What happened to the Hewlett Foundation's major gift?October 14, 2011: 8:20 AM ET
Its $113 million grant to the University of California, announced in 2007, raised eyebrows. Turns out, it has helped the school immensely during California's grisly budget debacle.
By Richard Nieva, contributor
FORTUNE -- Whitney Davis is not afraid to be honest. When the University of California at Berkeley art history professor was asked if he would potentially leave the premier public university because it might be possible to better achieve his academic goals elsewhere, his answer was, "absolutely." That changed last year, when he began to receive funding from a $113 million grant that has played a large part in helping the school retain its faculty.
The grant, a gift from the William and Flora Hewlett Foundation, has been one bright spot for the school through the economic downturn. With California's debt growing to $6.9 billion, the state passed a budget plan in June that raised the total to $650 million in cuts to the UC system. Fortune commended the Hewlett Foundation when the grant was originally announced in 2007. Four years on, the grant has allowed the school to remain competitive.
The money was to be paid in yearly increments over seven years, with the goal of creating 100 endowed chairs for faculty -- full professorial positions that are funded privately and come with a $25,000 yearly stipend for research, travel or graduate student employment. The chairs range from Art History to Journalism to Chemistry.
Last July, Davis was named the George C. and Helen N. chair in art history, one of the 91 chairs that have already been created. It eased his concerns. "One of my greatest worries at Berkeley has been whether I can assure myself that my longest-range goals for my teaching and research will and can be supported by the university," said Davis.
In conjunction with the grant, Berkeley issued the Hewlett Challenge -- raising money from other donors to match the original gift dollar for dollar. The university will have raised $220 million by grant's end. $3 million of the Hewlett gift was set aside to manage the funds. Each chair costs either $1 million or $1.5 million to establish. Donors have been individuals as well as corporations like Qualcomm (QCOM) and Craigslist.
The grant was the largest single donation the university has ever received. Previously, the top gift was $51 million, given by an anonymous donor, said George Breslauer, Berkeley's executive vice provost. For the Hewlett Foundation, the grant is also among its largest giveaways, though not quite as large as the $400 million gift bestowed upon Stanford after Bill Hewlett's death in 2001. Bill was an alumnus of Berkeley's cross-bay rival, but his wife Flora was a Cal golden bear.
The gift seems to have done well to keep retention rates up, which fluctuate from about 70% to 80%. That can't necessarily be entirely attributed to the Hewlett grant because other factors are at play too, like loyalty, or on the other end, budget freezes. But from July 2010 to June 2011, there have been 49 retention cases -- situations where a faculty member gets an outside offer and Berkeley decides to compete. Of the 49 cases, 27 have been resolved. Of those, 23 have remained with the university.
Poaching is a serious problem for Berkeley, which is hard pressed to compete with private universities and their monster budgets. "Competitive institutions have their sights set on us," said Breslauer. "They are coming after our faculty pretty vigorously." The average salary for a Berkeley full professor is $153,186 as of last month. Stanford does not keep an average number for its salary across all schools, but its most recent report in 2009 says a top-notch full professor in the social sciences can make upwards of $221,000.
Davis, who taught previously at the private Northwestern University, also held an endowed chair at his last job. For him, the difference in budget is night and day, though he still talks about Berkeley with genuine admiration. "Northwestern supported my research at a level that, at the time, I couldn't even manage to spend," he said.
What's worse is the toll it takes on educators simply trying to do their job, he said. The result is a bureaucratic nightmare that detracts from the level of teaching. "Raising funds to support one's research, especially in cash-poor areas like the humanities, becomes an end in itself," said Davis. "It becomes more time-consuming than the intellectual and pedagogical labors it's meant to support. We all become like hamsters on a wheel."
With the grant funds at his disposal, that has all changed. He's been able to fund a trip to London for a conference in November on computers and art history. He's also been able to invest in technology like large-scale scanners and software that allows users to build 3D reconstructions of artifacts. Davis said having the funds also eliminates the need to resort to politicking. Now, he isn't tempted to "massage" applications from outside donors, just to get the money to do his job.
Still, this notion of "philanthropy to the rescue" negates the very spirit of state funded institutions of higher learning. More and more, the public university must rely on well-meaning outside institutions in order to sustain itself. In 2010, the amount of money—in both cash and committed pledges—raised by private donors was larger than funds provided by the state, says David Blinder, associate vice chancellor of university relations at Berkeley.
Since that funding has decreased over recent years, Berkeley has needed to look to the business strategies of its private peers. "In the golden days of significant state support, that was much less of an issue for us than it was for privates like Stanford or Harvard," said Blinder. "But if you look overall at the downturn of state support, you can see the opposite happening in terms of philanthropic support."
To date, the foundation has paid $52 million to Berkeley, said Eric Brown, the foundation's communications director. It's less than half of the end goal, while Berkeley has created almost all of the intended chairs. Brown said there is no cause for concern. "There is some flexibility in how the foundation makes its payments, which is why the payout number may appear low at the moment," he said. "But we will meet the match commitments fully."
While California sorts out its larger economic issues, it's the public institutions that will suffer. In the meantime, a gift like the Hewlett grant must act as a tourniquet. "It doesn't solve the problem," said Davis. "But it gives me a fighting chance."