Penn's recent donor crisis will have uncertain financial and academic consequences on the long-term functioning of the University, multiple higher education experts told The Daily Pennsylvanian.

Frustrated with the University’s response to the Palestine Writes Literature Festival and the escalating violence between Israel and Hamas, dozens of Penn’s most prolific donors have announced their intent to cease financial contributions. While the drop in revenue is unlikely to affect the student experience in the short-term, experts said that the long-term financial and academic impacts of donor pressure are much less certain. 

The donor backlash began with a letter by Wharton Board of Advisors Chair Marc Rowan on Oct. 10, which called for donors to "close their checkbooks" until Penn President Liz Magill and Board of Trustees Chair Scott Bok step down — citing the University's handling of antisemitism on campus.

Other prominent donors followed suit in halting donations or threatening to do so, including 1969 College graduate and "Law and Order" creator Dick Wolf, 1987 College graduate and former ambassador and governor Jon Huntsman Jr. on behalf of his family, 1990 College and Engineering graduate David Magerman, and 1965 Wharton graduate Ronald Lauder.

Uncertainty about the impact on student life

Given the large amount of contributions that donors have already publicly withdrawn, some immediate financial pain is inevitable, according to Larissa Reece, a consultant at Ashley Rountree and Associates who works with nonprofits and universities. She added that it remains unclear how the loss of money will impact the student experience. 

Philanthropists often prefer to have a say in how their contribution will directly affect the students and the University's operations. When an individual, foundation, or corporation gives money to a university, that money rarely comes unrestricted, according to Amanda Adolph, the chief of staff at the Council for Advancement and Support of Education. 

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For example, Lauder, who recently halted his donations to Penn, donated funds specifically for the renovation of the Lauder Institute and the construction of Lauder College House.

When a donor withdraws that contribution, “different programs, different internships" and amenities could be impacted, Reece said. 

However, since only 1.5% of Penn’s $14.4 billion annual revenue is associated with philanthropy, it appears unlikely that Penn would allow programs with specific funders to collapse suddenly, Reece said. 

Still, fundraising is a “long-term proposition,” Adolph said, and there are reasons to believe that Penn might not emerge unscathed in the long run. 

The overall financial impact remains unclear, even to the University.

“While we are closely monitoring for potential impact, at this early point in the fiscal year, we are unable to draw any conclusions,"  University spokesperson Ron Ozio wrote in a statement to the DP.

Withdrawals from smaller donors and considering long-term effects

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Reece described the withdrawal of donations from high-profile donors as the “tip of the iceberg.”

“For every vocal donor who throws up their hands and walks away loudly, you're going to have a much larger number of smaller donors who also walk away,” she said. 

At least 17 class presidents have sent letters to Magill, including Penn Fund board members, former trustees, and Penn Alumni leaders, according to emails obtained by the DP. 

If the donors who give substantially to the annual fund halt their funds, "that’s going to have a dent," Reece added.

She said that perhaps more threatening to Penn’s finances is the risk that numerous donors will quietly take Penn out of their wills. Estate gifts can be substantial, and their loss could impact Penn down the road, according to Reece. 

Still, the fact that fundraising is built on long-term relationships can also be a reason to believe that Penn’s finances might recover, according to Adolph. She expressed uncertainty that a single "societal issue or challenge" would have a long-term impact on fundraising. 

“It’s too early to tell if the donors come back around,” Reece said. 

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Donor pressure and academic freedom

As government funding of higher education has decreased since the 1980s, universities are increasingly reliant on philanthropy, Adolph said. 

At the same time, she added that the expectation for leadership to speak out on current issues has grown, putting leaders in a “hard place" when donors disapprove of the University’s message.

There can be “a tension between what donors want to see internally in the university and the independence that the university must have to serve its public mission,” Risa Lieberwitz, a labor and employment law professor at Cornell’s School of Industrial and Labor Relations, said. 

To Lieberwitz, Penn’s leadership is “holding the line.”

She said Magill’s lack of interference with the Palestine Writes festival, despite the demands of donors, was an example of the Penn administration fulfilling its obligation “to stand up for the university's independence” and defend academic freedom.

Prior to the festival, thousands of Penn alumni and University affiliates, including several current trustees, signed an open letter to Magill calling on her to take additional steps to distance the University from the Palestine Writes Literature Festival. Following extensive criticism of the festival, Magill sent a letter to the Anti-Defamation League, which revealed that Penn had initiated a review of the process that external groups use to reserve Penn's space and host events on campus.

Penn recently announced a comprehensive antisemitism action plan, which some students said they believe might have resulted from donor pressure.

The perception of independence from donor influence is essential for universities to fulfill their duty to serve the public good, according to Lieberwitz. Donor money, she said, “should not come with strings attached.”

Still, the Penn chapter of the American Association of University Professors said that Penn administration’s response to the festival compromised the principles of academic freedom. 

In light of donors’ recent attempt to oust Penn’s leadership, the setting of clearer limits between universities and donors has “definitely” become a topic of conversation at institutions, according to Adolph. 

“Openness is a basic principle,” Lieberwitz said.