How MacKenzie Scott Broke the Problematic Patterns of Higher Ed Philanthropy
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MacKenzie Scott recently gave $50 million to Prairie View A&M University in Texas. Maureen.allen, CC BY-SA 4.0, via Wikimedia Commons
MacKenzie Scott has generated a tremendous amount of buzz with her latest round of grantmaking, which includes another infusion of support for over 30 historically undercapitalized universities, including 16 historically Black colleges and universities (HBCUs)
Throw in her big debut in July, and Scott has given $842 million to 42 institutions, according to the Washington Post. Of that amount, $560 million went to HBCUs, $147 million to Hispanic-serving institutions and $5 million to tribal colleges. She also gave $130 million to five other public colleges in Florida, Washington state, Nebraska and Kentucky.
Many have applauded Scott’s decision to bypass the usual affluent suspects. “There’s a long history in this country with minority institutions being underfunded, being thought of as not competing with white institutions, and therefore not receiving adequate funding to do the work that we do,” Ruth Simmons, president of Prairie View A&M, told the Washington Post. Her school received $50 million from Scott.
The decision to prioritize underserved and lower-income students is an admirable, signature component of Scott’s higher ed grantmaking, particularly given the size of these donations. But in this regard, her giving follows a trend that was taking hold even before the pandemic struck. Community colleges were netting bigger gifts thanks to increasingly sophisticated fundraising operations. In late January, Lodriguez Murray, senior vice president of public policy and government at the United Negro College Fund (UNCF), said that HBCUs were on the “precipice of the… renaissance,” thanks to surging philanthropic support.
The pandemic and growing calls for social justice accelerated these trends and galvanized what former university president and Forbes contributor Michael T. Nietzel calls a “shift in giving priorities, with major donors looking to invest in institutions that serve larger shares of low-income and minority students.” Scott tapped into this zeitgeist and made headlines by digging deeper, casting a wider net and overshadowing giving by her billionaire peers.
What’s truly disruptive about Scott’s giving spree involves the mechanics. Her methodology blew up the higher ed fundraising paradigm built on the twin pillars of personal relationships and restricted giving.
The prevailing relationship-based model
Before Scott, the idea that a mega-donor would give dozens of no-strings-attached mega-gifts to undercapitalized universities with whom she had no prior connection was the stuff of equity advocates’ most quixotic fantasies.
Higher ed fundraisers drummed up $49.6 billion during the 2019 academic fiscal year, according to the Council for Advancement and Support of Education (CASE). Practically all of this support came from a funder with some preexisting connection, however tenuous, to the recipient university. Mega-gifts loomed especially large, with seven institutions reporting eight single donors who each gave $100 million or more.
The pandemic has made universities even more reliant on alumni mega-gifts. “Top-of-the-pyramid” donors are “still making money and doing better than the rest of the world,” Don Hasseltine, a senior consultant and vice president at the Aspen Leadership Group, told me back in June. In many cases, “95% of the money raised in a capital campaign will come from 5% of the donors.”
These gifts typically come from alumni who have deep relationships with their alma maters. Many gifts are years in the making, with a donor often building up to a mega-gift with a series of smaller ones.
Even gifts earmarked to serve low-income students often have personal backstories of some kind. In June, Reed Hastings and Patty Quillin announced a $120 million commitment, which was distributed equally between the UNCF and Spelman and Morehouse Colleges. Hastings has known UNCF President Michael Lomax for over a decade, and last year, Lomax gave the couple a tour of the two schools.
In October, the Jay Pritzker Foundation made the largest community college gift in history—a 20-year, $100 million commitment to the California system. Jay’s daughter attended a community college before transferring to UC Berkeley.
A different approach
In Scott’s case, the grant recipients didn’t intuitively spring from her mind based on her life story or personal connections. Rather, she outsourced the evaluation process to a “team of advisors” who “took a data-driven approach to identifying organizations with strong leadership teams and results,” giving special attention to those operating in communities facing “low access to philanthropic capital.”
This approach considered “suggestions and perspectives from hundreds of field experts, funders and nonprofit leaders and volunteers” who pored over “thousands of pages of data analysis on community needs, program outcomes and each non-profit’s capacity.”
Upon identifying viable recipients, Scott’s representatives then contacted college presidents out of the blue “to interview them about their missions,” wrote the New York Times’ Anemona Hartocollis. “When they learned who was behind the effort, it was a surprise to them, too.” After mere “weeks or months of hush-hush conversations,” the money hit the schools’ accounts. “I was stunned,” Prairie View’s Simmons told the Times.
Impact is subjective
Scott’s “data-driven approach” also deserves a closer look, given the curious pre-pandemic calculus of Scott’s fellow mega-donors. Billionaire financier David Booth called his $50 million gift to KU, earmarked for its football facilities, “a long-term thing” and compared it to investing in the stock market. Yet readily available data suggests that college football programs are money pits.
The famously technocratic Michael Bloomberg gave $1.8 billion to help disadvantaged students attend his alma mater, Johns Hopkins University, which sits on a $6 billion endowment. As I pointed out at the time, had Bloomberg given the same amount to neighboring Baltimore City Community College, the money would have helped a far larger number of students.
Yet two years later, in a gift that foreshadowed Scott’s approach, Bloomberg gave three Black medical schools $100 million after his staff determined that one of the best ways to improve the health outcomes in Black communities was to attack student debt.
And therein lies a larger point. Increasingly important higher ed mega-donors don’t give solely based on a “data-driven approach” as much as a proprietary mix of intuition, nostalgia, loyalty, relationships, tax considerations, and, most importantly, their own subjective definition of impact.
If donors didn’t have strong feelings about what constitutes impact, they’d make unrestricted gifts and let administrators work out the details. But overwhelmingly, that’s not how higher ed donors think.
Ensuring “maximal flexibility”
Back in April, I spoke with John Aubrey Douglass, a senior research fellow at UC Berkeley’s Center for Studies in Higher Education, about how the university planned to raise $6 billion by the end of 2023. “Donors want to give to a specific project or university activity,” Douglass said, while noting that a staggering 99% of gifts to Berkeley are restricted by donors.
A search on the Chronicle of Philanthropy’s gift database corroborates Douglass’s point. The database generated 43 individual donor gifts between $15 million and $50 million in 2020. Nine of these gifts were previously announced commitments from Hastings and Quillin. Donors earmarked each of the remaining 34 gifts for a specific purpose like medical or research institutes, new buildings, financial aid, an MBA program, a football practice facility, and so on.
This doesn’t mean restricted gifts are inherently bad, of course. But restricted gifts “only partially help with general operating costs,” Douglass said. They can also compel administrators to prioritize a donor’s pet project over less flashy programs that serve more students or plug glaring, pandemic-sized financial holes.
Meanwhile, Scott’s gifts are unrestricted in order, she said, to provide recipients with “maximal flexibility.” Once the money is transferred into the recipient university’s account, her stated intention is to “get out of their way.”
In breaking historic giving patterns, Scott has given mega-donors the philanthropic cover to experiment beyond the conventional boundaries of relationship-based and restricted giving. The big question now, of course, is whether her peers will follow her lead or resume business as usual once the pandemic subsides.
