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"Breaking a Promise," The Chronicle of Higher Education, October 31, 2003, 19.
By WILL POTTER
When Florida lawmakers created a matching-grant program some two decades ago, Florida Atlantic University saw a big opportunity. The Boca Raton institution, sometimes overshadowed by larger research universities in the state, could get a boost by matching private donations with state dollars.
By all accounts, the college did everything right. Fund raisers trumpeted the program, and donors enthusiastically signed on. State funds for endowed chairs, professorships, and building projects flowed in, at least for a while. Then in the mid-1990s, the state started falling behind in its payments. Now Florida Atlantic has three-year-old gifts that have yet to be matched, and donations awaiting matching money are piling up. The college is waiting for more than $10-million from the state for 20 private donations.
In all, Florida still owes about $124-million in matching grants to its 11 public colleges, according to the state Department of Education, despite spending $41-million on the program this year.
"Each year we go back to the Legislature with the hope that we can solve this backlog, but each year we keep putting in more requests," says David Lowe, vice president for university advancement at the Florida Atlantic University Foundation, the college's fund-raising arm.
Florida is not alone. Once a model for matching-grant programs, the state is now a model for all that can go wrong with them. Nearly half the states have similar programs, and many, including Alabama, Connecticut, and North Carolina, say there is not enough money to match donations. The waiting lists of donations needing matches continue to grow, and at least one donor in Florida has withdrawn a contribution in protest. Some states have not matched donations in so long that colleges say the programs exist only on paper.
The problem is that the programs have worked well. Too well, says Doreen Knapp of the Association of Governing Boards of Universities and Colleges. Starting in the mid-1980s, colleges showcased the programs to potential donors and made them the cornerstones of capital campaigns with goals of a $1-billion or more in some cases. Donations ballooned and continued to climb, even as the economy turned sour. "Colleges raised beyond anyone's expectations," Ms. Knapp says, and then "state budgets went haywire."
Ms. Knapp, who has studied matching-grant programs as deputy executive director of the association's Center for Public Higher Education Trusteeship and Governance, says that in 2001, the last year for which national statistics are available, $216-million in private donations were matched by $117-million in state funds. Even if states are not matching the private dollars, most programs still exist. "If legislators don't have to fund these programs," says Ms. Knapp, "then why go through the trouble of repealing them?"
Donors Take Note
Benefactors are starting to notice, however. In June, one donor withdrew a gift of $750,000 for a new Judaic-studies center at Florida Atlantic University because he was frustrated with the state backlog. And at Florida State University, some donors have said they will contribute only if their gifts get matched. One donor made a $5-million gift contingent upon the state's matching the money within a year. Luckily, the state met the deadline, says J. Jeffrey Robison, president of the university's foundation.
"These donors made money by being smart business people," he says. "They want their money's worth."
That puts colleges in an awkward position. Should they continue touting the programs to donors and hope that the state matches the money? Should they be upfront about the lack of state money and risk losing donations? Should they just act as though the programs no longer exist?
College officials say honesty with donors has been the best policy. Florida State University still promotes the program, but is open about its problems. If donors seem apprehensive, fund raisers will try to "guesstimate" when their money will be matched. "We've had no instances of people being nasty about it," Mr. Robison says. "They support the university and want their gifts matched, even if it takes a few years."
Clear Explanations
Some foundations have changed the language they use to ensure that benefactors are not misled. Florida Atlantic, for instance, now tells donors that gifts are "eligible" for a state match. The University of Connecticut Foundation sends endowment reports and personal letters explaining the $14-million pileup in that state's matching program. When it was first created, the program, which matches donations for professorships, scholarships, and improvements in academic programs, was limited to the University of Connecticut system. But it was so successful that lawmakers extended it to the Connecticut State University System.
That expansion, combined with the slow economy, has meant that some colleges have not seen money since 2000. So far, no donors have complained, says Paul J. Brawley, associate vice president of donor relations at the UConn's foundation. "We assure them the money will come in," he said. "It's just a timing issue right now."
Not all higher-education officials are willing to be so reassuring. The status of Alabama's program is "morbid," says Michael E. Malone, executive director of the Alabama Commission on Higher Education. The Eminent Scholars Program was started to keep star faculty members from leaving the state for more lucrative positions. Alabama matches $400,000 for every $600,000 colleges raise, and is about $15.6-million behind in its commitment. "It was a great opportunity," when the program began, Mr. Malone said, "but we have never been able to make the case with the Legislature" to keep giving it the necessary funds.
Seeking Solutions
Despite all the problems with matching-grant programs, colleges have largely kept quiet in criticizing lawmakers about the backlog. When pressed, most college officials say the state will come through. With the economy still in the doldrums, though, some have stepped up efforts to get the programs back on track.
The University of Alabama at Tuscaloosa, for example, is moving forward with the matching-grant program, with or without state support. College officials did not want to risk the withdrawal of gifts by frustrated donors, so the university started matching the grants using dollars from its general fund. If the state money comes through, the university will reimburse itself, says Cathy Andreen, a spokeswoman for the university.
"When you have a person willing to donate $600,000 for a chair, we thought it was in the best interest of the college to make sure that happens," she says. The university is already waiting for $5.2-million from the state for 13 endowed chairs.
Turning to Lawmakers
Instead of paying for the programs out of their own pockets, most colleges are heading back to their statehouses and requesting more money for the matching grants. The University of North Carolina system asked the General Assembly to spend $11-million this year to clear a backlog of grants, and increase annual appropriations for the program to $6-million, from $2-million. Neither request found much support in the legislature.
"In tough times, when the state isn't keeping up with faculty compensation, these are ways to retain and attract star faculty," says J.B. Milliken, senior vice president for university affairs at the North Carolina system. "They may even become more popular as the state fiscal picture becomes bleaker."
Institutions are also trying to rein in the growing programs now, before they collapse under their own weight. Florida colleges have proposed capping donations: Their fear is that if a donor offered, say, $20-million, the gift would make a teetering program fall apart. "It's been so fabulously successful, it's become expensive. We may need to limit it in some way," said Leslie D. Bram, associate vice president of the University of Florida Foundation, which is waiting for more than $60-million. Colleges have also proposed a 20-year, $150-million bond issue to cover the backlog or using unclaimed prizes from the state lottery.
In seeking solutions, some college officials have turned to Utah's strategy. The state has a much smaller matching-grant program, but it has not fallen behind in providing funds to colleges. Utah's program works in the reverse of most: The state allocates money each year, and colleges must match it with private dollars before they can move forward on a project using the public funds. The approach has kept the program free of backlogs, says Cecelia H. Foxley, Utah's higher-education commissioner.
That strategy doesn't always work, however. Kentucky's Bucks for Brains program is similar in design. Public colleges each get a chunk of money allocated each year. If a college is not able to raise enough funds to use its share, the money goes back into a common pot open to other colleges. That has yet to happen.
As a result of its success and the recession, the state is having difficulty paying for the program. By the end of the year, Kentucky is expected to issue $120-million in bonds to support Bucks for Brains.
Even states that set up unique methods to pay for the programs and avoid shortfalls in the budget have taken a hit. Louisiana, for example, pays for its program using interest earned on a settlement with the federal government over oil revenues. That way the program is not tied to state appropriations. The state has given $144-million in matching grants to colleges since 1986, yet there has always been a backlog of matches, and the legislature sometimes appropriates money just to clear it, says Kevin Hardy, a spokesman for the Louisiana Board of Regents.
Little Support
Few of the proposals to reform matching-grant programs have made much headway in state legislatures. Lawmakers say they love the programs because they take some of the burden of financing higher education away from the state, but they just don't have the money to pay for them.
With other costs, like health care and social services, rising, matching programs are just not a priority with lawmakers, says Connecticut State Rep. Nancy E. Kerensky, a Democrat. Despite the backlog in that state's program, legislators have extended it three times. This year Representative Kerensky hopes lawmakers will agree to get the program back on track by appropriating more money.
"It makes us look very bad to be reneging on this," says Ms. Kerensky, who is co-chair of the Higher Education and Employment Advancement Committee in the General Assembly. "We say 'Go out and help yourself,' and that we don't want mid-term tuition increases, and that we won't increase funding" but then lawmakers fail to support colleges when they raise money on their own.
Florida State Rep. David J. Mealor, a Republican and chairman of the higher-education subcommittee in the Florida House of Representatives says lawmakers want to resolve the issue in the spring session now that the state has more money.
"Some time ago the Legislature charged colleges to go out there and match funds. To their credit, they did just that," he says. "And then we had a dip in the economy. Now, we are in a position where we want to honor previous promises."
Still, colleges are not getting their hopes up. Few expect to see an infusion of funds until after the economy rebounds, and in some states, that could be a few years from now.
"These programs are great when the economy is with you, but they are the sacrificial lambs when things get bad," says Travis J. Reindl, director of state-policy analysis at the American Association of State Colleges and Universities. "And right now, time is of the essence. Colleges needed this money yesterday."
