Academic journal article Journal of Economics and Economic Education Research

Determinants of Alumni Giving Rates

Academic journal article Journal of Economics and Economic Education Research

Determinants of Alumni Giving Rates

Article excerpt

ABSTRACT

This manuscript examines the determinants of alumni giving rates. The data set is derived from U.S. News & World Report and comprises 196 educational institutions. The combination of decreased state funding for education and increasing costs of education has increased the need to find alternative sources of funds. Alumni donations provide the funds needed along with the signal that alumni are proud of their alma mater. Regression results indicate that the primary determinants of alumni giving rates are institutional acceptance rate, amount of average student debt, percent of students receiving Pell Grants, cost of room and board, value of the institution's endowment, public versus private institutions, percent of full-time students, and percent of female students.

INTRODUCTION

Fundraising efforts at colleges and universities continue to be a top priority for administrators in a higher education environment universally characterized by declining government support as a percentage of total funding. There has been a shift in prioritizing elementary and secondary education over higher education. Higher education is less than one-third of state spending on elementary and secondary education, which comprises 35.1% of total state expenditures (National Association of State Budget Officers, 2007).

A simple search of employment opportunities at a level of college president or dean reveals fundraising ability as an important expectation of the job at most institutions. In order to meet strategic goals, universities compete for top students, faculty and research grants. However, the goals and initiatives are expensive and directly dependent upon accessing funding from donors (Mann, 2007). It becomes a catch-22 for institutions. Donors prefer to give to successful programs but universities need the funds initially to create the successes. Plus, many programs and research projects require several years before fruition, creating a lag effect between donation and success. Furthermore, institutions must continually find new programs that spark the interest of donors.

Higher education's significant and growing dependence upon donations from alumni clearly distinguishes it from other industries. Frequently, a dollar donated by alumni is critically important to an institution because it provides the funding for the margin of success for initiatives that separate one institution from another (Leslie & Ramey, 1988).

Recent reports indicate that the alumni contributions share of expenditures have climbed to over thirty percent. Donations are somewhat distinct from other higher education revenue sources because many times they are based on lagged rather than contemporaneous institutional features, administrative choices, and student body characteristics (Ficano & Cunningham, 2001). Major alumni donors are typically near or in retirement age and remember the university of their youth not necessarily the current characteristics of the institution.

The purpose of this research is to empirically analyze the determinants of alumni giving rates with a focus on financial, institutional, and demographic variables. This paper is divided into four sections. First, a brief survey of the related literature is discussed. The second section provides the model specification and variable discussion. This is followed by an empirical evaluation of the determinants of alumni giving rates for 196 educational institutions employing data from the 2005-06 academic year. The final section offers concluding remarks.

SURVEY OF THE LITERATURE

Scholarly interest on alumni giving to colleges and universities continues to grow. With greater demands on state budgets for health care, prisons, and transportation, education has had to fight for funding and seek an ever increasing amount of alumni-generated donations to make up the difference. Higher education is only 11. …

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