Most universities and colleges around the country faced severe budge t problems during the recession. In many cases, public sources, such as state governments, curtailed funding. Is there any evidence that in such gloomy financial times, alumni increase their donations to help fill the gap? N.C. State University economist Mike Walden answers.
“That’s a really interesting question …, and you can really speculate it could go either way. On the one hand, you could say, ‘Well, if the colleges and universities are having bad economic times probably the economy is, which means the alumni are, having bad economic times, so they’re not going to contribute as much.’
“On the other hand, you might say, ‘Well … dedicated alumni are going to see that their institution may be in trouble financially, so they’re going to step up their donations.’
“So, we’ve had some new research on this. In fact, it’s the first time we’ve had any research like this out of the National Bureau of Economic Research, which is a very famous private think tank. And what these researchers found is it’s actually the second effect that takes over. That is, alumni do respond in terms of increased donations. … When there (are) bad economic times, when they see their university or college endowments and subsidies and payments going down, they actually step up to the plate, and they contribute more. That’s the good news.
“Now the bad news is the researchers found that those additional funds from the alumni do not totally offset the reduction in funding to those universities and colleges from other sources.”