Private giving and state funding of Maryland's public institutions: New perspectives on support of historically black institutions

Abstract

College leaders and policymakers benefit by understanding the relationship between increases in private giving, changes in state appropriations and how to position the institution to maximize both sources of revenue. Anecdotal and attitudinal studies suggested that fundraising success may affect state funding of higher education institutions. Recent quantitative research examining all Maryland 4-year public institutions indicated that total private giving was a partial predictor of state funding per full-time equivalent student, although there was no multiplier effect on private giving leveraging increased state operating funding. This research demonstrated a new method to examine the private and state support of Historically Black Institutions (HBIs) and Traditionally White Institutions (TWIs) and the supplanting of state funding, which is the focus of this article. My analysis of data from Maryland's four HBIs compared to TWIs was undertaken to compare fundraising activity and state operating funding support during the period FY1997 – FY2006. This research was inspired from an understanding of public choice theory, the correlation of endowment size and institutional quality rankings, and the cost of excellence study. I developed a quantitative study of Maryland 4-year public institutions over a 10-year period. My research analyzed the change in private giving in terms of the institutional endowment and treatment of state funding as the equivalent of spending from a pseudo endowment. Pseudo endowment is a ratio that simulates an unrestricted endowment necessary to support an equivalent spending level equal to state funding and will be explained in greater detail within the research design section of this article.