Brian Flahaven (@FlahavenCASE) is senior director of advocacy at CASE.
As part of their final budget, U.S. Florida state lawmakers earlier this week approved legislation that will prohibit the state’s public colleges and universities from using state funds to pay for the salaries of institutionally related foundation employees beginning in 2022. IRFs (also known as direct support organizations, or DSOs, in Florida) are separate 501(c)(3) nonprofit organizations affiliated with public colleges and universities dedicated to raising and managing private support on behalf of their institution.
The legislation is the result of a recent examination of the spending practices of IRFs by the Florida House Appropriations Committee. But comments made during the committee’s March 8 hearing suggest a fundamental misunderstanding by lawmakers of the purpose of IRFs and the value of raising private support for public institutions.
Here are five myths driving this shortsighted bill.
Myth 1: Foundations exist to build wealth for institutions.
The idea that IRFs are growing wealth for institutions is tied to a misunderstanding of the purpose of endowments. Public college and university endowments are collections of hundreds or thousands of individual funds managed and invested by IRFs to serve current and future needs. Most endowed funds are restricted by donors for a particular purpose, such as scholarships at a particular school or for a faculty position. Endowments are not savings accounts or rainy day funds being built up to demonstrate wealth but instead provide a steady and reliable long-term funding source in support of students, teaching, research and other programs that would otherwise have to be paid for by tuition or state funding.
Myth 2: Foundations and institutions shouldn’t fund global travel.
During the March 8 hearing, committee members spent a great deal of time voicing concern about the amount of money being spent on international travel by IRFs affiliated with major research universities. But only a small portion of the travel mentioned was spent by IRF employees. The overwhelming majority of travel spending was from donor-restricted private funds used to support faculty and students attending conferences and conventions tied to their scholarly work. This is exactly the type of travel you would expect increasingly global institutions and their IRFs to support and fund – and it is being done using private funds. Additionally, international and cross-cultural understanding is a core value at many colleges and universities. When students and faculty travel overseas, they make valuable business connections and help advance global research to the benefit of the institution and state.
Myth 3: State funds should not be used to support fundraising.
Lawmakers repeatedly questioned the use of state funds to support fundraising, arguing that funds should go directly toward supporting students and learning. But investing in fundraising does support students and learning. And the state is actually seeing a significant return on that investment, generating more private dollars directly benefiting students and the state. For example, the University of Florida Foundation reported that for every $1 spent on fundraising, the foundation is generating $8 in private support back to the university over time. For state lawmakers looking to spend taxpayer dollars wisely, it would be hard to find a better investment than funding the work of IRFs.
Myth 4: Foundations are not accountable.
As public charities, IRFs are accountable to their donors and to the students, faculty, staff and trustees of the institutions they support. They are also legally accountable to the Internal Revenue Service and state agencies that oversee charitable organizations (typically attorneys general). IRFs file an annual IRS Form 990, a public document available for inspection. In addition, foundation annual reports, gift and endowment reports, investment performance summaries and audit summaries are routinely made available on IRF websites or upon request. Most IRFs also honor requests for other information that does not compromise the privacy of their donors.
Myth 5: Foundation funds should only support student aid.
While raising private support for student aid is a top priority, colleges and universities also raise support to recruit and retain top faculty, upgrade and build new facilities and to fund groundbreaking research. A student’s educational experience is also enhanced by these latter investments. Private support to endow professorships and supplement faculty salaries is particularly critical in Florida where the state caps faculty salaries at $200,000, often far less than they would be paid in the private sector. Perhaps most importantly, while IRFs can and do encourage giving in support of student financial aid, the vast majority of giving to public institutions is restricted by donors committed to supporting specific charitable purposes of their own choosing.
The State of Florida and students at its public colleges and universities have benefited greatly from private philanthropy. While the final budget legislation is an improvement over a previous House bill, it still sends the message that there is something wrong with state funds being used to generate private support at public institutions. Hopefully, Florida lawmakers will reconsider this flawed legislation and seek ways to support the critical work of Florida IRFs.