Give me a “P”

By 1995, a dark cloud had settled over the University of Pittsburgh. It was taking a beating in the press as it struggled to deal with one controversy after another.

Leadership at the highest level was in transition. Once-generous state subsidies to support its operations were drying up. And when hopes turned to the notion of raising $500 million through a major capital campaign, the consultant hired to evaluate whether Pitt had what it would take to make that happen told the school to forget about it.

“The consultant was right on the money,” says Thomas G. Bigley, retired managing partner of Ernst & Young in Pittsburgh who has served on the university’s board of trustees from 1985. “As you can imagine, we weren’t very enthusiastic about our chances of success at that time.”

However valid the reasons were for not engaging in such an ambitious campaign, newly appointed Chancellor Mark A. Nordenberg and the board of trustees were unwilling and could ill afford to shrug off any opportunity to raise money to advance the university’s academic mission. From Berkeley to Pittsburgh, schools that once enjoyed comfortable state subsidies were scrambling to find new revenue streams to offset the erosion of public support for higher education, upgrade their facilities and programs and compete for the nation’s top students and faculty.

Eleven years later, the University of Pittsburgh announced a stunning reversal of fortune. In October 2006, the capital campaign that was launched against the consultant’s advice surpassed $1 billion in donations and was extended with a revised goal of reaching $2 billion. The money has bought new facilities and academic programs. It has financed new endowed scholarships, fellowships, professorships and chairs that have helped attract talented students and recruit top faculty from leading schools. The quality of students enrolled at Pitt has never been higher. Sponsored research stands at record levels. And the school has risen in the rankings of the nation’s universities. All of which is good news for western Pennsylvania, where the university and the expansive University of Pittsburgh Medical Center hospital system account for a sizable share of the economy and are considerable assets when it comes to marketing the region.

Moreover, the university is better positioned to deal with the new financial realities of higher education, having built the infrastructure to successfully manage a major capital campaign and demonstrated the ability to be a prudent steward of those gifts. Private schools have long engaged in high-level fund-raising. Now, major capital campaigns are becoming the rule rather than the exception for publicly owned universities and state-related schools like Pitt that rely on public subsidies to cover a portion of their operating costs.

Among the chief reasons for this is the steady decline in public support for higher education, particularly at the state level. At Pitt, which assumed state-related status in 1966, subsidies from the commonwealth that had once accounted for 40 percent of its annual operating revenue today account for less than 12 percent. At the same time, the cost of doing business has gone up substantially, particularly among the highly competitive, top-tier research universities. The competition for outstanding faculty, new areas of research and the need for facilities to house interdisciplinary research, particularly in the biomedical fields, are a few of the factors. To compete for top students, universities are paying more attention to student amenities and spending more to upgrade such things as housing, recreation facilities, campus safety and social life. They are also under pressure to offer more financial aid as steep cuts to federal and state student aid cripple the ability of those programs to keep pace with the cost of attending college.

At the same time, schools searching for new revenues are discovering that the overall health of the U.S. economy in past decades and demographics have created a reservoir of private donors willing to support their mission. Among them, members of the baby boomer generation, who enjoyed the benefits of economic growth and have reached the point in their lives where they have educated their children, paid for their homes, are ready to retire and have a fair amount of wealth available for philanthropic purposes.

Today, 23 universities across the United States are engaged in capital campaigns to raise at least $1 billion, with 12 of them setting their sights on $2 billion, according to the Chronicle of Higher Education. And many more campaigns of similar size are believed to be on the drawing boards of school administrators across the nation.

“What we have been witnessing,” says Robert M. Berdahl, president of the Association of American Universities, “is the development of a privatizing mentality among public and semi-public universities.”

At the University of Pittsburgh, several obstacles to moving that transition farther along with a capital campaign were noted by the consultant in advising against such a fundraiser in 1995. A series of very public controversies had hurt the school’s image. Some of the issues involved in these storms were the kind that could damage a capital campaign, such as questions about administrative spending and compensation and reports that top trustees had lost confidence in the chancellor’s office. The university also had little fund-raising experience to fall back on. A campaign of such magnitude had never been attempted during Pitt’s 208-year history and the school lacked the organization and resources to carry one out.

Like many public and state-related universities, the institutional advancement side of the business was underdeveloped. Given limited resources, staff had produced limited results. The sporadic fund-raising efforts of the past had done little to nurture fruitful, long-term relationships with donors. A creaky data system contributed to the staff having to work without up-to-date addresses, phone numbers and other basic information necessary to stay in touch with alumni and other potential donors, particularly those living outside of the region. If there was a large reservoir of private money out there for the asking, Pitt first had to find it.

“We flat out weren’t aggressive about tracking that information before,” says Albert J. Novak Jr., vice chancellor of institutional advancement. “We didn’t know who our alumni were. We didn’t know what they were doing. There were tens of thousands of alumni whom we didn’t have addresses for. It was pretty much a nightmare.”

New leadership at the university set out to address these shortcomings, led by Nordenberg, who was appointed interim chancellor in 1995, and J.W. Connolly, who became chairman of the board of trustees the same year. “What was good about that feasibility study was that it gave the trustees and the chancellor a road map of things to fix,” says Novak. “And they took it as a challenge, not as a dagger to the heart.”

The rift between administration and the board was repaired. Controversies began to subside. The school invested in the institutional advancement side of the business, recruiting fund-raisers experienced in major gift giving and providing them with tools to do the job, including a new data system that was an asset rather than a limitation. Without fanfare, the university began its campaign to raise $500 million in July 1997, quietly approaching its closest potential donors to test the waters. “I don’t think anyone realized how much money could be raised because the resources hadn’t been invested in institutional advancement up until then,” says Bigley. “But we felt on the board that we had a sleeping giant.”

When the campaign went public in late 2000, the school had already raised $356 million. The $500 million had been secured by the summer of 2002, more than a year ahead of schedule. “The good news for us,” says Novak, “was that when we found them, people were saying, ‘What took you so long? Come on in.’ Instead of, ‘What took you so long? Don’t bother me now.’”

The trustees immediately extended the campaign another five years and upped the goal to $1 billion.

“We discovered a new universe of prospective donors we hadn’t had a relationship with. We clearly weren’t tiring them out. We were just getting to know them,” says Clyde B. Jones III, president of the University of Pittsburgh and UPMC Medical and Health Sciences Foundation. “We had strong leadership. We had built a fund-raising function that was working. It made no sense to stop where we were, despite the prevailing wisdom of some fund-raising professionals that we should go into a quiet phase and regroup.”

Raising huge sums of money has required universities across the nation to make significant investments in their institutional advancement mechanisms. At Pitt, much of the heavy lifting is shared by the school’s Office of Institutional Advancement and the University of Pittsburgh and UPMC Medical and Health Sciences Foundation. Since 1995, their combined staff has grown to nearly 175 employees, who are spread over two offices on campus. Some of these people work support jobs, such as maintaining the data system, processing thank-you notes and keeping financial records in order. Others are involved in broad-based outreach, such as direct mail and telemarketing. Major gift officers, directors of development at the university’s various schools and constituent relations officers work with select, individual donors. There are those whose job is to develop relationships with corporations and foundations. Others have expertise in planned giving, estates and trusts. There is a special events staff, an alumni organization and a research team. According to the university, the cost of this fund-raising operation is roughly eight cents on every dollar raised, which falls below the national average of 10 to 12 cents per donor dollar.

Getting people to part with their money, particularly large sums, is more of an art than a science. Researchers can identify potential high-yield donors and provide gift officers with a briefcase full of information on their experiences with the university, what they do for a living, their successes, their family and interests. But gift giving is often personal and almost always requires a relationship that has been nurtured over a period of time, years perhaps. These relationships are kindled a number of ways: a simple phone call, face-to-face meeting, an event held to gather alumni for an update on a school’s accomplishments and aspirations, a patient’s experience at one of the university’s hospitals. Among the major gifts, for example, was the $5 million donation to the Thomas E. Starzl Legacy Endowment Fund for transplantation research made by the family of the founder and owner of Sarris Candies, Frank Sarris, who received a living donor kidney transplant at UPMC in 2002.

Fund-raisers say an effective campaign strategy has been the “University On The Road” program that sends Nordenberg and select faculty around the country to address large groups of Pitt graduates organized by local alumni clubs. These popular events have been a key part of efforts to reach out to the nearly 100,000 out-of-state alumni who until the campaign had largely been ignored. Last year, the university reported that gifts from outside western Pennsylvania have accounted for 55 percent of the campaign’s total.

Pitt alumni made up the largest share – 59 percent – of the 116,146 donors who contributed as of last year. The campaign has done well with other key donor groups, particularly first-time donors, who made 39 percent of the 198 gifts of $1 million or more.

But for all of the fund-raising strategies, phone calls, lunches and events, it is the donor’s confidence in the product that earns their gifts. “The key is stewardship,” says Novak. “If people know you are a good investment, that you will follow through on the purposes for which they have given, and you will make a difference in someone’s life, they will feel good about giving and will be likely to give again.”

Pitt’s campaign gained momentum as gifts were invested in ways the public could notice and appreciate. There were the high-profile gifts of John M. and Gertrude E. Petersen that included $10 million for the school’s Petersen Events Center and $5 million to support nanoscience and technology. Few newspapers missed the story of cancer researcher Anna Lokshin, who is part of a cancer research fellowship program made possible by a $20 million gift from Pittsburgh philanthropists Henry and Elsie Hillman. Their support jump-started Lokshin’s research to develop biological markers that recognize ovarian cancers and offer hope that soon doctors will have a way to detect the disease during its early, more curable stages.

Campaign money has paid for 332 new endowed scholarship funds, 29 new endowed fellowships, 16 new endowed professorships and 66 new endowed chairs. Such investments receive little public notice, but they have helped Pitt compete for the best and brightest students and faculty. In one case, the university convinced pulmonary disease expert Steven D. Shapiro, M.D., to leave an endowed chair at Harvard University by offering him the $2.5 million Jack D. Myers Chair in the Department of Medicine that was established as part of the capital campaign.

Freshman applications to attend Pitt have more than doubled since 1995. The quality of students admitted has skyrocketed. Sponsored research climbed to $603 million in 2005, a 160 percent increase over what Pitt researchers secured in 1995. The school jumped to seventh among all U.S. universities in National Institutes of Health research funding. It even zoomed up the charts in the unscientific — but widely read — annual college rankings published by U.S. News and World Report.

Such strides come as good news to those concerned with the region’s economy and development. The university alone employs more than 11,000 full-time and part-time faculty and staff. Pitt reports that the hundreds of millions of dollars it spent on research in fiscal 2005 supported 17,100 jobs. The UPMC hospital system, the region’s largest single employer, provides another 40,000 jobs.

In all, UPMC, Pitt and the region’s other universities account for about 35 percent of the jobs in western Pennsylvania. “University presence and research here is clearly one of the huge economic drivers of our region,” says F. Michael Langley, chief executive officer of the Allegheny Conference on Community Development. “And you have to put the University of Pittsburgh and UPMC and their symbiotic relationship at the top of the list in terms of impact that a particular institution has on the economy.”

Pitt and Carnegie Mellon University give western Pennsylvania the enviable distinction of being one of a handful of regions that can boast of having two acclaimed research universities. Beyond the jobs they provide and research dollars they attract, such schools raise the profile of the region as a magnet for the brightest minds, a place where new ideas are born, nurtured and spun off as viable businesses. In fact, Pitt was ranked sixth among U.S.

universities in the number of start-ups spun from technologies developed by the school’s researchers in a 2005 survey published by the Association of University Technology Managers.

Heightened investment in new fellowships, chairs, academic programs and research should only strengthen Pitt as a regional economic force, Langley says. “The trickle-down theory says it will create more entrepreneurial opportunities, more jobs and more investment. There clearly is a pathway from those capital dollars to economic growth in the region.”

But what happens when the capital campaign is finally put to bed? Pitt’s campaign is set to expire in 2014 and if trends elsewhere are any indication, the university will likely enjoy a bump in annual gifts in the years that follow. The AAU’s Berdahl, who served as chancellor of the University of California, Berkeley from 1997-2004, recalls that several thousand new names appeared on the donor list every year during the school’s capital campaign and that their gifts, typically small at first, tended to become more generous over time.

The question is whether the blockbuster capital campaign will ever be kept on the shelf for very long. “I think it is the way of doing business for the foreseeable future,” says Berdahl. “And I think that all universities will be doing it.”