The Story of the University of Chicago
Chapter 10 The Struggle with the Deficit
Thomas W. Goodspeed
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THIS chapter might have any one of several names. It might be called "The University and Its Benefactors," or "The Expanding Plans of President Harper," or "The Munificence of Mr. Rockefeller." All these things will emerge as the story develops. But the thing that is always in evidence in the record of the fifteen years that followed the opening of the University is the struggle with deficits. The beginnings of that fifteen-year struggle were touched upon in the preceding chapter. It was then told how Mr. Ryerson had offered $100,000 on condition that the sum was increased to $500,000 by the contributions of others and how Mr. Rockefeller followed with a contribution of $150,000 for current expenses. This was the opening of that long struggle with a deficit that became a monster threatening to devour the institution.
The summer of 1893 was one of the most trying in the history of the University. Nothing had been added to the Ryerson fund. The country was suffering from one of the worst panics in its history and it
(117) would have been lunacy to try to raise money. One man indeed could still make contributions, and on the last day of October of that year Mr. Rockefeller sent the board a new subscription of $500,000 conditioned on the raising of the Ryerson fund before July I, 1894. It was to be devoted to the general purposes of the institution and to providing for the deficit of 1894-95. The Ryerson half-million-dollar fund had now become the Ryerson million-dollar fund. But the financial depression continued, and it was not till May, 1894, that a new beginning could be made in soliciting subscriptions. It was finally found impossible to comply strictly with the conditions of Mr. Ryerson's subscription. The entire sum, indeed, required was raised and more, but it was necessary to admit some contributions for purposes not originally contemplated by Mr. Ryerson.
I was associated with President Harper in the raising of this subscription and can never forget its difficulties and discouragements. I recall one of the incidents that greatly depressed us at the time, but later gave us many a hearty laugh. We called on a well-known citizen, trustee of a well-known school, and began by saying, "We are calling on you because we know you are interested in education." We got no farther. Quick as lightning he burst out: "Not a par-tick! Not a particle! Not a particle!" But almost invariably we were received, not only courteously, but with cordial friendliness.
( 118)
While the effort for the Ryerson million had been going on the obligations of the University had been increasing at an appalling rate, until they had approached half a million dollars. It was the knowledge of this situation which had moved Mr. Rockefeller to make his proffer of half a million to encourage, and, if possible, insure the raising of the Ryerson fund.
It was raised at last and the young institution rescued, not from bankruptcy, for it was perfectly solvent, but from a load of obligations that threatened to cripple its activities, if it did not compel the temporary suspension of its educational work.
The authorities had been so disturbed and alarmed by the dangers that had threatened that the mistakes of the first and second years were never repeated. Temptations were not lacking. The number of students increased astonishingly. New departments, new schools, clamored for establishment. It was only by setting their faces like a flint against them that the authorities were able to resist the temptation to embrace most alluring opportunities for branching out in various directions. And yet, with the best intentions in the world to pursue a conservative policy, the trustees, while guarding against the earlier peril, found, to their grief and dismay, the annual expenses mounting up by leaps and bounds. In 1894-95 these were, in round numbers $544,000; in 1895-96, $637,000; in 1 896-97, $692,000. The income for the corresponding
(119) years showed deficits of $53,000, $47,000, and $97,000, a total for the three years of nearly $200,000. This alarming result occurred notwithstanding the fact that Mr. Rockefeller made the following special contributions for current expenses for the express purpose of providing against deficits: in 1894-95, $175,000; in 1895-96, the same amount; and in 1896-97, $100,000, a total for the three years of $450,000. It was also in the middle of this period on October 30, 1895, that Mr. Rockefeller made his great threemillion-dollar subscription. This was an unconditional pledge of $1,000,000 for endowment, which was paid two months later, and a further subscription, to quote the language of the pledge, of
$2,000,000 for endowment or otherwise as I may designate, payable in cash, or, at my option, in approved interest-bearing securities at their fair market value, but only in amounts equal to the contribution of others, in cash or its equivalent, not hitherto promised, as the same shall be received by the University. This pledge shall be void as to any portion of the sum herein promised which shall not prove to be payable on the above terms on or before January 1, 1900.
Mr. Rockefeller had noted with apprehension the growth of the annual expenses and the increasing deficit. He made one effort to call a halt. In December, 1894, he had subscribed $175,000 for the current expenses of 1895-96, but had provided that he was to be at liberty to withhold further payments on the subscription in case it should be found that the expendi-
(120) -tures were exceeding the income. Ten months later he seems to have concluded that a better way would be to secure such an addition to the funds as would provide an income ample for the annual expenses and make deficits impossible. It would seem as though no device would be more certain to accomplish this result than this opening of the way to adding $5,000,000 to the funds. It will be noted that after giving $1,000,000 outright, he proposed to duplicate every dollar that was contributed by others, for any purpose, during the ensuing four years, up to $2,000,000. These were no hard conditions. The proffer was most wisely and generously conceived to help the University in every way. And in helping the University it was most effective. It called attention once more and with renewed emphasis to the fact that a really great University was developing in Chicago. It awakened an assured confidence in the minds of all in the future of the institution. It led persons of large wealth to feel that it would endure and was a safe place in which to make large investments for education.
On December 14, 1895, only six weeks after the announcement of Mr. Rockefeller's subscriptions, Miss Helen Culver, having "concluded that the strongest guaranties of permanent and efficient administration would be assured if the property were entrusted to the University of Chicago," turned over to the trustees properties which she valued at $1,000,000.
(121) They did not eventually produce that full amount and from time to time she added other contributions. The whole gift was "devoted to the increase and spread of knowledge within the field of the Biological Sciences."
In the early part of the year following these subscriptions and contributions, the Chicago Commercial Club turned over to the University the Chicago Manual Training School, its property and endowments, the whole aggregating in value $250,000.
Year by year the four-million-dollar fund grew, but not fast enough to reach the total sum of two million dollars on the date fixed, January 1, 1900. The time was therefore extended to April i. During these three months some notable gifts were received, carrying the total to almost two million dollars. Among the great contributions to the fund, in addition to those already mentioned, were the following: $206,000 by Mrs. Charles Hitchcock, $135,000 by Marshall Field, $72,000 by Elizabeth G. Kelly, $60,000 by Charles L. Hutchinson, $50,000 by W. F. E. Gurley, $50,000 by John J. Mitchell, $40,000 by Martin A. Ryerson, $34,000 by Catherine W. Bruce, $30,000 by Mrs. B. E. Gallup, $27,000 by Mrs. Emmons Blaine, and $20,000 by Nancy S. Foster. There was a contribution of $50,000 from Leon Mandel for Mandel Assembly Hall, which, a little later, but not soon enough to be counted in this fund, was increased by $35,000
(122) more. The very last days of the extension to April 1 came and a few thousand dollars were still lacking to make up the full two million the University must raise to secure the full two million Mr. Rockefeller had subscribed. On the last day but one President Harper received the following telegram:
Wire me Saturday noon [March 31] how much you lack in fulfilling conditions.
F. T. GATES
The information was dispatched and the following answer came back without delay:
President W. R. Harper, University of Chicago:
I have secured valid pledges from friends of University sufficient to cover whatever may be found on examination to be the actual shortage in the amount necessary to entitle the University to the full amount of Mr. Rockefeller's pledge of October 30, 1895, and you can therefore announce the success of the movement.
F. T. GATES
Thus was the greatest financial campaign of the first quarter-century brought to a triumphant issue. The University never inquired who the "friends" referred to in the foregoing telegram were. Mr. Rockefeller considered their subscriptions "valid," and as they were paid and duplicated by him the University was more than satisfied. As a result of the great subscription of October 30, 1895, $5,000,000 came into the treasury of the University. It would naturally be supposed that with this immense addition to its
(123) resources the institution would now escape deficits. It would be supposed that most of this great sum must have been added to the endowment. As a matter of fact almost the only part that went into the endowment was $1,500,000 from Mr. Rockefeller and a part of Miss Culver's contribution. The greater part of the two millions given by others went into additions to the site, equipment, books, supplies, collections, and new buildings. Of Miss Culver's gift $325,000 was expended on the four Hull Biological Laboratories, and the fund was then withdrawn from use for about sixteen years and allowed to accumulate, the interest being annually added to the principal, so that when it was finally released in 1914, the fund had so increased that it yielded in the neighborhood of $40,000 a year toward the annual expenses of the Biological departments. Of the two millions contributed by Mr. Rockefeller in duplicating the gifts of others, some $1,300,000 went to pay accumulated and current deficits in expenses for the six years succeeding the making of the subscription, and the remainder to pay for additions to the campus, to erect new buildings—the Press Building and the Power Plant—to supplement the gifts of others for buildings, to purchase the law library, to provide for medical instruction, and to provide the temporary structure for the School of Education. It was a great disappointment to the Founder and the trustees that so little could
(124) be saved from the $2,000,000 gift for permanent endowment.
Mr. Rockefeller fully understood all the factors in the situation, the genius of the president, which he did not wish to have discouraged, the conservatism of the trustees, the inevitableness of the University's expansion, and the difficulty of regulating it. His interest and confidence in the ultimate outcome were not diminished. They increased. He continued to care for the large deficits. In December, 1900, he made a new contribution of $1,000,000 for endowment and once more half a million for general purposes. In December, 1901, he added another million dollars to the endowment, and in December, 1902, still another mi!-lion, making a total up to that date of more than $8,000,000 for endowment alone. Meantime since 1 897 Mr. Rockefeller had given the following sums to provide against current expense deficits: for the three years from 1897 to 1900, $200,000 each year; for 19001901, $225,000; for 1901-2, $253,000; for 1902-3, $250,000; and for 1903-4, $261,000, a total of almost $1,600,000, for current expenses in seven years. And yet the deficit grew. Such was the expansion of the University's work that notwithstanding these unparalleled gifts, and the contribution of several million dollars from other benefactors, the deficit for 1904-5, according to the budget proposed for that year, showed an increase of $60,000. This was, in a
(125) conference between John D. Rockefeller, Jr., Dr. Gates, and a committee of the trustees, cut down a little, but only a little, and Mr. Rockefeller provided $300,000 to meet the prospective deficit. Then the conference took the following action to bring the annual deficits to a final end:
It is the unanimous sense of this conference that until this deficit is wiped out by endowment or retrenchment, the University must rigidly decline to consider the enlargement of any departments now existing, or the addition of any new departments of work which do at the time, or may in the future involve the University in additional expense, unless adequate funds are especially provided therefor. This policy the gentlemen here assembled commit themselves to carry out to the full extent of their ability.
In adopting this policy we are not taking a backward step, nor are we conceiving the University as remaining stationary. We conceive this step to be a step in advance, and the most important and the most exigent now before the University. If we shall demonstrate our ability to conduct the institution within its income and thus place it on an assured and permanent financial foundation, we shall have placed the institution in a position to invite the confidence of men of means, both in Chicago and in the East, and will be in a position to assure them, not only of the permanency of the institution, but that it can and will conduct its affairs annually without financial embarrassments and without financial crises, which may either threaten its usefulness or embarrass its friends.
As Mr. Rockefeller had for the three years preceding this conference added $1,000,000 to the endowment as regularly as January came round, and as the needs were greater and more urgent than ever,
(126) and as the responsible parties had concluded an agreement, binding on them all, henceforth "to conduct the institution within its income," it might have been supposed that a new and perhaps unusually large endowment gift would now be made. But no contribution whatever for endowment was made. Mr. Rockefeller subscribed $300,000 to make the income for 1904-5 adequate, but that was all.
December, 1904, came round and a committee again visited New York, with the budget for the year July 1, 1905. Again there was disappointment as to any gift for endowment, but Mr. Rockefeller cheerfully promised $245,000 for the current expenses. He was waiting to see whether the conference agreement of December, 1903, was being faithfully observed—whether the trustees were conducting the institution within its income and thus inviting "the confidence of men of means both in Chicago and in the East." There was disappointment, but perhaps this disappointment had its part in encouraging the trustees to establish that absolute control of the annual expenditures which characterized the financial management of the University from that day forward.
When in December, 1905, the committee carried the budget for the next year to New York and with it presented the endowment needs, its members found themselves in a new atmosphere. In January they were able to report that Mr. Rockefeller not only
(127) promised the funds needed to provide for the prospective deficit, but $1,100,000 for endowment. And during the same year, on December 26, 1906, he emphasized his confidence by contributing $3,025,000, of which $2,700,000 was to be added to the permanent endowment.
The day of deficits ended. The last deficit was provided for in 1908.
On December 30, 1907, a new contribution for endowment was made amounting to $1,400,000, and a year later still another gift in bonds of the market value of $862,125. These bonds were given not only for the permanent increase in endowment but also to provide for any possible deficit. But there was no deficit. Mr. Rockefeller, Jr., knew there would be none. In that joyful confidence he wrote Mr. Ryerson, "It is with the utmost satisfaction that we see the deficit in the annual budget of the University thus permanently wiped out." For the rest of the period covered by this story, that is up to 1924, it was wiped out. Through the princely munificence of the Founder the long and desperate struggle with the deficit had been brought to a triumphant conclusion.
