How a Few Foundations Shape American Higher Ed (opinion)

As America approaches its 250th birthday, we rightly celebrate, as did Alexis de Tocqueville, our tradition of citizen-driven philanthropy. As a share of GDP, Americans give more to such causes than any other country. A robust part of that tradition is the private foundation, the tax-advantaged institution that supports everything from college scholarships to local theater. There are more than 150,000 of them, many started by families, and many devoted to a single community.

Less appreciated is that a handful of mega-foundations dominate both the financial resources and the grant making of the sector, and that a few have played a major role influencing the priorities of higher education. A new resource from the American Enterprise Institute, SOURCE, the Searchable Open University Records of Charitable Expenditures, is a window into that dominance.

SOURCE assembles nearly 1.1 million grants, with a total value of approximately $90 billion, drawn from 15 years of Internal Revenue Service filings. Of the 57,339 foundations that give to higher education, just 165 supply half the dollars. The receiving end mirrors the concentration: Of 5,270 institutions in the data set, 54 capture half the money, led by Harvard, Stanford and Johns Hopkins Universities. The 526 community colleges in the data set received $1.3 billion combined, less than any one of those three. Some campuses rely disproportionately on a single patron: Nike co-founder Phil Knight’s foundation supplied 86 percent of the foundation money to the University of Oregon, and Open Society provides slightly more than half of the foundation money to Bard College. Measured as economists measure inequality, the dollar concentration of both funders and recipients carries a Gini coefficient above 0.92, steeper than any nation’s income gap.

The largest funders cluster where they can influence direction. The biggest foundations—those that gave more than $100 million across our dataset—pour 71 percent of their grants into the core faculty-facing academic mission, such as research, specific disciplines and capital projects. Meanwhile, the tens of thousands of smaller family and community foundations do the reverse, dedicating 76 percent of their funding to financial aid and general operations. A few dominant patrons thus shape what is studied while the many quietly underwrite access and keeping the lights on.

Priorities are driven from the top. The median grant, $5,000, has barely moved in a decade, while the largest gifts have doubled from under $60,000 to $120,000. And with rare exceptions such as the Gates Foundation, the biggest foundations intend to last forever: They are legally permitted perpetual existence, they are funded by their own endowments, their trustees appoint their own successors and they answer to neither an electorate nor the market. Entire disciplines now take their cues, indefinitely, from the preferences of a few self-perpetuating, self-funded institutions. The small number of major foundations focused on select aspects of higher education raises the risk that their ideological preferences will have an outsize influence.

To be sure, foundations are far from the primary funders of universities. Of the approximately $900 billion in total revenues reported by public and private universities in 2023, foundation money accounted for about 1.3 percent, and in the sciences the federal government outspends every foundation combined 16 to one. But size is the wrong measure of influence. Tuition and federal dollars arrive already committed. On the other hand, foundation money is discretionary, and the marginal dollar in resource-starved fields seeds the incremental programs and centers that create new opportunities for what gets studied and who gets hired. A small stream, aimed with purpose, can move a field on its own.

Foundations naturally fund what they believe matters, as they have every right to do. But the market structure invites scrutiny and debate. We believe the remedy starts with transparency. Consider the Andrew W. Mellon Foundation, the largest patron of the humanities, which in 2020 announced it would prioritize “social justice in all of its grantmaking.” Mellon describes each of its 2,392 grants to 426 universities since 2016 in detail, such as a $500,000 grant to the University of Massachusetts Amherst for a “fellows program in decolonial global studies.” By contrast, the classical liberal-focused Charles Koch Foundation described nearly all of its 1,574 grants to 430 universities over that same period as simply “educational programs” or “general operating support,” although they do—commendably—publish 54 “major” grant agreements and their standardized template online.

Meaningful donor-side disclosure requirements should apply regardless of political valence. Alternatively, recipient universities themselves could be required to report their grant amounts above a certain threshold, funder type (but not name in order to protect donor privacy) and earmarked purpose on their tax filings—as they already do in their uniform guidance reports for federal funding—which would capture flows from individuals, LLCs and foreign sources. The latter set of sources escape donor-side disclosure requirements entirely.

At best, these foundations reflect the choices of a robust civil society, funding what the political interests of the day will not and guarding against the tyranny of the majority. But philanthropists from Julius Rosenwald to Warren Buffett have long warned against the risk of the “dead hand”: the preferences of the long gone steering the living, who have little recourse but to decline the money, which many cannot afford to do. Just as worrisome is the prospect of capture of large foundation fortunes by unknown future generations of unaccountable staff and trustees, who wield great influence and can sometimes redirect a founding mission. SOURCE makes the record reviewable at last. It is meant to permit scrutiny of foundation choices in a democracy and encourage the discussion of their role and responsibilities in a robust civil society.