Graduate school alumni donations to academic funds: micro-data evidence

American Journal of Economics and Sociology, The, April, 1996 by Albert Ade. Okunade

I

Introduction

Inflation-adjusted appropriations to U.S. public higher education grew 2% in fiscal 1994/95 relative to 1992/93 allocations.(1) Higher education also received 73% of the $2.5 billion total corporate donations to education in 1993, a real increase of about 2% over the 1992 level.(2) Despite the increased funding for 1993/94 compared with the 1991/92 levels in 40 states,(3) one of the leading issues facing higher education is mid-year budget cuts. During 1993/94, for example, 23% of the public colleges and universities in ten states had mid-year budget cuts,(4) 28% of the public colleges had no increase in budgets from 1992/93 to 1993/94, and 15% do not expect an increase before the year 2000.(5) Thus, administrators in public higher education, 86% of whom expect enrollment gains of from 1% to 5% by the year 2000, are becoming more creative and determined to increase donations from voluntary sources such as alumni, parents of past and current students, other individuals, corporations, foundations, religious, and other organizations.

During fiscal year 1992/93, of these sources, alumni gifts comprised 27% of the roughly $11.2 billion voluntary supports for U.S. higher education.(6) Alumni gifts typically fund financial aid (scholarships, grants and fellowships) for students, supplement anemic faculty development budgets, complement other funds and support acquisitions of equipments and supplies at the universities, their academic units or program levels.

The growing importance of alumni funding of higher education is projected to continue, as the fragility and uncertainty of state subsidies for education intensify in the U.S.(7) and in other developed countries (Bollag 1995a, 1995b). Additional support for this projection is clear from falling college enrollments(8) that lead to reductions in public funding, tuition-based revenues, other 'user-fees' and, most recently, faculty salaries (Wilson, 1995). A third reason is that higher education administrators doubled their use of paid consultants between 1982/83 and 1992/93, mostly for fund-raising and admissions.(9) Finally, substantiating this likelihood, is the rapid growth of advertised full-time job vacancies for Directors of both Alumni Affairs and Planned Giving.(10)

Both college and university administrators and their development officers readily acknowledge the importance of alumni as the financial backbone of educational institutions (Mael and Ashforth, 1992: 106). However, surprisingly very little is still known about the factors which influence alumni attachment and involvement. Studies of alumni giving published in education and social science journals have focused on specific institutions, enabling researchers to capture the peculiarities of an institution's alumni. The few published studies cover selected, private, 4-year liberal arts colleges, one religious college and some of the comprehensive universities located throughout the U.S.(11)

Currently, there are no published studies focusing explicitly on the giving profiles of graduate school (Masters and PhD) degree alumni. Consequently, the goal of this paper is to investigate the determinants of graduate school alumni philanthropy, based on a microdata sample of a large, U.S. Carnegie-classified Doctoral Universities I institution.(12) Since roughly 25% of the Fall 1993/94 entering freshmen in U.S. colleges and universities decided on attending specific institutions whose "graduates go to top graduate schools" (Chronicle of Higher Education, Sept. 1, 1994: 17), this study findings could highlight the alumni giving implications of rising numbers of graduate school alumni.

This paper also looks at whether the enhanced earnings capacity of graduate degrees (Washburn, 1994) translates to improved giving. Such a motivation might help confirm the moral truth of Christ's teaching the parable of the talents, "For unto every one that hath shall be given, and he shall have abundance: . . ." (The Holy Bible, 1984, 579). Finally, the results could also assist the development officers in efficient choice of fundraising prospects among graduate degree alumni.

Section II briefly reviews the interdisciplinary literature. Section III focuses on the methodology and the data. Section IV discusses the empirical regression results. Section V concludes with implications of the findings and suggests future research directions.

II

Review of Recent Literature

Previous research on personal charitable contributions found economic, social, psychological and other factors to be important predictors. For instance, income and estate tax incentives influence the amount, timing and form of giving (Auten, Cilke and Randolph, 1992). Moreover, personal philanthropic activities are influenced by (1) demographic factors [marital status, gender, age, place of residence]; (2) socio-economic variables [number and age distribution in the household, social class and employment status, race, past giving, tax-determined effective price of giving, future price of giving, income]; and (3) psychographic factors [perceptions of self and of recipient charitable organization, individual's lifestyle, beliefs and values]. Previous researchers have looked at these factors in general (Schwartz, 1970; Johnson and Rosenfeld, 1991; Lankford and Wyckoff, 1992; Schlegelmich, et al., 1992; Barrett, 1991).