At UO, private money pays off.

Byline: Greg Bolt The Register-Guard

If not for private support, the University of Oregon campus would be a vastly different place.

It would not have the Knight Law Center, for instance, or the expanded Knight Library. The Lillis Business Complex would not exist, and the newly expanded Jordan Schnitzer Museum of Art would be little changed from when it opened in the 1930s.

Autzen Stadium would be the smaller bowl it was in the Ducks' losing days, and the Casanova Center, Moshofsky Center and the soccer and practice fields would be gravel parking lots. Any number of academic buildings would have outdated labs, classrooms and study centers, many of the best faculty would not be here and thousands of Oregonians either never would have attended or would have graduated with vastly higher loan debts.

Private money is more important than ever these days, not only at the University of Oregon but at every public university in the country. The lavish gala the UO staged Saturday to formally launch its state record-setting $600 million fund drive only underscores how crucial donations are to the university's fiscal health.

"We are in a position right now where if we didn't have the private gifts, we would be a much lower quality university," UO Provost John Moseley said. "We'd still be offering classes, but the state funds just barely cover the minimum to provide the educational services our students need."

The UO already raises a considerable amount of private money to supplement its state appropriation and tuition. In the past several years, it has raised $300 million, half its goal, and this year was the first in UO history that its annual fund raising surpassed the state allocation.

Despite that, tuition at the UO has increased 46 percent since 2000. Resource fees also have increased along with other costs, right down to a per-page charge to use printers in university computer labs.

But with all of that private money flowing in, why is the cost still going up?

Boiled down, the answer is that private money doesn't pay the utility bill, doesn't keep the grounds or the buildings clean and doesn't cover the bare-bones costs of undergraduate education. In the grand scheme of higher education financing, the state allocation is supposed to provide the basics, with private money building on that to make what otherwise would be a mediocre or good institution into a great one.

"The driver is the need for resources above and beyond what the state provides, especially for universities that aspire to be among the top-tier institutions," said John Lippincott, president of the Council for Advancement and Support of Education, a Washington, D.C.-based advocacy group. "The private giving is not a substitute for state support. It is a supplement."

And it is a supplement that universities would not get if they did not provide an adequate foundation built on state support, tuition and research grants, higher education leaders say. Donors are looking for opportunities to make a university stand out and are rarely if ever interested in covering expenses that the state or students should be paying.

"We can't, and wouldn't be successful if we did, ask donors to give us money to help backfill this hole in state support," Moseley said. "They'd laugh at us. Donors want to feel like they're making a positive difference, that what they're doing is adding value to the university beyond what we would normally expect the state to pay for or students to pay for through tuition."

What's more, donor money is rarely available to use as the university sees fit. About 80 percent of it is dedicated for specific purposes, such as a building, a scholarship fund or a professorship.

Even then, the gift often is given in the form of an endowment, in which the money is banked and only the interest income is used. Such investments typically pay out at an annual rate of about 4 percent, which means that $1 million donated to the UO produces $40,000 a year that can be used only for the purpose for which it was given.

That concept is sometimes hard to convey to a public that now sees state universities hauling in hundreds of millions of dollars in private giving, and university presidents worry that the public will see private gifts as a substitute for taxpayer support rather than a supplement.

But UO President Dave Frohnmayer said that's a necessary risk, because private money is the only way the university can hope to maintain an academic and athletic edge in the current funding landscape.

"There's been a view that one doesn't give to public institutions because the public should support them," he said. "And now it's so clear the public doesn't support us even at the same level it did a generation ago."

That has produced some important changes in how the UO goes about its business. The ability to raise private money has become a key qualification not just for presidents but also for deans and other high-level executives, who now spend less time on the business of education.

Frohnmayer said he devotes at least 40 percent of his time to external affairs, which includes fund raising as well as public appearances, alumni events and legislative contacts. He no longer makes final decisions on questions of tenure and hiring, leaving those tasks to the provost and deans, who themselves spend more time on the money circuit.

"To be a dean, for example, fund raising was not thought to be particularly important a generation ago or even 15 years ago, but it is indispensable now," Frohnmayer said. "Not every person likes fund raising. Not every person likes going out and representing the institution publicly. But you had better like it, or you won't be a good choice in this environment."

Also, universities now must be much more conscious of their "external constituencies," Frohnmayer said. Alumni relations and public perceptions have taken on much more importance, as was illustrated by the well-publicized and now-healed rift between the UO and its largest donor, Nike's Phil Knight, over the university's decision to join a labor watchdog group that Knight opposed.

That incident and the greater emphasis on fund raising raises questions about who controls the university, it's president and faculty or its donors. But Lippincott said private donors rarely try to influence university decisions and that their support actually is essential to the university's public mission.

"In particular, it is private support for student scholarships that ensures broad public access to public universities," he said. "So not only do I not think it's compromising the public role of the institution, in many ways I think it reinforces the public role of the institution."

Frohnmayer said the university sets its own priorities for building projects, scholarships and other needs and then seeks donors interested in supporting those priorities. He calls it an "enlivening, engaged, back-and-forth" process.

He said the UO is not interested in taking money for things it doesn't need.

"We haven't done anything that is not important to the university, even if it's been 100 percent donor financed, if for no other reason than that we would have to maintain it even if it were 100 percent financed," he said. "So we're not going to do something that's contrary to our mission or not important to our mission."

But with all the private money coming in and state support at an all-time low - the state now provides just 14 cents of every dollar of revenue the UO receives - some might wonder whether it makes more sense to forgo state support and state oversight and become a private university. But there are several problems with that.

One is that the campus and all its buildings and equipment, with a replacement value of more than $1 billion, are owned by the state. Another is that to replace even the modest state appropriation, the UO would need to increase its current endowment by $1.5 billion.

Frohnmayer said that kind of fund raising, while not outside the realm of possibilities, would be a huge undertaking. But more importantly, he said, the question goes to the heart of what the University of Oregon is.

"That piece of it is a much more philosophical one and a much more vital one, and that is that we started out as a public university. We have a public mission. Our existence is traceable to the Oregon Admission Act," Frohnmayer said. "That is the reason why we're here. It's a very important heritage, and the notion that we abandon that at a time when the publicness of higher education ought to be even more important is really unthinkable."