President's Pages in Princeton Alumni Weekly
April 9, 2003
Over the last 21 months, I have had many occasions, both on campus and across the country, to speak with alumni and parents about Princeton, and to hear your thoughts and concerns. One of the challenges that I often face is to rationalize the importance of Annual Giving to Princeton at this time of economic recession when charitable organizations in all our communities are suffering cuts to their budgets. The question is often posed as follows: “How can Princeton, with its large endowment, need my relatively small contribution this year?” In this page I hope to provide answers that will help explain why Annual Giving is so essential to Princeton and to the students who benefit from it.
First, let me provide some general facts about the endowment and Annual Giving. Princeton’s endowment is the fourth largest among universities (after Harvard, Texas, and Yale), but it is significantly greater than any of our principal competitors on a per-student basis. It subsidizes the education of all Princeton students, whether they receive financial aid or not. Thanks to excellent management and the continued generosity of donors, even in these uncertain economic times, the endowment has sustained its value and currently stands at about $8.1 billion. The spending rule that governs how much of the income from the endowment can be spent each year helps maintain a balance between current and future needs. The endowment income is the engine of the operating budget (as opposed to its capital—bricks and mortar—budget), and supports approximately 30 percent of annual University expenditures, an unusually high percentage even compared to our most well-endowed peer institutions. A large portion of this income is targeted for specific uses, which limits the flexibility these funds allow us in any given year.
If the endowment is the engine of the budget, then Annual Giving is its seed cord that needs to be replenished each year. Annual Giving dollars, because they are unrestricted, allow the university to be fleet-of-foot; that is, they allow us to respond rapidly to new opportunities as well as to meet unexpected challenges to the budget. In fact, they typically provide 50 percent more unrestricted dollars than the endowment in support of the University’s operating budget. Last year Annual Giving provided $36.4 million, or about $8,000 per undergraduate student, and accounted for approximately 10 percent of the University’s overall budget for education and general expenses. Remarkably, over 75 percent of all undergraduate alumni over each five-year cycle support Princeton through Annual Giving, and a growing number of graduate alumni, parents, faculty, and staff contribute as well. This is an extraordinary demonstration of loyalty and confidence, and it makes us the envy of every other university in the nation.
Here are some examples of how Annual Giving has provided us with the “margin of excellence” that allows us to provide an education at both the undergraduate and graduate levels that is second to none. It was the sustained strength of Annual Giving, along with the growth of the endowment, which gave the trustees the confidence to enact our extraordinary new financial aid program. In the Class of 2006, a record 52 percent qualified for financial aid, with an average grant of $22,650. Annual Giving filled the gap between what we had budgeted for these students and their actual need. Those dollars made it possible for 7 percent of the freshman class to be the first member of their families to attend college. Princetonians are justly proud of this program, but to sustain it in the short run until we can raise sufficient endowment, we are depending on the continued generosity of Annual Giving.
When we decided to create a new undergraduate writing program in December of 2000, we used Annual Giving funds to hire enough instructors so that we could provide seminars for all freshmen by the fall of 2001—a rapid response to an educational opportunity that could not have happened without the flexibility of Annual Giving. Those unrestricted funds also help enormously in faculty recruiting. For example, Annual Giving contributions helped us persuade David Botstein, one of the world’s pre-eminent scientists, to leave Stanford to head up the Lewis-Sigler Institute for Integrative Genomics. As is so often the case when we bring faculty in the sciences and engineering to Princeton, we must be able to provide funding for laboratory space and other start-up costs. Opportunities to make such appointments often arise without much advance notice, and Annual Giving allows the immediate deployment of resources to respond to such opportunities. On a daily basis, from rewired classrooms to renovated dormitories, from athletics to the arts, from the beauty of our historic quadrangles to the safety and security of our campus, Annual Giving has a direct effect on the lives of all of our students.
Annual Giving has been making a critical difference since 1940-41 when the program started with contributions totaling $80,000 from 18 percent of the alumni and a few friends of the University. One alumnus gave the proceeds of a short story he had just published; another cashed in two Yale football tickets he couldn’t use; all 150 members of the Class of 1898 contributed, making them the first class to achieve 100 percent participation. In celebration of this effort, President Dodds told the class agents that year, “You men have started something which may well grow to be the most effective force for progress at Princeton.” His prediction has been borne out, thanks to the generosity of the men and women of successive Princeton classes, graduate alumni, parents, and friends of the University. Annual Giving is what allows Princeton to be Princeton. Thank you!