How philanthropy could change higher education funding

This article is part of a series exploring ideas for reforming higher education in Australia. We asked academics to analyse overseas models, innovative ways forward in a digital world, and ideas we may not have considered.

Donations from wealthy individuals and organisations have sustained universities since the Middle Ages. Today, the ambitions of universities extend well beyond governments’ preparedness to pay for them. Philanthropy – the donation of wealth towards the welfare of others – can provide an important contribution to the scientific and social advances universities aim to deliver.

The transformative potential of philanthropy

Attracting and effectively using philanthropy requires a level of strategic sophistication and professionalism that has been absent until recently in many countries, such as Australia and the UK. This means universities need to be more sophisticated in the way they use donations, not just using them to fill in budget holes. They need to use it to transform.

They also need to employ more and better staff, and have more effective systems and processes in place.

Read more: Philanthropy in Australia: it's what you do with it that counts

Traditional reliance on government funding in such countries has not developed the cultures and practices of giving found in the US. There, private donations have always been of greater significance.

Harvard University embarked on its first fundraising campaign in 1643. According to some measures, it now receives an average of A$3.83 million a day.

Around one-third of the research budgets of the US’s leading universities come from philanthropic gifts. The impact of these donations is greater than their financial scale would imply. Philanthropic giving, for example, funds longer-term, more adventurous research, and is especially important for younger, less well-established researchers.

It is also impactful. According to one estimate, 47 Nobel science prize winners have had significant funding from Rockefeller philanthropy in one form or another. Philanthropy has also massively improved the teaching and accommodation facilities for students.

What we can learn from the most successful universities

One of the most important strategic considerations about philanthropy is the possibilities for transformation. If it’s all just about the money, philanthropy fails to deliver its potential. By building deep and continuing relationships with knowledgeable donors with shared values, partnerships can stimulate new ideas and directions in universities.

MIT, for example, built successfully on the expertise of Mohammed Abdul Latif Jameel in alleviating root causes of global poverty in its Abdul Latif World Water and Food Security Lab.

Philanthropy can also be valuable in stimulating important inter-disciplinary initiatives. London’s Imperial College has a new centre for biomedical engineering, funded by the Michael Uren Foundation. It became a foundational investment in the university’s new research translation campus, which connects companies with researchers to turn scientific and technological innovations into new products and services.

One of the most marked examples of transformative philanthropy in Australia was the A$100 million series of directed gifts to The University of Queensland from Atlantic Philanthropies. This was leveraged into the A$1 billion Smart State Institutes, such as the Institute of Molecular Bioscience.

Challenges facing university philanthropy

One thing for universities to be wary of is the potential dangers posed by the hidden agendas of some philanthropists. For example, the case of the Koch brothers in the US, who used their fortune to promote their libertarian – if not extreme right wing – views.

The Director of the London School of Economics resigned in 2010 after it was revealed that funds had been received from the Gaddafi Foundation, at a time when the Libyan leader’s son was alleged to have been awarded a ghost-written, plagiarised PhD.

The pursuit of smaller donations can also pose difficulties, with the use of wealth identification services infringing the privacy of alumni. There is the reputational danger for some universities being seen as constantly badgering alumni for funds.

These considerations emphasise the importance of effective communication of the aims of philanthropic giving within university communities, and broad acceptance of its value and contentment with its source.

Long-term, transformative investments in universities do not fit well with the short-term, budget-constrained priorities of governments. Universities that have long relied more on the public purse need to diversify their funding. They also need to hedge against their dangerous dependence on overseas student fees.

Read more: Raising capital: the problem of philanthropy and funding in Australian universities

Philanthropic giving is another major source of support. While it’s increasing in Australia, with major campaigns such as the University of Queensland’s Not if, When, it is dwarfed by funds raised in the US.

There is great competition for funding, including with some of the most prestigious universities. Both Oxford and Cambridge have recently conducted successful multi-billion dollar campaigns. Oxford raised just over A$3.5 billion and Cambridge nearly A$2 billion.

Among the priorities for universities is the need to:

• develop persuasive cases for philanthropic support, based on distinctive, imaginative and bold initiatives

• ensure the strategic vision for the university and its funding models are appreciated and shared by their staff and communities

• search for and sustain deep relationships with key donors that share common values

• continually make the case that public and private investment are not alternatives, but complements.