How long can the U.S. stay on top?

Posted by Jeffrey Mervis, June 21, 2013

Originally appeared in Science Magazine.

Government funding has powered U.S. research universities to global preeminence. With that support now shaky, can philanthropy help them maintain their lead?

Johns Hopkins University bears the name of the Maryland banker who in 1873 made what was then the largest bequest in U.S. history, some $7 million, to create a research university and hospital. Today, the name of another record-setting philanthropist is nearly as ubiquitous on the Baltimore campus.

The Bloomberg Center for Physics and Astronomy, the Bloomberg School of Public Health, and the Bloomberg Children's Center hospital are prominent reminders of the 1.1 billion dollars donated over the past 30 years by Michael Bloomberg, the billionaire media mogul and outgoing New York City mayor. And his generosity goes well beyond bricks and mortar: In January, Bloomberg (Hopkins class of 1964) announced that he was donating 250 million dollars to endow 50 new faculty chairs and 100 million dollars to provide scholarships to needy undergraduates.

Such gifts aren't just eye-catching: In an era of stagnating U.S. government support for academic science, officials at Hopkins and other top research universities in the United States say that private philanthropy is increasingly essential in maintaining their elite status. In one popular ranking of the world's best universities, by Shanghai Jiao Tong University, U.S. institutions now hold 19 of the top 25 slots.

But many of those top universities worry that their ratings could slip if the largest single slice of their revenue pie, funding from the federal government, starts to shrink. Their anxiety is heightened by the increased spending on academic science elsewhere in the world, notably China and other Asian nations.

To stay on top, many schools are aggressively pursuing a time-tested American strategy for fueling growth: asking affluent donors for money. Despite the recent global recession, that strategy is paying off handsomely. Last year, for example, Stanford University became the first nonprofit institution in the world to raise more than $1 billion in private donations in a single calendar year.

Private institutions are by no means the only ones cashing in. Driven by declining support from their states, public institutions have also become aggressive fundraisers. "We are much more reliant on philanthropy than ever before," says Robert Birgeneau, outgoing chancellor of the University of California, Berkeley, the state's flagship university. "I think we've survived the crisis and we've transitioned to a new model."

This story is the last in Science's series on what it takes to be a top global research university. It examines threats to America's academic research prowess. Most university presidents believe that the new model is sufficient to keep their institutions on top. But some worry that countervailing trends could defeat that strategy.


Although the average American may think that the United States has always led the world in academic science, its preeminence is a relatively recent phenomenon. To be sure, top-rated universities such as Harvard, Princeton, and Yale have been around for centuries. But others on the list, such as Hopkins and Stanford, date from only the late 19th century. And, as a nation, the United States didn't become the unquestioned leader in university-based research until the past half-century.

"The center of intellectual excellence has moved very often over the centuries," says biologist Shirley Tilghman, who is stepping down this month after 12 years as president of Princeton University. "It started with Bologna and the great Italian universities. It moved to Germany, then to England, and only relatively recently across the Atlantic to the United States. That suggests that the center of gravity could easily move outside the United States if we stop paying attention to the ingredients that make our great universities the magnets they are today."

Drew Faust, president of Harvard University, says that it's a mistake to think that the great schools rise and fall on the basis of some immutable historical clock. "There's something fatalistic and deterministic in saying that this is cyclical and we should just sit back and say that our cycle is done," says Faust, a historian. "The United States is still the strongest economy in the world and has the strongest university system. Whether one or both of those things persists depends on us, not on some predetermined fate."

The top U.S. schools have achieved and maintained excellence through a combination of historical, economic, and political factors, says Princeton historian Anthony Grafton. Historically, "a really powerful national commitment to research" helped create great institutions, says Grafton, citing Germany and Great Britain as nations that saw the geopolitical advantages of funding science. "But that's not enough. Without World War II and Sputnik, [the United States would] really be nowhere. Those events created a feeling that our national security rested on a commitment to research."

That argument was crystallized by engineer and White House adviser Vannevar Bush in Science: The Endless Frontier. His influential 1945 report, requested by President Franklin Roosevelt, emphasized the importance of federal support for academic research. "The approach required pumping in money across the board, rather than to the islands of excellence that already existed," Grafton explains. "Research became what the university is about." The report led to the creation of the National Science Foundation (NSF) and fueled the rapid expansion of the National Institutes of Health (NIH).

Publicly financed tuition allowed millions of World War II veterans to go to college on the GI Bill in the first decade after the war. But once that wave subsided in the early 1950s, he says, institutions began to contract. It was actually their children, the so-called baby boomers, who provided the demographic push that launched today's academic research juggernaut. But a new set of demographic and economic trends are prompting U.S. research universities to once again rethink their strategies.


A look at how elite U.S. universities are funded explains why philanthropy is becoming so important to the bottom line. Just as a great white shark must keep moving through the water to extract enough oxygen to avoid drowning, a top-ranked research university must ingest ever-increasing amounts of money to pay for the new buildings, updated equipment and facilities, promising students, and world-class researchers required to stay on top. That imperative largely explains why, in recent decades, Stanford, Harvard, the Massachusetts Institute of Technology, the University of Michigan, and other research powerhouses have grown at a rate that far outpaced the overall economy.

Even as U.S. personal incomes stagnated over the past dozen years, the budgets of elite U.S. universities roughly doubled. And that increase has generally been poured into research rather than into creating a larger pool of undergraduates. While the overall budget of Stanford University, for example, has grown from 1.8 billion in 2000 to 4.4 billion dollars this year, the size of its freshman class has remained at about 1750.

Parents paying ever-rising tuition costs might think that they have been fueling that growth. But they would be wrong. Even at an elite private school like Stanford, with an undergraduate sticker price of $60,000 a year, student income is providing only 17% of this year's overall revenues. And with the public and politicians questioning the value of an education and demanding greater accountability, raising tuition by more than a small percentage each year has become a risky proposition.

Other revenue sources are also under siege. Caring for patients provides a significant income for universities with medical schools and hospitals. But efforts to rein in the cost of health care, including provisions in the 2010 law known as Obamacare, are putting the squeeze on academic medical centers.

At public universities, state funding historically paid a large portion of the bills. But that source has steadily declined over the past 2 decades. Many flagship research universities now describe themselves as "state-assisted" or even "state-allied" to reflect the diminished role of government.

"When I joined the law school faculty 35 years ago, the state appropriation made up about a third of our budget," says Mark Nordenberg, who has been chancellor of the University of Pittsburgh in Pennsylvania since 1995. "It's now well under 10%. If the board of trustees had been judging me on that measure alone, they would have found a new chancellor a long time ago."

At elite research universities, the two biggest revenue streams are typically sponsored research (overwhelmingly from the federal government) and investment income (meaning philanthropy and the income generated from a school's endowment). Traditionally, however, research dollars are more prestigious because they are awarded through competitive peer review by funding agencies such as NSF and NIH. Those dollars are so important that federal funding has become a de facto measure of overall quality for a university.

Nordenberg, for example, notes with considerable pride that his institution ranks fifth on a list of U.S. universities receiving NIH research dollars. "Penn [University of Pennsylvania] is fourth, and we're going to catch them," he predicts. Thanks to its renowned medical center, Pittsburgh also ranks 10th in overall federal research funding.

At Vanderbilt University in Nashville, Chancellor Nicholas Zeppos touts the fact that Vanderbilt's research portfolio has grown five times faster over the past decade than the budget of NIH, its primary source of research funding. To Zeppos, that rate of growth helps explain a parallel rise in the university's performance on national surveys of overall excellence.

Zeppos also points to the fact that Vanderbilt ranks among the top 10 of more than 100 U.S. medical schools in the amount of federal funding received per square foot of space devoted to research. That metric, he says, means the university provides the government with a bigger bang for its buck than most institutions—an important selling point in today's fiscal environment.

Such efficiency requires considerable attention to detail, he admits. But Zeppos, a former lawyer and law professor, says he sees no problem applying such management practices to an enterprise that has historically resisted calls for greater accountability. "Remember, as a lawyer I used to have to account for my time in 6-minute increments," he notes.


Uncertainty over the future of major revenue streams is helping supercharge interest in philanthropy at major research universities. For some, it's a return to their roots: Bequests from wealthy individuals created and sustained many of today's elite U.S. research universities, which, in turn, adopted the family names of their donors. Hopkins was on the leading edge of a cohort of industrial barons turned philanthropists who include Cornelius Vanderbilt, Ezra Cornell, Leonard Case Jr., Andrew Carnegie, and Richard Mellon, all now memorialized on sprawling campuses bearing their names.

It's hard to overstate the historical importance of academic giving, says Subra Suresh, who this spring stepped down as NSF director to become president of Carnegie Mellon University in Pittsburgh. "In 1900, Andrew Carnegie gave 1 million dollars to the city of Pittsburgh and then Andrew Mellon created the Mellon Institute of Science. And in 1967 they merged," says Suresh, who starts his job on 1 July. "So Carnegie Mellon came into existence as a result of philanthropy, as did lots of other institutions."

Such stories reflect a uniquely American tradition that, fostered by tax and estate policies, continues today. Last year, for example, academic giving totaled 31 billion dollars, according to the Council for Aid to Education (CAE), a New York–based nonprofit that tracks private giving to education. The amount is just $600 million below the all-time high set in 2008 before the global financial crunch hit home.

For 29 of the past 30 years, either Harvard or Stanford has been ranked No. 1 on the list of top fundraising universities, according to CAE. And it's probably no coincidence that they also rank first and second, respectively, in the Shanghai rankings.

"Philanthropy is hugely important to us," says Harvard's Faust. "Our endowment generates about 35% of our operating budget. And it's the result of centuries of philanthropy."

At Stanford, investment income (donations and the interest from its endowment) this year generated 1.1 billion, one-quarter of the school's 4.4 billion dollar operating budget. That amount almost matches the $1.27 billion in research grants that Stanford's faculty attracted. But the two funding streams are trending in opposite directions, with donations gaining momentum and research grants likely to be squeezed by the tightening federal budget.

Stanford's billion-dollar fundraising year, for instance, came shortly after the university concluded a 5-year capital campaign, labeled The Stanford Challenge, which raised 6.2 billion dollars. That total exceeded Stanford's goal by nearly $2 billion and set a record for any university. But the record may not last long. This fall, Harvard will launch a capital campaign that, according to rumors, could aim to raise more than 7 billion dollars.

Private angels have helped the University of California, Berkeley, offset reduced state government support. State funding as a percentage of the university's overall budget has dropped from 30% to 11% since 2004. "If philanthropy disappeared, that would have a huge negative impact on us," Chancellor Birgeneau says.

Generous donors may be even more important to Cornell NYC Tech, a startup university that hopes to spur innovation in and around New York City. A 350 million dollar donation from alumnus Charles Feeney helped Cornell win a competition to establish the school, and Cornell officials are counting on philanthropy to generate most of the $2 billion needed to build a modern campus on the city's Roosevelt Island.

This spring Irwin Jacobs, the founder of Qualcomm, and his wife, Joan, gave $133 million toward the largest component of the new university, the Technion-Cornell Innovation Institute. The gift earned the couple naming rights and was tangible evidence that the institute's vision could be realized, says Craig Gotsman, who directs the new institute.

A computer scientist and serial entrepreneur at Israel's Technion, Gotsman believes that the institute's approach to training high-tech workers and researchers with an entrepreneurial bent matches Mayor Bloomberg's vision for a new type of graduate science university. But its future was not at all assured when Cornell won the competition over a Stanford-led team in December 2011.

"At that point we were living on love and fresh air," Gotsman confesses. But "we never really considered having to close up shop." Acquiring a dependable and substantial revenue stream through philanthropy was a given, he says. And Jacobs's gift is not sufficient, he acknowledges. "We're not out of the woods."

Although huge individual gifts may garner the most publicity, institutional fundraisers spend most of their time cultivating smaller donors (see sidebar). Community-based foundations can also play a vital role.

"There are several large foundations in our area that see a link between strong universities and a vibrant regional economy, and they have made support for universities a high priority," Pittsburgh's Nordenberg says. He cites a 1984 grant from the Richard King Mellon Foundation that established the University of Pittsburgh Cancer Institute, which has become an NIH-funded comprehensive cancer center.

Amid such philanthropy successes, there are hints of concern. Nordenberg, for instance, worries that declining government support could make it harder for universities to keep winning major foundation grants. "Foundations have looked to the federal government to leverage their investments," he says, "and I'm not sure they would make the same investments if they didn't believe the federal government was going to do its part."

Princeton historian Grafton sees a deeper problem. He thinks that university presidents are taking a big gamble by counting on philanthropy as a long-term solution to fueling growth, especially with the actual cost of an education lagging behind what students pay. "The top schools, especially the privates, have this very precarious structure," he says, "which basically rests on the assumption that we subsidize everybody now, and then we get the money back 40 years later when they're rich. And nobody knows if that's right."


Ultimately, such discussions come down to a fundamental question: Can U.S. research universities retain their preeminence if their public and private funding flattens out?

A no-growth scenario would be traumatic, several presidents told Science. "There are very important new areas of exploration into which we need to move," Harvard's Faust explains. "And if that occurs without growth, then there are important things we're doing that we'd need to stop doing. We would need to make tradeoffs to free up resources for areas where there are expanding opportunities. And those tradeoffs will be very costly in terms of our research and education missions."

Nordenberg agrees. "Our continued growth, to a large extent, is dependent on philanthropy," he says.

Princeton's Tilghman would like to see her colleagues spend less time on plans to keep growing and more time contemplating a no-growth universe. "It's very hard to go onto any research university campus, particularly one with an academic medical center, and not see a new building going up," she says. "So what is the expectation for how research in that building is going to be funded?

"If you ask any medical school dean, they will say that it will be paid from a combination of direct and indirect costs funded by the federal government," she continues. "Given the constrained prospects for increases in federal funding for the next, who knows, 5 to 10 years, that dean has to believe that, in order to pay for the building, his or her institution is going to outcompete, to an even greater extent than they do now, every other academic institution.

"But this just can't be true for every academic medical center," she says. "It does not compute. I think we need to have a conversation between the government and the research universities on how to live at steady state. I don't see that conversation happening right now."

The assumption that their institution will be able to continue to indefinitely expand contributes to what Tilghman sees as an even bigger problem. "The greatest risk to American universities," she says, "is complacency and self-satisfaction."


Despite her concern over growth, Tilghman joins her peers in offering an upbeat assessment of several other developments often seen as potential threats to U.S. preeminence in academic research. Some analysts predict the booming science budgets of China and other Asian countries, for instance, will make it harder for U.S. institutions to recruit the best and brightest. But California's Birgeneau sees Asia's academic growth as a welcome addition to the global research enterprise.

"We're about creating knowledge, and the more people there are who create knowledge, the better," he says. "Likewise, the more educated the world is, the better off civilization will be."

Having more world-class universities will increase the competition for faculty members, the presidents acknowledge. But elite U.S. universities are accustomed to holding bidding wars for the best researchers.

"I find it peculiar when people ask if I'm going to hire someone from another university," Vanderbilt's Zeppos says. "What big, ambitious institution doesn't do that? And how do the best universities know they have the best talent unless someone is knocking on their door trying to recruit them away?"

The increased capacity in other countries has also made international collaboration even more attractive, several presidents say. "I'm really heartened by the type of intellectual partnerships that are happening all over the world that allow us to fund really expensive science," Tilghman says. The Large Hadron Collider at CERN outside Geneva, Switzerland, and the Atacama Large Millimeter/submillimeter Array telescope in Chile are two examples of several countries pooling resources to do research that none could afford on its own, she notes.

Closer to home, the dramatic growth in the past 2 years of massive open online courses, known as MOOCs, is a trend that every university president is watching. But none think that this new technology will undermine the quality of education on their campus, a development that could make it harder to attract talented students, especially from other countries.

"If you talk to those students, a big part of what they want to do is to be in America and learn from interacting with Americans," Nordenberg says. "And you can't do that effectively without being here. And when students look back at their experiences and say how much they learned, it's often because of the interactions outside of the classroom, with a faculty member or other students, or through some extracurricular activity."


Such optimistic assessments may come naturally to university presidents, Grafton says. "If you're asking people for money, you have to pretend that everything is fine," he says. "Because if your institution looks like it's in trouble, nobody will give you money."

Birgeneau is taking such can-do thinking a step further: After he steps down from the top job at Berkeley, he'll devote much of his time to raising funds for a $10 billion initiative, called the Lincoln Project. The plan is to pool federal, state, and private money to create 10,000 new endowed chairs at U.S. research universities, he says. Reaching that goal "will require a redirection of funds," he admits. But "when legislators tell me there's no money, my answer is that there's lots of money. It's just a question of what we spend it on."

Grafton says he wants to believe that is true. "Every fiber of my being hopes that this world can go on," he says, and that U.S. research universities can sustain their heady success. "But it's hard to extrapolate a happy future 20 years down the road."