UofL President Dr. Neeli Bendapudi inaugurated as hundreds watch Thursday
Matt Stone, Louisville Courier Journal
Donations to the University of Louisville plunged along with its reputation during recent scandals, but there’s hope for the school’s coffers as U of L works to mend cracked relationships with donors.
Spooked by serious problems with how men’s basketball players were recruited and how the U of L Foundation managed Louisville’s multimillion-dollar endowment, some donors grew wary of giving the college more money and are still cautious today.
But new President Neeli Bendapudi’s early leadership efforts since she joined the university in May 2018have inspired some donors to show renewed confidence in the university with big-money gifts.
“Nobody can change the past, you know, and nobody’s happy about the past,” said Barry Allen of the Gheens Foundation, which pledged $2 million in February — the nonprofit’s first gift to U of L since about 2013. “But life is always about the future.”
In 2018, U of L attracted about $90.5 million in philanthropy — a total that includes new cash contributions as well as financial pledges people pay out over the course of several years, according to university data.
That’s a $24.9 million increase over 2017’s $65.6 million, which was its lowest annual haul for philanthropy over the past five years.
Donations are vital for public universities like Louisville, which watched the funds it gets from state government dwindle over the past decade and resorted to repeatedly raising students’ tuition. U of L may hike its rates again soon, by about 2.5%.
Like many colleges, Louisville has its own endowment, which is designed to provide the university with funding in perpetuity by investing donors’ money and then doling out a limited amount each year to support academic scholarships, faculty positions and other initiatives.
As the government spends less on higher education, schools like U of L must depend more on donors who can help bankroll their academic and research efforts and provide scholarships students desperately need in an era of skyrocketing debt. (The Federal Reserve recently estimated that outstanding student loan debt has climbed to nearly $1.6 trillion.)
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That’s why repairing relationships with donors and forging new ties with people in the broader community has been a top priority for Bendapudi.
So far, her leadership and optimism appear to be making a difference with donors, although her arrival hasn’t been a silver bullet for the school’s financial problems.
Brad Shafer, U of L’s vice president for advancement, was “ecstatic” with 2018’s fundraising results and said Bendapudi deserves a lot of credit for the improvement.
Donors are simply feeling good about what’s happening under her watch, said Shafer, who oversees Louisville’s fundraising and alumni outreach efforts.
“When you see her with a donor or talking with a student or leading a strategic planning meeting, she’s the same person in all three situations, and donors and foundations and other supporters see that stability and genuine approach,” he said. “Her ability to connect with donors … might be unparalleled.”
2019 is off to a good start, too. U of L outpaced its fundraising during the first quarter of 2018, raising about $10 million in philanthropy as of March 31 (compared with $6.8 million in early 2018) and $18.8 million in cash donations (versus about $7.6 million).
But, Shafer said, Louisville must keep working to earn back people’s trust, establishing relationships with new donors and rebuilding its fundraising team if it’s going to start raising at least $100 million in philanthropy per year — the benchmark for a school of its scope.
To accomplish that, Shafer is making a series of new hires and has brought nearly 30 staffers on board so far, who have primarily filled vacant positions. His growing team also is rolling out a recurring newsletter for donors.
When he took the job at U of L, Shafer knew this was a “turnaround project” in need of major improvements. It typically takes 18 months to see significant results, he said, but the university is less than a year into that rehabilitation process and are already making progress.
The Gheens Foundation, for example, gave its first grant to U of L in the 1950s but stopped donating after learning about problems with the endowment’s management, among other concerns, said Allen, its president and treasurer.
However, Allen called Bendapudi “a refreshing new wind beneath the wings of the university” and said he hopes the foundation’s recent seven-figure gift will encourage skeptical donors to start giving again, too.
University data shows Louisville still faces a long climb to the fundraising heights it experienced during former President James Ramsey’s tenure, which was marked by significant growth at the school but also by scandals.
2018’s donations fall well below the earlier philanthropy peaks of $133.2 million and $142.6 million the school received in 2014 and 2015, before problems with the men’s basketball program and the U of L Foundation fully came to light.
U of L hasn’t bounced back in terms of how much outright cash people are donating, either. The school received about $77.1 million in cash gifts in 2018 — the lowest amount it has received in the past five years.
Shafer noted that 2014’s fundraising peak happened during a $1 billion capital campaign, which helps colleges attract more money than they do in noncampaign years.
He also said he didn’t expect to see a boost in the amount of cash gifts U of L is getting yet since those donations are often payments made on donors’ earlier pledges. But the fact that philanthropy is on the rise is a good sign, he added.
“During a rebuild project, you would expect philanthropy to go up first,” he explained. “After a downturn, philanthropy needs to return or cash won’t.”
The athletics department, which has its own team of about eight fundraisers, also has weathered a dip in donations.
Cash gifts to athletics fell from $38.6 million in 2017 to $33.3 million in 2018, and the overall philanthropy the department received dropped, too.
Athletic director Vince Tyra attributed the decrease in donations primarily to the end of a capital campaign that funded Cardinal Stadium’s $63 million expansion. (On a brighter note, athletics just had its most productive 12-month period for million-dollar corporate sponsorship deals in at least 10 years.)
Even though Louisville has been in the crosshairs of a federal investigation into college basketball recruiting, Tyra said he has been getting positive feedback from donors about the way he’s run the athletics department and the seven head coaches U of L has hired since he took the reins roughly 18 months ago.
“I don’t really hear a whole lot about the NCAA and the FBI, to be honest,” he said. “We’ve built up a lot of trust — a lot of credibility — with the donor base. … I think people have gotten their head around the spirit of moving forward.”
U of L’s endowment still struggling
Over at the U of L Foundation, donations have picked up lately.
People gave about $5.9 million in cash gifts to the endowment in 2018, an uptick from 2017’s five-year low of $4 million in cash contributions, according to university data. And in the first quarter of 2019 alone, about $3.6 million in cash donations flowed in for the endowment.
Those figures are flimsy compared with 2014, when endowed cash gifts reached $19 million. But the foundation’s executive director, Keith Sherman, said it’s making headway in repairing its relationships with donors.
“They had hit ‘pause’ once all the negative news hit,” he said, but now many donors are making payments on their pledges again.
Sherman said the foundation overspent money from U of L’s endowment in prior years, outpacing the returns it earned on the endowment’s investments — an issue the university and foundation cite in their ongoing lawsuit against former president Ramsey.
As of March 31, U of L’s endowment was valued at about $715 million.
“It could have been and should have been larger, but for excessive spending in the past,” Sherman said.
But Ramsey’s attorney, Steve Pence, noted that fundraising hit an all-time high when his client was at the helm and contended that the way the university handled Ramsey’s ouster in 2016, as well as its pursuit of an ongoing lawsuit against him that includes “outrageous” and “false” allegations, is what actually scared donors away.
Compared with other schools, U of L already has an impressive endowment.
The National Association of College and University Business Officers’ research on the market value of universities’ endowments in fiscal year 2018 placed Louisville among the top 200 of roughly 800 schools that were listed.
The U of L Foundation has set its sights on gradually increasing the value of Louisville’s endowment to $1 billion — a signature achievement for any school, Sherman said.
If only 5% of an endowment that size were spent each year, he said that would provide around $50 million in annual funding for the university.
The foundation’s top challenge, though, involves protecting donations people already have made.
About 800 of the roughly 1,600 accounts in U of L’s endowment are underwater, which means their market value is lower today than it was when they were established, Sherman said. That’s largely because of the foundation’s past overspending.
“Absent market fluctuations … donors expected that those accounts would grow,” he said. “They didn’t get what they expected.”
The foundation is committed to bringing the accounts “above water,” he said, and has put tighter limits on how much of the endowment can be spent each year.
To help make amends, the nonprofit recently poured $13 million into more than 90 endowment accounts created with state funds and invested another $2 million into other accounts created by private donors that have fallen too much in value.
That could free up an extra $4 million per year to support the university’s academic needs, Sherman said. However, it will take time to bring the value of the accounts that are still underwater back up through a mix of investment returns and fresh donations.
To make the remaining underwater accounts whole again, he said the foundation would need close to $40 million. He’s bullish about its long-term prospects, though.
“We’re regrowing the health of the endowment,” he said. “There isn’t a better time to come back to the university.”
Rebuilding trust among donors
The most important “coin of the realm” for any institution is its reputation, said Richard Legon, president of the Association of Governing Boards of Universities and Colleges. And reclaiming a tarnished one doesn’t happen overnight.
“If I was running Louisville, I’d say: ‘We — more than many — understand what can happen when you get an ethical hit that affects your reputation, and our donors can be sure that we learned that lesson,'” he said.
It will probably take more time to fully restore many donors’ confidence, said Shafer, U of L’s head of fundraising. “We’re in a rebuilding of trust phase,” he explained.
Some longtime donors, like the Gheens Foundation, already have come back, and Shafer said he’s been chatting with other people who pulled promised gifts in the past and are looking to return to the fold.
But some donors are staying a bit skeptical, at least for now.
Retired pilot Max Baumgardner — who yanked a planned multimillion-dollar donation to Louisville athletics in 2017 and earmarked that money for other recipients instead — indicated he’s cautiously optimistic about the university’s future with Bendapudi in charge.
“She’s extremely intelligent, aware of everything that’s going on,” he said. “I think she will straighten things out and do well.”
He could see himself donating to U of L athletics again eventually, but “not yet.”
“When they fired (ex-athletic director) Tom Jurich, I was really, really upset,” Baumgardner said. “Lately they’ve made efforts to pull themselves out of the mire that they were in. … I still love the school.”
On the flip side, donors like Rick Kueber, CEO of Sun Tan City and Planet Fitness Louisville, have been eager to strengthen their ties with the university.
He and his brother, David, became U of L athletics donors more than a decade ago, and their latest gift was announced in December 2018: $3 million to expand the campus training facility for women’s lacrosse and the men’s and women’s basketball teams.
Kueber described the new donation as a vote of confidence in the leadership shown by Tyra and Bendapudi, as well as men’s basketball coach Chris Mack.
“My relationship with Vince (Tyra) is hands down the best relationship I’ve ever had at the university,” he said. “I think a lot of it comes down to accessibility and transparency.”
Kueber indicated that donating to Louisville athletics makes sense from a business standpoint, as well as a personal one.
Plenty of their local Planet Fitness employees and customers are Cardinals fans, he said, and there’s no greater influencer in this market than the university and its men’s basketball team. (To recognize the Kueber brothers’ latest donation, which is tantamount to a sponsorship, U of L decided to change the practice facility’s name to the “Planet Fitness – Kueber Center” and christen a parking area at Cardinal Stadium the “Planet Fitness Purple Lot.”)
Kueber said he thinks the local business community is happy with the changes U of L is making. That doesn’t mean everyone is rushing out to donate, though.
Some people are taking a wait-and-see approach, he said, and there’s a tiny subset of folks who are still upset that U of L ousted officials like Jurich and former men’s basketball coach Rick Pitino, “but that number is shrinking by the day.”
As a donor, Kueber said his goal is to support the university and its programs, not specific leaders.
“While I had great respect for Coach Pitino and Tom Jurich, I was not one of their fans,” he explained. “I was a fan and supporter of the university, and the university will be here long after all of us are gone.”
Tyra shared a similar outlook. “I don’t want them to be donors to Vince. I want them to be donors to the University of Louisville,” he said of his fundraising philosophy.
Understaffed but planning ahead
To raise money, universities need fundraisers they can send into the community to build relationships with donors.
A university of Louisville’s size and scope should have 60 to 70 “front-line” fundraisers, Shafer said. When he joined U of L in July 2018, the school had 13 of them, excluding the athletics department’s fundraising team.
(In comparison, the University of Kentucky has 63 front-line fundraisers.)
Louisville had a bigger fundraising staff during the Ramsey era, Shafer said, but some people left that office during the fallout from various scandals.
Keith Inman — who spent over 10 years as U of L’s vice president for advancement before he became president of Kosair Charities in 2017 — said the school completed a $1 billion fundraising campaign during his time there, but donations started dropping in late 2016.
Fatigue over the school’s string of scandals led to the fundraising dip. “It was painful,” he said. “Staff morale was bad. … My team was really devastated.”
Shafer has been working to fill the gaps in staffing, bringing Louisville’s number of fundraisers (excluding athletics) up to around 30 people.
Several schools within U of L, including business and engineering, didn’t have a single fundraiser dedicated to seeking donations for their programs when he arrived. Fixing that became his first priority, which has largely been accomplished.
The second wave of hiring involves filling out those squads. The business school has three fundraisers now, for instance, but it should eventually have four.
From February: Kentucky to cut money for higher education this year
Shafer also plans to create specialized fundraising teams, including one that works with U of L’s international alumni.
Louisville’s advancement office, which Shafer runs, has a budget of $8.6 million, which falls well below its peer institutions’ average annual budget of about $30 million. He’s asking for extra funding to help pay for new hires and other initiatives.
Most advancement offices that manage universities’ fundraising spend around 12 to 15 cents to raise $1, he said, making it a wise investment.
Once he’s finished rebuilding Louisville’s fundraising operation, Shafer plans to mount a comprehensive capital campaign within the next couple of years. The details, including what academic programs and construction projects it will try to fund, are in the works.
With a big fundraising push like that, schools typically want to bring in at least $500 million in donations, he said. (UK is in the midst of its own $2.1 billion campaign.)
Meanwhile, Tyra and the athletics department have hired a firm to do a study of their facilities as they take a fresh look at what their next priorities should be.
Tyra also wants to build up the athletics endowment again, which he said has dropped from the $25 million range a couple of years ago to around $12 or $13 million, in part because of payouts the department made to officials like Jurich.
“But behind the scenes, we’ve already been raising money for a next step,” he said. “The community’s been great.”
As president of Kosair Charities, Inman is now responsible for helping make donations to the school instead of seeking them.
The nonprofit wants to see several of its U of L endowments brought back above water, in addition to improved communication with foundation officials. So far, he’s pleased with the strategic way Louisville is picking its new fundraising priorities.
U of L and its foundation damaged their relationship with Kosair Charities through financial mismanagement and other missteps, he said, but not irreparably.
“Can we fix it?” he asked. “Yeah.”
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