Two months into the COVID-19 crisis, many university fundraising leaders are only just beginning to see the impact that the deep economic slowdown is having on their philanthropic returns.
EAB’s latest take on advancement and COVID-19Get the Insights
To get a better sense of what they are experiencing, EAB surveyed 110 chief advancement officers and AVPs about their revenue projections for this fiscal year (FY2020) as well as the next one (FY2021).
As we analyzed the results, we of course saw profound uncertainty. There’s only so much we can divine, after all, about a historically unprecedented crisis.
Yet we also detected a growing consensus that higher education fundraising is poised for a dramatic drop that will rival, or perhaps exceed, the decline that we experienced during the Great Recession. Below are four consequences that advancement teams are already seeing and how EAB believes they will affect future fundraising efforts.
Consequence #1: Philanthropic revenues have already taken a swift hit—and declines will likely accelerate next year
Although most institutions had only three months left in their fiscal years when the COVID-19 crisis hit, advancement leaders nevertheless expect year-end results to be disproportionately affected by the slowdown.
When we looked at the data, we found that 41% of institutions are projecting declines of 10% or more compared to FY2019. More than 1 in 5 are expecting the revenue drop to surpass the 20% mark.
The situation looks even bleaker next year, with the percentage of institutions projecting double-digit declines climbing 3.6% points to 44.6%. The share of institutions anticipating 30%+ declines likewise ticked up for FY2021, underscoring the potentially devastating effects of this crisis on overall fundraising production.
Consequence #2: Small and mid-sized gifts will likely fall across institutions in the near-term, though the biggest drops may come at the top of the pyramid
For both FY2020 and FY2021, gifts under $1M were the area that advancement leaders said they were most likely to see revenue declines of 10% or more. Yet the severity of declines for gifts under $1M are likely to be more muted than those we see even further up the giving pyramid
Below $1M, most of our advancement partners’ projections clustered in the 10%-19% decline range. Declines were substantial, but not necessarily debilitating. For gifts above $1M, though, we saw a flurry of concerns about 20%+ or 30%+ revenue declines
This discrepancy stems from the fact that large gifts are inherently volatile. A single donor changing their mind about a big gift is enough to deal a crippling blow to overall fundraising production, especially as we come to rely on the top of the pyramid more.
If top donors begin pulling back on their philanthropy en masse despite the new tax incentives in the CARES Act around charitable contributions, it would likely to prove the pessimists in our survey sample more than correct.
Consequence #3: Visits may bounce back next year, but the current cultivation drop-off will continue to impact proposals
1 in 5
When asked for FY2020 frontline activity and outcome projections (qualifications, visits, submitted proposals, and closed proposals), many advancement leaders pointed to visits as the biggest victim of the immediate crisis. Nearly 1 in 5 institutions are projecting 30%+ declines in FY2020 visit counts.
That makes sense: travel bans and stay-at-home orders caught many fundraisers who still rely on an old-school “visit or nothing” mentality flat-footed, and visit counts compared to last year unsurprisingly plummeted when social distancing made them impossible.
Projected Declines in Activity and Outcome Metrics, FY20
The good news is that many advancement leaders expect visit counts to tick back up slightly during FY2021. The bad news is that it may be too late for those visits to impact FY2021 revenue. Currently, our survey shows slightly more projected 10%+ declines for submitted and closed proposals than for visits in FY2021.
The takeaway is that fundraising, metaphorically speaking, is a cruise ship—when it slows down, it takes a while to speed back up. Successful proposals in FY2021 rely on rigorous cultivation in FY2020, and once we arrive in the new fiscal year, there won’t be much that can be done to accelerate proposals in time for annual reporting.
Consequence #4: While new campaign launches may continue apace, institutions already in campaign will likely begin to delay their major milestones
The 2010s were the age of the mega-campaign. By the end of the decade, nearly 2/3 of institutions were in some phase of a campaign, many of which aimed at higher goals than ever before.
There’s some indication that institutions that aren’t currently in campaign still feel the itch to do so, irrespective of the unfavorable climate. Of the institutions that were planning to enter the quiet phase of a campaign during the next fiscal year, 77% say they are still moving ahead with their plans.
Yet for institutions already in a campaign, many are exploring a delay in their next milestone, be it a public launch or the campaign close.
Three out of four institutions in the quiet phase say they may end up deciding to change their public launch date, and 1 in 10 have already done so. Across all institutions in a campaign, 45% say they’re still deciding about whether to delay their closing date. More than 1 in 10 have pushed the close date back a year or more.
Navigating uncertainty in a time of fundraising decline
Much remains uncertain about the future. Will the severity of the virus abate across the coming months? Will we develop a treatment that mitigates COVID-19’s impact even before the rollout of a vaccine? Will our economic slide by a momentary dip or a deeper, more intractable period of stagnation? How will donors react in each of these scenarios?
Across the past 24 hours, my colleagues and I surveyed 77 of our advancement partners to see how they are responding to COVID-19.
Here are the top two transformations within advancement that we suspect might be here to stay and demonstrate COVID-19's impact on university fundraising.