In 2010, as Stanford threatened to cut fencing as a varsity sport, alumni and fencing enthusiasts banded together to save the program that was founded in 1891, the same year as the prestigious university. “Little kids were putting their loose change into one of those water cooler bottles to save the program,” Rita Comes-Whitney, Executive Director the Stanford Fencing Association, said.
Collecting donations big and small raised more than $1.25 million to keep fencing at the varsity level. Even as that endowment has grown to more than $2 million in the decade since, according to Comes-Whitney, it wasn’t enough to save the sport. Stanford included fencing last week in a decision that resulted in 11 varsity sports being dropped.
More than 100 varsity sports have been cut at dozens of schools in recent weeks as universities scramble to close budget gaps caused by the pandemic. With those cuts, the Stanford fencers, like college sports boosters across the country, are learning a hard lesson: As teams get dropped, money given to support programs for the foreseeable future almost always stays with the school, even when the fields go silent. “The house gets to keep the money,” a disappointed Comes-Whitney said.
The disconnect comes from the nature of how athletic donations are used and the sometimes arcane laws that govern charitable gifts. Donors often aren’t aware that how they give to their favorite team at their alma mater governs how easily schools can redirect the money. Money given to athletic departments is often channeled through annual athletic department funds. The funds collect money for a year’s operational expenses and the department almost always can direct the money as it sees fit, regardless if it was earmarked for a specific sport or project, such as sending a team to play abroad.
“People don’t really understand that when they write a check to an athletic department that those aren’t endowed funds,” Karen Weaver, a business professor at Drexel University and a former college athletic director, said. “And a university endowment has a lot of legal mumbo jumbo around the concept of what happens to those funds and when the university can spend the principal versus the monies that are thrown off by it.”
Schools usually intend for the income generated by an endowment gift to contribute toward expenses. Using Stanford fencing as an example, the investment return on a $2 million endowment probably covers perhaps half of the $340,000 a year it takes to run a varsity fencing team. “If I gave a $15,000 endowment, only 5% of that money could be used to pay for a scholarship. But people would call that an endowed scholarship, even if 5% doesn’t begin to cover the entire cost,” adds Weaver. In short, endowed actually doesn’t mean forever.
It’s not just the kids dropping pennies into fundraising jugs who can see their favorite team go away. Even the millionaires and billionaires who could endow a whole team forever can’t guarantee to have their way.
“For a university, you can’t lock them in to something. There’s a general principle called cy pres, which means ‘as near as possible.’ It gives the entity receiving the money the chance to do something similar, to adapt the use for it,” said Eileen Heisman, President and CEO of National Philanthropic Trust, a charity that manages $6.2 billion in donor funds for disbursement to non-profit recipients, including colleges.
This clause gives athletic programs and schools enough wiggle room to make decisions that donors rarely think would happen. Dropping a varsity sport down to club status, something Dartmouth and Brown are also doing, easily counts as ‘near as possible.’ But school flexibility goes beyond that. A donor can only extend their control so much: Too many stipulations and demands, from having a say on a coaching hire to dictating the level of competition or any other number of clauses a donor might want, can negate the donation’s status as a gift.
“By law, it has to be a completed gift, which means you totally surrender control. So if the donor wants to retain too much control, you can have your tax deduction put in jeopardy,” Heisman said.
Eliminating sports is an unexpected event in most of college athletics. In 1982, the average school had 15.1 sports teams. By 2019, that had steadily grown to 18.1, according to NCAA data. The number of students expanded much faster, more than doubling to 499,217 last year. The scope of this summer’s cuts and the financial ramifications with donors will probably take up to five years to really be seen, likely with the courts having to sort out some unforeseen legal issues around gifts, according to Heisman.
Even if the law is on the schools’ side, athletic departments will have to work hard to repair fractured relationships with supporters. “There isn’t a real path to follow on this. Athletic departments are going to have to have some tough conversations with donors about what the intent is for the program that they were supporting,” Weaver said.
In California, at least, one donor is rethinking her gift plans. Comes-Whitney, who is also a board member of the U.S. Fencing Association and on the veterans council of the International Fencing Federation, is considering redrafting her estate plan. “I’m part of the Founding Grant Society,” she said, referring to Stanford’s at-death bequest program. “If I die tomorrow, that program is going to get funded. I’m going to have to change my will.”