Just three years ago, an anonymous donor pledged to give $25 million to Gordon College. The donation was, at the time, the largest of its kind; it dwarfed previous gifts by four times.
This past fall, that record was once again surpassed by the announcement of a pledge of $75 million dollars, by the same anonymous donor. And even though the previous $25 million was included in that final sum, the gift made headlines for being one of the largest donations ever given to a Christian liberal arts college. Along with the massive gift, the Faith Rising fundraising campaign was announced in an attempt to double the amount of funds.
To make this announcement, the College put on a dramatic multi-media presentation that celebrated 130 years of Gordon history. But despite the swelling music and grand projection show, many students left the chapel that day feeling conflicted. While some acknowledged that the gift was a good thing, many students were still reeling from the budget cuts that had removed some of their favorite professors and left some departments nearly empty.
Students voiced many questions: if Gordon is getting all this money, why can’t the College save some of the programs that were cut? What does it mean that the gift is primarily going into Gordon’s endowment? If this is such a big gift, why is the school asking for more even money via the “Faith Rising” campaign? Since many of those questions remain unanswered, The Tartan sat down with Britt Carlson Eaton, associate vice president for advancement and director of the Faith Rising Campaign, and John Truschel, vice president for finance and business development, to get answers.
Q: Why can’t the school use the $75 million to save programs and professors affected by the budget cuts?
A: Typically, donors have very specific intentions when giving large amounts of money. The $75 million dollar gift was primarily intended to alleviate student costs by bolstering the school’s endowment. The endowment, in turn, provides additional funds for scholarships over the coming years. According to Eaton, these particular guidelines were settled on because the donor desired that the gift have a long term impact.
Gordon gives away approximately $30 million dollars a year in institutional aid, aid that is not covered by sponsored scholarships, Gordon’s endowment, or other gifts. Essentially, the cost to run the school is much greater than what students collectively pay in tuition and fees. While some scholarships come from specific funds or the endowment itself, nearly half of student aid is unfunded, which leaves the College with a short-fall. As enrollment has decreased in recent years, this financial shortfall worsened, which required the school to make the cuts last Spring.
The intention for the $75 million is to build the endowment so that the $30 million gap might be closed and students offered more scholarships. “The major focus is trying to make Gordon more affordable…than it would be otherwise,” said Truschel.
Even if the funds were not allocated to the school’s endowment, the financial situation of the College required more than a one-time infusion of cash to cover the losses of 2019. Eaton said: “It would have fixed it for one year, but we would have been in the exact same situation the next year. Because really our financials haven’t changed.”
Furthermore, as is the case with many gifts, the $75 million is deposited to the school in monthly installments, not all at once. While the donor pledged the whole amount, it will not arrive in full until an undisclosed time.
Q: So, how does an endowment work?
A: An endowment is basically an investing strategy. The College doesn’t take any funds from the initial total amount, instead they access the interest that accrues over time from investment. This provides passive income continually throughout the years without running out, provided the school does not take from the principle. An endowment also provides year-to-year financial stability, especially when enrollment numbers change and when the College cannot pay for its expenses on its own.
Eaton used the analogy of receiving an apple orchard as a gift. There are a couple options of what one could do with the orchard. “You could choose to cut down all the trees and sell the wood…and you’d basically get a one-time infusion of cash to help you with your current financial circumstance,” said Eaton. “Or you could choose to tend the orchard and year over year have apples that you are able to sell and then you have an ongoing source of revenue to provide ongoing support.” An endowment operates on the same principle as the apple orchard.
Additionally, since the $75 million gift is given gradually and the amount that can be taken out grows as the total grows, the full impact of this money won’t be felt for a decade, Truschel explained. So while there is some of the gift that is going towards student scholarships today, primarily for Global Honors students. Most of it will be used for future student scholarships, and not just Global Honors students.
Q: If this is such a big gift, why is the College now asking for more money?
A: Eaton said that when a large donation is given to a particular organization, it’s actually a perfect time to fundraise.
“Getting a gift like the transformative gift can be a catalyst for others to say: this is a place that is a good investment,” Eaton said. “And it can call attention to the College and the good work that’s happening here and inspire others to be similarly generous and philanthropic. And we have seen others inspired by this.”