Jerry Sandusky Scandal

PSU may face donor crisis amid child sex abuse scandal

STATE COLLEGE — Penn State Nation has a stealth army of alumni, a half-million strong stretching from the Florida Keys to Seattle.

They have always given their alma mater their loyalty, gratitude, and money — lots of it.

But after the appalling revelations of the past month, some Penn State benefactors big and small are snapping their checkbooks shut. It’s a critical problem for a school that is already reeling and doubtless faces more and more bruising headlines in the months to come.

In response, the school in recent days launched a quiet outreach effort to deep-pocketed alumni, aimed at ensuring its most important donors remain on board.

December is always the top month for giving, and the next few weeks can make or break many nonprofits’ entire year. But instead of closing the deal with many alumni, Rodney Kirsch, the school’s top fundraiser, is engaged in full-fledged damage control.

Since news erupted about allegations that former Penn State football coach Jerry Sandusky’s sexually abused eight boys — and questions were raised about whether Penn State officials ignored one instance of abuse — more than a dozen people who had planned to leave an inheritance to the school have changed their wills to exclude Penn State, Kirsch said. Another donor canceled a $300,000 pledge.

“There are no ifs, ands or buts about it: This will hurt the school, as far as fundraising,” said Patrick Malloy, class of 1965. In 2007, Malloy gave Penn State $5 million for the creation of an endowment in the name of his longtime friend Joe Paterno, the iconic coach who was unceremoniously fired on Nov. 9.

No surprise, then, that Malloy received a call from one of new President Rodney Erickson’s top lieutenants last week, seeking his continued support. Penn State got the answer it wanted. Malloy, of Key Largo, Fla., said he “won’t think twice” about giving again.

Buffalo Sabres owner Terry Pegula, whose $88 million gift for the creation of a Penn State hockey team in 2010 was the largest in school history, voiced similar support to the university during an interview with a Canadian television station two weeks back. But others have been far more restrained, if not downright dismissive of Kirsch’s overtures. They gave voice to the shame and anxiety that still permeates Penn State, from administrators to faculty down to the student body.

Erickson, who replaced besieged predecessor Graham Spanier on Nov. 9, wants to begin moving forward. But how does the school of 95,000 build for the future when it’s seemingly paralyzed by crisis?

“I don’t know if there’s been a scandal like this before,” said Mark Dyreson, a professor in Penn State’s department of kinesiology. “Image is an important thing in American universities. There’s still an undercurrent of deep unease. “I think people here are truly nervous about what else might come out.”

Cut through the emotions and stigma, and Penn State’s fundamentals remain strong. Erickson told some 400 students at a town-hall meeting Wednesday night that Penn State is trending ahead of last year’s record number of applicants (55,411) and employers still covet the school’s graduates.

Major corporate partners such as Pepsi are, by and large, hanging tough.

And while short-term fundraising will surely suffer, in most years, donations only make up 6 percent of the university’s roughly $4 billion annual budget. Furthermore, the school’s multiyear fundraising initiative — entitled For The Future: The Campaign For Penn State Students — had generated $1.38 billion as of July, and to date remains ahead of schedule.

However, any charitable losses would come on the heels of a huge drop in state support.

The state’s 2011-12 budget cut the school’s funding by almost 20 percent, although Penn State still received $279 million, including money for its medical center, from the state this year. Hoping to recoup some of those cuts, the university is asking lawmakers for $294 million next year.

State Sen. Jake Corman, R-Benner Township, who is chairman of the Appropriations Committee, said it is probably too early to say whether the university’s situation will have an impact on appropriations. Gov. Tom Corbett won’t announce his budget proposals until February.

But Corman has heard concerns about the university’s expected steep legal fees and who will pick up that tab. “I’m sure that during the appropriations hearing that will be a topic of discussion,” Corman said. “Depending on the answer, we’ll see how significant it is.”

And Thursday, state Sen. Mike Stack released a letter he sent to Erickson questioning how the university intends to handle potential settlements in civil cases arising from the Sandusky allegations.

Dried-up fundraising would only make matters worse.

While gifts are rarely used for basic operating costs, they do go to faculty endowments, grants for new construction and academic scholarships.

Which means, Penn State might not be able to grow as much as planned, could struggle to hire the best and brightest, and could disappoint promising students in need.

The news doesn’t get much better for the athletics department.

Of its roughly $90 million annual budget, 28 percent comes from the Nittany Lion Club, the department’s fundraising arm. A significant drop-off in giving would hurt not just the football program, but also the school’s non-revenue sports that rely on football money to survive. Efforts to reach Ken Cutler, the Penn State athletics’ director of development, were not successful. “This is like the mother of all (scandals),” said Pete Garcia, the athletic director of Florida International University in Miami.

“You’re not talking it taking a couple of months to get out from underneath. You’re talking a couple of years. “For the next five, 10 years, people will still be bringing it up.”

Garcia served as the director of football development at the University of Miami in 1995, when the NCAA delivered severe sanctions over the Hurricanes’ notorious Pell Grant scandal. Dozens of student-athletes falsified federal applications and wrongly received more than $220,000 in grant money.

There was national condemnation — Sports Illustrated called for UM to drop football altogether — and the program mired in mediocrity for several seasons before returning to prominence at the turn of the century.

It’s still not clear what, if any, action the NCAA can and will take against Penn State.

But like Miami — which hired Butch Davis in 1995, with much success — Penn State football can best regain its stride by hiring the right coach.

Erickson said Wednesday that an exploratory committee had been formed this week, and the coaching search was “wide open.” “The qualities of the next coach really have to reflect our longstanding core values of integrity, honesty and attention to academics,” Erickson said. “We’re an academic institution, and a really good one. We need to make sure that that message comes through to everyone.”

There are already signs that, at least in the short term, the episode might have a rallying effect among Penn Staters. When the Nittany Lions hosted Nebraska on Nov. 12, their first game since Sandusky’s arrest and Paterno’s consequential dismissal, there was an announced attendance of 107,903 — the biggest home crowd of the year.

And while the true fundraising shortfall won’t be known for at least six months, the news hasn’t been all grim for Kirsch. Now that the darkest days have apparently passed, the school has received two substantial gifts from still-supportive alumni in the past few weeks.

“They basically said, ‘We’re staying the course with the university,’ ” Kirsch said.

Adam Beasley can be reached at abeasley@miamiherald.com; Anne Danahy can be reached at adanahy@centredaily.com.

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