The Carolina way: the well-heeled need not be Tar Heels to attract attention of UNC fundraisers.

• Author: Mildenberg, David
• Position: Cover story

Thomas Marsico didn't go to Carolina, but he's the poster child for the future of financing the nation's oldest public university. As UNC Chapel Hill prepares a major fundraising campaign--maybe as much as $4 billion--it's eyeing 1 percenters such as Marsico, whose Denver-based mutual-fund company manages $16.6 billion. His donations to the school date back a decade, but he kept a low profile until March, when his name went on a nine-story research building, the biggest on campus. Tar Heel taxpayers picked up $243 million of the tab for construction, plus a $50 million annual outlay to study cancer. Both had been championed by Marc Basnight, the longtime state Senate leader and staunch UNC supporter. Now battling Lou Gehrig's disease, the man who once was the state's most powerful politician watched the dedication ceremony from his home in Manteo. But future students and researchers will file through Marsico--not Basnight--Hall, a credit to the nearly $40 million provided by the Coloradan known as one of the best stock pickers of his generation.

Raising money from the nation's wealthiest isn't as ingrained in Carolina's culture as it is at elite private universities and some public ones, but that's about to change. To remain competitive with other state-supported schools ranked among the nation's best, UNC officials say they need more money from private sources. Donors, from the Marsicos to the $25 givers, contributed about 14% of revenue over the past six years. "We're still raising $250 [million] to $300 million a year, but the purpose of campaigns is to raise the bar, and we need to be raising $350 million to $400 million a year," says Roger Perry, former chairman of the board of trustees and a Chapel Hill developer. "We've been staying steady, but we are getting ready to rev it up whenever the chancellor says." A goal and deadline for the campaign hasn't been set, though David Routh, the chief fundraiser, envisions an eight-year campaign, including a two-year "silent phase," when a quarter of the goal is typically pledged.

Revving the fundraising machine comes at what might be one of the best--and worst--times for the school. A soaring stock market has fattened donors' brokerage accounts. Carolina attracted $778 million in research money last year, 71% of it from the federal government. It ranked seventh among public universities receiving National Institutes of Health funding for medical research. Government research grants make up about 30% of total revenue, up from 25% in 2008. It's harder to get in, with almost 31,000 applicants seeking about 4,000 freshman slots last year. With many of the nation's premier private colleges costing $60,000 or more annually, Carolina's overall price of $23,000 for in-state students and $46,000 for out-of-staters--compared with $27,400 and $56,000 at the University of Virginia--is a deal for some parents.

But it's not easy to ask for a check with the scent of scandal wafting over the university. Messes in the athletics program and the Department of African, African American and Diaspora Studies--and in the development office--keep embarrassing the school. At least eight senior officials and coaches were fired or resigned over the last two years. Administrators failed to monitor programs that during the last decade offered more than 50 phony classes, many filled with scholarship athletes. The controversies prompted the departure last year of Holden Thorp, a chemistry professor who had been chancellor since 2008. While the no-show-classes controversy mostly involved football players, Carolina's famed basketball program drew the spotlight in June when former star Rashad McCants claimed coach Roy Williams knew he took fake classes, skipped regular ones and relied on tutors to write his term papers. Williams, who was inducted into the national Basketball Hall of Fame in 2007, responded in a statement, "In no way did I know about or do anything close to what he says."

The controversy has hampered fundraising, says Nelson Schwab III, another former board of trustees chairman and a Charlotte private-equity investor. Contributions remain "pretty dam impressive, but I think there was no doubt it caused questions to be asked. It caused confusion on a number of different scores. It's bound to have hurt."

Donations for athletics were $23.6...