The Role of Philanthropy

February 16, 2011

To the Queen's Community,

These regular financial updates aim to increase awareness and understanding of the current fiscal challenges facing our University. We want to broaden the discussion to consider the complexities behind the University's financial picture. It is our hope that by encouraging collaborative, creative dialogue we will arrive at the best possible outcomes.

Where does the money come from?

At the Grant Hall Society dinner last October, Queen's Chancellor David Dodge laid out the current funding challenges facing post-secondary institutions in Canada and, in particular, the role that philanthropy plays in bridging the widening gap between the University's needs and the level of support we receive from government. We touched on the Chancellor's remarks in our October update and want to use those remarks now as a jumping off point to more closely examine one of the less-well-understood aspects of the Queen's financial picture: private support for the University's mission.

Philanthropy – then and now

By the 1970s, governments were providing the vast majority of funding for post-secondary institutions in Canada. For the next 30 years, most operational support for core programs and functions came from a combination of government funding and minimal student tuition payments. As Chancellor Dodge suggested, the role of philanthropy in that paradigm was to provide the "nice-to-haves" – the things that were not essential to the university experience but certainly went a long way to making that experience exceptional.

Over the last decade, the funding model has shifted. The level of government operational support has declined from 80% in 1990 to just over 50% today. And in the last few years, the change has accelerated, leaving us to look elsewhere for revenue. The inevitable result has been steady increases in both tuition and enrolment to boost revenue.

Pressure has also increased for private support – which is no longer just for the "nice-to-haves." Non-government support is now essential to maintaining critical components of the university. For example, capital renewal – the maintenance and modernization of our facilities – would be next to impossible without the sustained involvement of philanthropic gifts.

The role of infrastructure funding – matching support

While annual operating support from government has declined, since 1992 all levels of government have shifted their funding focus to infrastructure projects – there is less money for the day-to-day, and more money available for projects and infrastructure development.

Government funding for infrastructure is a key element in the delicate system of modern project financing. Governments often make their contributions contingent on matching investments from private sources or other levels of government – without private support, there is no government support.

With government support and significant support from alumni and friends, Queen's has had many significant successes in recent years: Stauffer library, Douglas Library renovations, Agnes Etherinton Art Centre, Goodes Hall, Beamish-Munro Hall, the Isabel Bader Centre for the Performing Arts, Chernoff Hall, and the new School of Medicine building. However, we faced a significant financing challenge with the Queen's Centre and we are debt-financing much of the cost over 30 years. The facility is a huge success with students and users. From day one it has positively contributed to the learning environment, but it is impacting the operating budget.

Beyond buildings: Donor dollars at work

While major capital projects attract attention, donations of all sizes and kinds from alumni and friends – not to mention the support of faculty and staff – are critical.

Over the last four years, total fundraising has averaged approximately $48.6 million annually and almost all gifts (approximately 96.3%) are targeted toward specific areas and projects. Donors give to initiatives that match their passions and interests and these reflect the fact that Queen's is a balanced academy – excelling in both teaching and research. In addition to infrastructure, donations are directed in support of chairs, professorships, student assistance, curriculum development, art, lab equipment and more. Every dollar raised has a positive impact on our students and their experience at Queen's.

With government support for operating budgets declining, fundraising has taken on an even greater importance. But while we can and will raise more money in the future from non-government sources, donor support will never provide the complete solution to the operating funding gap.

The 2008 market meltdown had a significant effect on giving. We are recovering, but the continuing decline in government operational funding has exacerbated our financial challenges.  Diminishing government support is a near-universal problem in the not-for-profit sector – which means nearly everyone is seeking support from non-government sources. There are many worthy causes and the pool of available private support is finite.  Still Queen's has faced financial challenges many times in its 170- year history and philanthropy has historically helped us overcome these challenges. In 2011 and beyond, it continues to have a vital role.

Managing in the current climate

It would be unrealistic to count on privately raised funds to help us out of our current structural deficit position. This presents a challenge when an institution is trying to look three, four, or 10 years ahead and make plans for ongoing growth and development. The only way to successfully manage that uncertainty is to invest and spend the dollars we have in a way that minimizes the risk of large drops in available operating funds, year-to-year. In short, we must not simply seek to raise more money; we must be ever-more careful about how we use the money we have. The fiscal climate requires us to be cautious and prudent and to live within our means.

Right now, we are not living within our means. Our task at hand is to bring our expenses in line with our projected income, while continuing to match the interests of our donors to the needs and academic priorities of the university to the best of our ability. These aren't the "nice-to-haves" – they have quickly become the strategic "must-haves" that distinguish Queen's.

Looking forward

In upcoming Financial Updates we will take a closer look at ongoing pension issues as well as capital programs at Queen's.  We want to provide a clearer picture of the relationship between our operating budget and the funds that support the ongoing expansion and renewal of our facilities. It is a complex issue that bears closer examination and discussion to help members of the Queen's community better understand the challenges we face and the tools we have at our disposal for resolving them.

We remain thankful to the faculty, staff, students, alumni and friends of Queen's for your continuing support and contributions. Should you have any questions or comments, please do not hesitate to email us at financial.challenge@queensu.ca.

Sincerely,

Bob Silverman, Provost and V-P (Academic)
Caroline Davis, V-P (Finance and Administration)