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A uniquely American institution founded by a Canadian is closing in on its 50th anniversary. Saturday Night Live first aired in 1975. That’s nearly 50 years of 90-minute shows imagined, written, and performed within one week. SNL’s infamous pressure cooker environment has given rise to hundreds of moments of comedic genius, thousands of instances of mediocrity, and even more examples of bad behavior. Like the time the great Gilda Radner invited the women of early SNL to her apartment for a baby shower to honor Al Franken’s wife Franny and their new baby. In the book Live from New York, Al recounts what happened as everyone waited for the baby to arrive:
My wife came with her sister first and I was to bring the baby. So I got a doll the exact size of the baby and swaddled it – I told Franny I was going to do this – and there’s like thirty women, and I walk in and they’re all going like “Ohhh… ahhhh.” So I walk in and hit the baby’s head on this piece of furniture and I go up in the air and I come down with everything, everything, going onto this doll, so that there is no way I didn’t kill the baby. And the screams, the screams!... And then my sister-in-law walks in with the real baby.
Predictably, one of the least fun SNL characters is the Canadian: founder and impressario Lorne Michaels. In Live from New York, Lorne’s ability to identify talent is universally praised. But he’s viewed as insufficiently effusive and aloof. Even his good friends call him a name-dropping snob. And he’s not good at ending conversations like other humans, having developed a habit of simply saying “conversation over” then walking away.
You know who can’t say “conversation over” and walk away? College and university fundraisers. They’re charged with spending as much time as possible with alumni of means, fostering relationships that convince them to part with fortunes. These are the relationships that give rise to eight- and nine-figure donations and places like Yale’s new Schwarzman Center. Funded by Blackstone founder and Trump hanger-on Steven Schwarzman, the $150M Schwarzman Center was lauded by the Yale Alumni Magazine for its “dramatic contrast between classical limestone and modern glass and steel” and described as “a subterranean playground” featuring a dance studio, a café and performance space known as The Underground, and – directly beneath the rotunda – a circular pub called The Well that serves beer, wine, cider, and – to demonstrate Schwarzman’s non-Trumper bona fides – kombucha. According to Jeff Selingo, who’s “seen a lot of bells-and-whistles” across decades of campus visits, “the Schwarzman Center is definitely among the most lavish.” And this is at a university that recently spent $500 million on two new residential colleges with stained glass windows and “vast quantities of granite, brick, limestone, and slate for the exterior, oak for interior hardwood floors” to “make the spaces feel at once antique, imposing, scholarly, quirky, cozy, and comfortable.”
The Schwarzman Centers is a product of higher education’s fundraising industrial complex. Yale has 279 employees in its Office of Development. In 2017, USC’s Office of Advancement employed nearly 500 (up from 230 in 2011). USC currently has 26 open fundraising positions. If we assume average salaries over $100,000 and add funding for consultants, travel, and events, Yale is probably spending over $50M and USC may be spending $100M each year to raise money. And budgets reportedly double during capital campaigns.
The problem’s not that the investment isn’t paying off. Last year USC raised $685M and Yale hit $567M. At these levels, even $100M seems like a bargain. Maybe this is why many universities bestow the title “officer” on fundraisers (development officer, advancement officer). Whereas military officers are leaders whose authority is derived from a commission from the head of state and corporate officers are C-level executives who can sign contracts, legally binding corporations, colleges and universities extend the honorific not to their most prolific researchers or best instructors, but rather to hundreds who have a talent for getting along with rich people and providing a “ quality donor experience.”
The problem is that the fundraising industrial complex is accelerating inequality among American colleges and universities. The U.S. already had the world’s most unequal system of higher education in terms of brands; a few dozen world famous schools educating less than 2% of the country’s undergraduates, the other 98% at thousands of schools with reputations that are local at best. The 2% also tend to have business, medical, and law schools that produce wealthier alumni. With these built-in advantages, they’ve been busy providing students with more personalized experiences, establishing a deeper sense of identification, leading to a greater inclination to donate in later years. Not surprisingly, for generations they’ve been attracting students who are more likely to make a lot of money in the first place.
Their head start in the endowment race has given them an insurmountable lead. It’s impossible to catch up to Harvard when last year’s 34% return added $11.3 billion – more than the endowments of all but 8 other institutions. So Harvard can invest even more in brand building, attracting the most talented and motivated students, producing wealthy, loyal alumni, and – of course – fundraising. Harvard funds 39% of its operating budget from its endowment. At Yale, it’s 35% of a budget that includes nearly as many administrators as undergraduates (including some who appear to be causing more problems than they’re solving).
Of course, endowment spending also provides financial aid miracles. As Jeff Selingo noted, the median net price for Yale students who apply for financial aid and come from families making less than $65,000 is $3,000. The median net price for Yale students whose families make between $65,000 and $100,000 is $5,700. That’s less than you’d pay for room and board anywhere in the country for 8 months of the year. But you have to win the lottery to benefit. Applications to the Ivy League have increased 127% in the past 15 years, but available seats have grown less than 10%. While Yale added 2 expensive new colleges and 800 seats, Harvard has increased its class size by less than 1%. That means 1,665 places for 8,200 applicants with perfect GPAs. Of course, most of those perfect GPAs come from families of means; as of four years ago, five Ivy League schools had more students from the top 1% income bracket than the bottom 60%.
All this leads to a sense that places like the Schwarzman Center are for children of plutocrats plus a smattering of lucky kids plucked Henry Higgins-like from the bottom decile. These places aren’t accessible to the average or above average student, and not beneficial to the average American family. So while the fundraising industrial complex seems like a virtuous cycle to those cloistered behind fancy gates, the gap between the 2% and 98% has accelerated dramatically, and the perceived and actual winnowing of American socioeconomic mobility could not be more vicious (see e.g., Varsity Blues scandal where 47 wealthy parents have pled guilty and two have been found guilty for paying bribes to get their children into fundraising giants like Yale and USC).
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We tolerate ostentatious displays of wealth in museums and art galleries. It makes sense because, for a small admission fee, anyone can get in and benefit from the resources. Many nonprofit hospitals also invest in lavish facilities, but we don’t object because we could benefit; even if they don’t take insurance or Medicare/Medicaid, they still might save the life of a loved one in an emergency. But the odds that a random citizen will see any benefit from the Schwarzman Center are vanishingly small. The best public benefit argument I’ve seen is that it could “bring additional visitors… to the struggling city of New Haven, which depends heavily on Yale as an attraction.” Even expensive college football stadiums are more likely to benefit the public, either by attending or seeing a more entertaining spectacle on TV.
It’s crazy that the tax code allows wealthy Americans to build tax-deductible monuments to themselves without regard to public benefit. Just as you can’t take a tax deduction for donating a building to your country club for the benefit of a few hundred already fortunate members, you shouldn’t get one for donating a building to benefit a few thousand already fortunate students.
The massive fundraising engines built by top U.S. universities have been fueled by tax rules that treat all donations to 501(c)(3) organizations as equally deductible. Higher education is Exhibit A in the case for making deductibility dependent on use. Nonprofits should not be able to use tax-deductible funds to build elaborate facilities closed to the general public. When colleges, universities, and private schools spend from donations and endowments, they should have the burden of demonstrating public benefit. If they cannot, they should be responsible for taxes saved on the original deductions – effectively a luxury tax.
Such a change wouldn’t be the first for university endowments. 2017 saw the first ever excise tax on endowment income for private institutions with endowment assets greater than $500,000 per enrolled student. But shifting the burden to colleges and universities to justify donation and endowment spending would direct more tax-deductible capital to publicly beneficial purposes, either at colleges and universities that have seen the light (i.e., the new tax rules), or via other nonprofits that more clearly serve the public interest.
Fortified by Schwarzman Center kombucha, Yale seems to be angling in this direction. Its brand new $7 billion capital campaign, modestly titled “ For Humanity,” aims to “ solve the problems that are keeping us up at night.” Alumna Angela Bassett introduced the campaign in a video, asking “What are you for?” Although the priority areas for the campaign – Arts and Humanities for Insight, Science for Breakthroughs, Collaborating for Impact, and Leaders for a Better World – eerily mirror the university’s academic organizational structure more than the problems that are keeping us up at night. And try to overlook that the campaign is still raising money to name lobbies, terraces, and galleries, and counting Schwarzman’s $150M towards the $7 billion total. I guess you really can’t teach an old bulldog new tricks.
At places as privileged as Yale, the public interest can be best advanced through fundraising in one of two ways. The first is research combined with a social or global change agenda – not only academic programs, but activism. If Yale is truly “ For Humanity,” before the new capital campaign is up, it will figure out how to direct incremental giving and spending to real problems like climate change, infectious disease, inequality, and safeguarding democracy rather than theoretical problems like the humanities division in its Faculty of Arts and Sciences or ontological problems like what to name a large meeting room. With restricted giving significantly outpacing unrestricted giving, donors are increasingly seeking to direct their philanthropy. Research and change-oriented campaigns like For Humanity will need to provide donors with such opportunities and forcefully demonstrate why the university is better situated to solve these problems than Joe or Jane Nonprofit. So fundraisers will need to develop subject matter expertise beyond gladhanding and fake nostalgia (apparently Yale’s development office doesn’t hire Yale alumni).
The second is expansion: increase the odds that the public will benefit from the exceptional education on offer by dramatically increasing the number of seats. As I’ve previously noted, America is way behind its peers in terms of places per capita at top universities. Canadian students are about 10x more likely to gain admission to a top Canadian university. UK students are at least 5x more likely to get into Oxford and Cambridge. (Jeff Selingo has made this point repeatedly as well.) The answer can’t be spending $500 million to add two new colleges and 800 beds. It must mean rethinking undergraduate education. After the Covid year, that’s more intensive use of technology for teaching and learning. It could also mean transforming all dorms into first-year housing and directing endowment spending to scaling faculty, classrooms and technology, and developing new off-campus housing sans stained glass windows. Administrators may frown, but they’ll be hard pressed to argue that educating 4x more students each year won’t be in the interest of taxpayers who’ve been carrying their water over decades of tax deduction-fueled fundraising.
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You know the fundraising industrial complex has a problem when development officers say things like “we’re always in a campaign, or about to start one,” and “preparation for the next campaign happens right after—or even before—the current campaign completes.”
The “perpetual campaign” has transmogrified the fundraising function to a ravenous beast that must always be fed. Capital campaigns continue to grow in size. Harvard just raised $9.6 billion, USC $7.16 billion, Cornell $6.36 billion, Stanford $6.2 billion, Columbia $6.1 billion. Amidst the frenzied fundraising, functions that were once outsourced like producers to design and run Hollywood-style events are now hired internally. For both employees and alumni, it’s a treadmill run amok.
Dreary perpetuals campaigns are likely to fatigue potential donors, particularly those less excited about endowing conference rooms and lounges than solving actual problems. Colleges and universities like Yale need to get off the treadmill and put the fun back in fundraising by directing philanthropy to meaningful initiatives that are more in the public interest than in the interest of one of Yale’s 5,000 administrators and managers. Yale For Humanity’s a good start, but still way too amorphous, pompous, and maybe misleading, demonstrating we shouldn’t wait for these schools to wake up. Changing the tax code will do it for them.
It's true that America’s top universities might not have been able to build their magnificent campuses had tax rules directed spending a century ago. But a century of gains feeding gains have left these schools in a very different place. What worked for American taxpayers 100 years ago isn’t working now. So let’s change the rules to reduce inequality in higher education and promote social cohesion rather than upheaval. In so doing, we’ll usher in a new era of raising funds for discrete initiatives focused on solving real problems and targeting specific donors instead of generic campaigns that seem to last longer than Saturday Night Live and come across as snobbish as Lorne Michaels.