow.psu.edu. While the total dollars received through October 31 are down about 13 percent compared to last year, we are encouraged that the higher number of donors and gifts reflects both enthusiasm about our present fundraising campaign and a growing culture of philanthropy among Penn Staters. In these difficult times, our alumni and friends are reaching out to the University and its students, and we are deeply grateful for this continuing support.
4. What changes do you anticipate in patterns of giving to the University?
As we enter December, a traditional time for charitable giving, all of our donors will be thinking carefully about how to make the greatest impact with their support. Some individuals may choose to target fewer causes, but increase support to the organizations that matter most to them. Donors at every level will be looking for philanthropic opportunities that both fundamentally change individual lives and impact society as a whole; higher education does both. At a complex institution such as Penn State, even smaller gifts can have an important impact on the day-to-day lives of our students and programs, and we anticipate that donors will give more careful consideration over which charities make the best case for their support.
5. Are there ways that donors can maximize the value of their giving and protect their personal financial interests?
Penn State's Office of Gift Planning provides confidential and professional assistance to our donors and their financial advisors in developing tax-efficient, and sometimes income-producing, approaches to supporting the University. Gift annuities, charitable lead annuity trusts, and charitable remainder trusts can all be attractive options in today's low-interest-rate environment, and our staff can advise you on the best option for your needs. Despite the drop in the market, assets that have been held over the long term can still generate significant capital gains taxes; donors may be able to avoid this cost by transferring the assets to Penn State. For donors whose present financial flexibility has been limited by the economy, there are many ways to create a legacy at Penn State, from designating the University as the ultimate beneficiary of their retirement plans to bequests of personal property. More information on many of these options can be found at www.giftplanning.psu.edu.
6. What is the status of the University's new fundraising campaign? How is the economy impacting it?
For the Future: The Campaign for Penn State Students began on January 1, 2007, and under the leadership of campaign chair Peter Tombros and nearly 600 volunteers, it is off to a strong start, with the University's alumni and friends already committing more than $570 million toward six objectives that have the potential to assure our position as the nation's most comprehensive, student-centered research university (www.giveto.psu.edu/ReasonsForGiving/PSUCampaigns/FortheFuture.html). The campaign's progress has continued despite the economic events of recent months with new commitments of $80 million secured between July 1 and October 31. Our development staff is continuing to visit our alumni and friends across the country, sometimes to discuss specific gifts, and sometimes simply to stay in touch. Larger gifts typically result from months of dialogue between the University and donors to find meaningful opportunities. For the Future is expected to last until 2014, and we intend to stay engaged with our donors and be ready to assist them when the moment is right for them to make their gift to the campaign.
7. Any predictions about the future?
While we may not know what will happen in the financial markets next week or next month, we know that the loyalty and generosity of Penn Staters will endure. Individuals and families will continue to give to organizations that are important in their lives, where they feel appreciated, and where they can make a difference, and for many of our alumni and friends, Penn State meets all of these criteria. Thanks to philanthropy, the University has more resources with which to face our present financial challenges than ever before. On behalf of Penn State, I would like to thank all of you who have made gifts in the past. When you choose to continue your support to the University this year, please know how deeply we appreciate your faith in our institution, our students, and our future.