Hectic start for French university foundations

Encouraging donations: Valérie Pécresse, France’s research minister.

By January 2010, 60 universities that will be autonomous, and given the freedom to set up foundations on the basis of a simple board decision, most are attempting to emulate the recipe that has long built fortunes for American institutions such as Harvard or Yale.

Until now it was impossible for French universities to set up foundations. In particular, the powerful Ministry of Finance did not allow tax breaks for donors. While this is no longer the case, the reforms of the past three years are still in their infancy. And competition for finance sparked by economic crisis, plus new bureaucratic and political hurdles, threatens to undermine these foundations before they get off the ground.

The rush to set up foundations dates back to April 2006 when the then Minister of Research, François Goulard, introduced the Scientific Cooperation Foundation. His ministry had just received extra funding of €300 million from the proceeds of highways privatisation and Goulard proposed using two-thirds of this to launch Foundations for Scientific Cooperation (Reseaux thematiques de recherche avancée, or RTRAs).

Within weeks 37 projects were submitted to an evaluation committee and in October 2006 13 RTRAs were selected. The following month these RTRAs, including a nanotechnology research foundation in Grenoble and mathematics research foundation in Paris, received their first funding. But instead of seeing this money as an exceptional grant – as intended by the minister – the recipients considered this as seed money for long-lasting research foundations. 

Looking to companies

Soon they started to tap private companies for further funding, with Airbus in Toulouse, BASF in Strasbourg and scientific instrument maker Bruker in Grenoble among the prominent industrial donors.

And so although it was intended as a one-off experiment, the RTRA foundation status was used by universities and public institutions to create autonomous research foundations.

But that was not enough for the Pécresse when she took over as minister of research in 2007. First, she decided to provide match every euro raised by an RTRA from the private sector with state funding. For an institution such as the School of Economics in Toulouse, which raised €30 million from the private sector in addition to the €20 million it received from the government seed funding, that added up to a significant endowment of €80 million.

Pécresse also increased the number of RTRAs to 26. That was not all. The law on university reform in July 2007 introduced another structure for university foundations to encourage companies to cooperate with, and invest in, them.

Tax advantages

For the first time in France universities were able to manage private money through those structures. And there are significant tax breaks. For example, an individual can deduct 66 per cent (with a ceiling of €5,000) of a gift from income tax. Wealthy individuals can also deduct up to 70 per cent (with a ceiling of €66,000) from France’s wealth tax. Companies can deduct up to 60 per cent of their gifts from corporation tax. And after a recent decision of the European Court of Justice in Luxembourg, these tax deductions are allowed for transnational donations also.

But there is a twist. First, since France has little tradition of raising money through foundations, most universities had no experience of managing private fundraising operations. All in all, there are 1,571 foundations in France, more than 15 per cent of them in medical research. But unlike in the US, professional fundraisers are rare species in France.  

The launch of a number of different structures for foundations – RTRA, university foundations and partnership foundations (limited duration foundations to finance specific research projects) – has also created competition for resources at a time when money is scarce. For example, the Université Pierre et Marie Curie in Paris participates in four RTRAs and has created its own university foundation. Looming conflicts of interest may deter some donors already uneasy about the state of the economy.

In addition, the competition between the RTRAs and the university foundations is not equal. RTRAs started with a total of €350 million of public seed money and close to €70 million in private donations. That, perhaps, explains university foundations have raised only €35 million to date.