Busting the Myth: Understanding Endowment Management at Public Historically Black Colleges and Universities

Abstract

Allegations and assumptions of fiscal mismanagement at historically Black colleges and universities (HBCUs) have existed since their founding and continue today. There is little evidence that these claims, fueled by the media, legislatures, and often accrediting agencies, are actually truer than fiscal mismanagement at predominantly White institutions (PWIs). Using 18 years of Integrated Postsecondary Education Data System (IPEDS) data spanning 1991 to 2008 for 249 institutions in 46 states, this study utilizes panel data regression analysis to explore the fiscal management of public HBCU endowments to that of comparable public, predominantly White, institutions. The study finds that there is no difference in the fiscal management of public HBCUs as compared to public PWIs. Keywords: endowments, historically Black colleges and universities, predominantly White institutions, fiscal management State legislatures have historically underfunded Black colleges and universities in comparison to their predominantly White peer institutions (Brady, Eatmen, & Parker, 2000; Gasman & Drezner, 2010; Green, 2004; Jones, 2004; Kujovich, 1994; Minor, 2008; Sav, 1997, 2000) and allegations of inequitable funding of public Black universities continue today (The Coalition for Equity and Excellence in Maryland Higher Education, et al. v. Maryland Higher Education Commission et al, 2006). During the years after the Brown v. Board of Education (1954) decision, Black colleges faced a hard situation, for example, experiencing widespread deficits, fundraising struggles, low endowments, and receiving gradually more under-prepared students (Gasman, 2007a). Post-segregation fights over the need for Black colleges led to the starving of many institutions financially (Gasman, 2007a). Nearly 20 years after Brown, 31 of die private Black colleges were operating with deficits totaling $7.5 million (Holsendolph, 1971; Thompson, 1973; Trent, 1971). Private Black colleges had meager endowments adding up to $72,250,000. Even more disconcerting in these figures was that five of the private Black colleges held 62 percent of endowment funds (Trent, 1971). To provide context, the average endowment size of an individual predominantly White institution (PWI) in 1963 was $63,109,000 (Wingerd, 1993). This figure is only $9 million less than the combined total private Black college endowments. The picture is even grimmer for public HBCUs. A review of the public HBCU endowments, much like the holdings of public PWIs, shows smaller investments (DuBois, 1982; Townsend, Newell, & Wiese, 1992; Wagener & Smith, 1993; Wingerd, 1993). Furthermore, according to an analysis by Drewry and Doermann (2001) between the Brown decision and die mid-1970s, the market values of Black college endowments fell. In comparison, with the exception of two years (1962 and 1970), endowments at PWIs increased every year between 1961 and 1975 (Wingerd, 1993). Similarly to expanding personal wealth gaps between the most wealthy and those less fortunate - that are also often along the color line - endowments continually build on themselves making it nearly impossible to close the historic gaps and prior investments (Conley, 2003; Taylor et al., 2011). It is with this context tA¬iat the authors look at public HBCU endowments. Today, the world's markets are down significantly and fears of a double-dip recession are adding to institutions' concerns. As personal wealth is disappearing from portfolios, institutional endowments are succumbing to the wreaking of the markets as well. According to the annual National Association of College and University Business Officers' (NACUBO) endowment study, the average rate of return in the fiscal year ending June 30, 2008 was a three precent loss (NACUBO, 2008). Returns fell an additional 23 precent in the first five months of the FY 2009. While the economy is slowly recovering and, as a result, institutional endowments are beginning to regain some of their losses, the conditions of the market have led to budget cuts, hiring freezes, and other substantial reductions in non-mission critical expenditures. …