We are now two weeks into spring and at the beginning of April, when, as the saying goes, April showers bring May flowers. Which is probably why my online weather forecast is showing rain in nine of the next 14 days.
Spring is, literally speaking, the season between winter and summer. But it is also seen as a time or season of growth and development. Here in Happy Valley, that growth or development is marked every year by the alumni election of three members to the Penn State Board of Trustees.
As Penn State acknowledges, colleges and universities use designations to describe their financial structure: public, private, nonprofit and for-profit. Penn State considers itself a public nonprofit university that receives some funding from the state.
Although there is no august body anywhere that provides the stamp of approval of whether a university is public or private, Penn State uses a generally accepted definition that private colleges don’t receive funding from the state, and instead exist on tuition income, as well as funding they receive through endowments and donations.
Regarding its nonprofit status, Penn State also uses a generally accepted definition that nonprofit universities are not owned by a company with investors, and that they reinvest their revenues back into the institution and educational operations to support their mission and educational purpose. And although there are august bodies – the states – that do confer nonprofit status on companies and organizations, Penn State, which is privately chartered by the Commonwealth, follows this generally accepted definition to allow for its nonprofit designation.
I have worked in and for public nonprofit organizations for a quarter-century, and as a Penn Stater, I’m usually very interested in the annual spring election of alumni members to the Board of Trustees. This year is no different. But instead of looking at this election from the specifics of the candidates, let’s talk about it a bit from the perspective of a public nonprofit organization, which, as I noted, I know a thing or two about.
Nonprofit organizations, like for-profit companies, have two distinct sides. A board that provides governance, and a staff and/or volunteers that provide management. The board provides the overarching vision and keeps the organization heading in the direction of that mission, while the staff/volunteers handle the day-to-day operations. Governance and management. In a relatively perfect world, both sides will not stray greatly into the jurisdiction of the other.
In a large, for-profit public company, the board is beholden to the shareholders – the investors who own stock in the company as noted above. A large public nonprofit organization like Penn State does not issue stock, so who is the Board of Trustees beholden to? Who are the shareholders?
I would suggest Penn State alumni are the majority shareholders of Penn State. The alumni are the ones who have “invested” in Penn State through their tuition dollars – which were a little over $1.9 billion in the fiscal year that ended on June 30, 2023. That’s 43% of Penn State non-health system revenue, and almost six times the amount of the state’s appropriation.
In addition to that cash tuition investment, Penn State alumni are financially tied to the university via donations, as well as their daily lives. The Penn State brand is important to Penn Staters. We love touting how the Penn State Alumni Association is the world’s largest dues-paying alumni relations organization, or how many Fortune 500 CEOs have a Penn State undergraduate degree. We buy millions of dollars of clothes and accessories featuring the Penn State name and logo every year, and are only too happy to wear them and display them. We tell tales of how we’ve traveled to places all over the country and world and heard someone shout, “We Are,” as we walked by in our Penn State gear.
Now, while in a public for-profit corporation it is usually the shareholders who elect all the members of a company’s board, obviously that is not the case with Penn State as it relates to the alumni. Only nine of the board’s 36 voting members – one-quarter – are elected by the alumni. And although I’ve suggested many times before that Penn State alumni ought to be electing more of, if not all, the members of the Board of Trustees, it’s unlikely that will happen anytime soon.
So, as you read this during this early springtime of growth and development, only eight days away from the start of the alumni election of three members to the Penn State Board of Trustees, how can we get the board to grow and develop a bit so we can assure that our needs as Penn State “shareholders” are being met?
Of course, I have a suggestion.
Nonprofit organizations need to fundraise to exist. Without donations to fulfill their mission they cease to operate, unless they are completely volunteer-based. One of the many methods nonprofit organizations will use to help their fundraising efforts is to tout the involvement and commitment of their board — that 100% of their board donates to the organization, and sometimes how much the board gives in total, so prospective donors can see they are donating to something the board believes in and supports.
As alumni, we certainly should have every expectation that all of our Penn State trustees, whether they are elected by the alumni or not, are committed to the university, that they take pride in its mission and are invested in seeing it do well.
Here is what I suggest: that all Trustees be required to disclose how much they personally donate to Penn State every year as a percentage of their Adjusted Gross Income (AGI) from their annual IRS 1040 form.
For example, if a trustee reports $100,000 in AGI and donates $1,000 to the university that year, then they would report 1%. If another trustee gave $10,000 and had an AGI of $2.5 million, they would report 0.4%.
Obviously, in the above scenarios, the first trustee was giving less money, but as a percentage of their AGI it was more than double the trustee with the higher income. And that shows us their commitment. Are they giving until it proverbially hurts?
Plus, this is just donative giving. It won’t include any money given to Penn State for tickets, parking, tuition, books, food or anything that doesn’t generate a donative tax receipt. In fact, although I wouldn’t want to create more work for Penn State’s Division of Development and Alumni Relations, they could be the ones to report to each trustee what their donative giving that year was, so we have as much confidence as possible in the percentages we would get.
I would make one caveat to this reporting, and that is this: any Trustee who has given more than $50 million to the University in their lifetime could choose to be exempt from this reporting requirement. I think cumulative giving at that level certainly indicates a deep and abiding belief and commitment to the mission of Penn State University.
So, there you have it. As we move through this spring season of growth and development, I would very much like it if every member of the Board of Trustees, as well as all trustee candidates, reported to us their donative giving to Penn State in the manner above.
And, although I’m not a trustee, and will never be a trustee, in the interest of fairness I will give them (and you) the percentage of AGI that is our annual giving to Penn State. It is 1.1%. I would hope that every trustee on the board at least meets that level of commitment – or better yet surpasses it.
