From the President
Unprecedented philanthropy

President Don Michael Randel on why the second half of the University’s $2 billion capital campaign is as important as the first.

The mid-May inauguration of the University’s Paris Center included, among many celebratory events, a press conference attended by a range of French media. As you might expect, one of the questions the reporters posed had to do with money. How, they asked, had the University financed this very nice facility near the French national library and in the heart of an exciting new academic neighborhood in Paris—what some predict will be the Latin Quarter of the 21st century. The answer was simple: private philanthropy.

The answer is also without precedent in France or any country but the United States, where private philanthropy has created the greatest universities the world has ever known. And private philanthropy is what will sustain them at a moment when the world needs them more than ever.

In that statement lie the hopes of the Chicago Initiative. The Initiative, with its goal of $2 billion, is an unprecedented effort to secure resources for the University. Thanks to the generosity of a great many people, we have now passed the $1 billion mark (see “Chicago Journal,”). But another billion? Isn’t $2 billion an awful lot of money? And does a university with an endowment of approximately $3.5 billion really need that much more? Well, yes. And yes.

Why? The answers are many and bear repeating. The University’s business is ferociously competitive and relentlessly entrepreneurial. We compete daily for what is our principal asset—a rather small (by worldwide standards) group of extremely talented people. And we compete daily for these people against a handful of institutions distinctly wealthier than we are.

We have prevailed in part because of the institution’s extraordinary commitment to—and focus on—what matters most, ensuring that the maximum share of our resources goes to support our core objectives. We have done without what some of our competitors have come to think of as the perks of daily life. But there are limits beyond which such focus will not enable us to remain at the top of the heap, which is to say a university able to attract and retain the best faculty, staff, and students and thus able to remain the most intellectually entrepreneurial of universities. Our people create and sustain the culture in which the best ideas are challenged by still better ideas, pursuing the life of the mind to places it has never been before. That is entrepreneurship worthy of the name.

A few numbers help to define the entrepreneurial challenges. The clearest single measure of university wealth is endowment per student. Our richest competitor has an endowment per student that is approximately $1 million more than ours. At typical rates of endowment payout, this amounts to about $50,000 per student, per annum, more than we have, which is a good deal more than we charge our students each year. This is money that would be available for faculty and staff salaries, student financial aid, library acquisitions, facilities, and much else.

Another way to think about the relevant numbers is to recognize that the principal streams of our costs, namely people costs of all kinds, are rising faster than the principal streams of our revenue. Tuition remains a more important revenue stream for us than for better-endowed institutions, and tuition growth is likely to remain at rates around 5 percent or less. But salary and benefits (especially health care) cannot readily be constrained to such rates as long as there is real growth in salaries in the economy in general. Nor will the cost of financial aid be easily constrained if we continue to believe that we have some responsibility to young people from the bottom half of the nation’s income distribution—we must remember that half of the nation’s families of four live on slightly more than $50,000 per year.

Despite rising competitive costs, we have maintained the discipline of balanced budgets. How have we fought off the gap between revenue and expense? Again, the answer is simple—private philanthropy.

Make no mistake: the Chicago Initiative is not about the frosting on the academic cake. Because of our competitive position, the Initiative calls upon us to exercise greater self-discipline than ever. As we pursue the second half of this essential undertaking, we must more than ever remember the values at the institution’s core and ensure that resources are aligned accordingly. If we succeed in raising $2 billion but fail to add significantly to resources for faculty support, undergraduate and graduate financial aid, the facilities necessary to create the knowledge that will shape the 21st century, and the programs that benefit real people in our own community and elsewhere, our success will be hollow.

I am as confident as I can be that we will succeed—but not because it will be easy. Rather, I believe that there are those who understand the unique value of this university at this particular moment and who will commit their resources to sustaining it. And I am confident that Chicago’s disciplined commitment to what matters most will ensure that we make the best possible use of those resources and thus justify the faith of those who join the Initiative.