Private giving versus state funding: Perspectives on funding of Maryland 4-year public institutions

Abstract

This study examined the relationship between and among the changes in the level of institutional fundraising and changes in state funding at Maryland public 4-year institutions. As institutions have become more engaged in fundraising, the impact of private giving success on changes in state funding becomes more apparent in the context of increased fiscal constraint, and as a mechanism to help ensure institutional competitiveness. Anecdotal theory and attitudinal surveys indicated that public funding reductions were considered when private giving increased. Using 13 cases based on 10 years of data from 13 institutions, descriptive statistics, correlation and regression testing results were analyzed using data from several state and national databases. Private giving, state funding, wealth indicators (including the endowment expenditure ratio (EER) and the state pseudo endowment) and ranking indicators, comprised the types of variables tested. Several statistically significant correlations were found, including a moderate, positive correlation between Total Private Giving and State Funding per full-time equivalent (FTE) Student. Simple regression testing indicated a portion of State Funding per FTE Student could be explained by Total Private Giving. This research interpolated that virtually no change was predicted in State Funding per FTE Student per dollar Change in Total Private Giving. Other correlations included statistical significance between private giving variables and several ranking indicators. Many of these indicators were also correlated with state funding. The findings revealed no statistically significant evidence that private giving was used to supplant state funds. Hidden reductions in state funding increases may have occurred, although this research was unable to extract such findings from the analysis. There was an indication that state funding did not keep pace with inflation. On the basis of the findings, an operational model was developed to assist institutional advancement and government relations efforts to maximize funding. The model introduced the pseudo endowment, a fiscal resource variable enabling comparisons between public and private institutions and their assets supporting operations. Discussion of supplanting theory was also raised as an outcome of this model and the underlying research.