Last week, the Harvard Crimson printed some unofficial estimates on the university’s current capital campaign.  Be forewarned: these numbers will give many of you a heart attack, so to soften the impact I’m going to lead  by providing some background on the campaign. 

Universities raise money.  Sometimes it’s small donations, sometimes it’s big ones.  Sometime the university spends that money right away, sometimes the money goes into an endowment, which means the capital is available in perpetuity and the university only a small fraction each year (often less than the interest earned).  The standard “take” from endowments these days is 4%, hence the fundraising joke “the quickest way to turn $1 million into $40,000 is to endow it”.  Big donations – the kind you read about in the papers – are almost always endowments.

(The campaign numbers are two paragraphs away.  Are you sitting comfortably?  I want you to be sitting comfortably, because it’s going to be a shock.)

Every 15 years or so universities do something called a “capital campaign”. This is an intense, time-limited effort to get a lot of money out of donors, usually for purposes of acquiring specific physical assets like a new building or two – though the politics of universities are such that capital campaigns aren’t entirely about infrastructure (it’s suicide not to fundraise for scholarships at the same time, for instance).  Capital campaigns always have the same format: they start with a “quiet” period in which money is raised behind the scenes.  Then, after a year or more, they have a public launch ceremony in which the institution sets a goal for the campaign and announces that “surprise!” they’ve already met some suitably high percentage of that goal.  Needless to say, this is always done in such a way that the announced goal will be surpassed.  The face(s) of this effort are always drawn from the senior ranks of local business and alumni.

(Are you ready?  The number is coming.  Deep breath.)

The largest ever university capital campaign was concluded in 2011 at Stanford University, which raised $6.2 billion.  Naturally, when Harvard launched its campaign in 2013, it set a target of $6.5 billion ($8.1 billion Canadian), of which it raised $2.8 billion during the “quiet” phase.  Last week the Crimson broke the story that the $6.5 billion target had been reached.  The University declined to comment, noting that it only announces updates every October, but if true this means that with two years to go, the campaign is on track to raise something on the order of $10 billion by the time it finishes in 2018.

(Everything OK?  Another deep breath.)

Think briefly, if you will, about what $8 billion looks like.  It’s about three years worth of the entire budgets of our granting councils.  It is 33% more than the gross domestic product of Prince Edward Island; (or, if you want to get all internationalist about it, equal to the GDP of Malawi).  It is more or less equal to the aggregate operating budgets of all the universities in Ontario.  And remember, this is just the take from four and a half years of a capital campaign.  We’re not talking the entire endowment here – that’s six times as large again (US$37.6 Billion at last reporting but presumably around US$40 billion now).

Of course, all of this money comes tax-free.  Donations are deductible to the donor, and of course universities are charities and consequently exempt from most taxes.  But at a certain point you have to wonder whether or not Harvard is a charity in any meaningful way.  What’s the public good of having all this money go to a single institution?  Assuming a 30% tax rate, the Harvard campaign has cost American governments almost $2.2 billion in lost revenue.  Imagine the number of students that could be supported with that money. 

Recently, the legislature in Connecticut debated taxing charities’  endowments (read: Yale’s endowment) if they exceeded $10 billion because beyond a certain point it’s tough to make the case that there’s a genuine public benefit to that money.  In the end, they chose not to pursue this idea, but this is – deservedly – going to be a significant public policy issue for the next few years.  There are limits to the amount of money a university needs.  Berkeley aside, the top half-dozen American research universities are now reaching that limit.