2020 Was a Historic Year for HBCUs, Yet The HBCU Wealth Gap Likely Increased

2020 was an unparalleled year for philanthropic giving to HBCUs. Where did the money really go?

2020 was an unparalleled year for philanthropic giving to HBCUs. Yet once closely examined, it's clear the bombardments were mostly targeted at certain institutions.

In the United States, college endowments held about $630 billion at the conclusion of the 2019 fiscal year. In many ways, higher education is just a reflection of our country so it should be of no surprise that there is a stark wealth gap between institutions. The top 10 schools by endowment size held about a third ($210 billion) of this wealth alone. Oftentimes, when Historically Black Colleges & Universities(HBCUs) are brought up in this discussion it is to highlight the fact that HBCUs lag well between predominantly white institutions(PWIs) in endowment size. However, what the discussion often misses is that within HBCUs there is an even starker wealth gap between institutions.
2020 was an unparalleled year for philanthropic giving to HBCUs, with multiple benefactors flooding institutions with eight-figure donations. Throughout the year as gift after gift bombarded HBCUs, we saw multiple HBCUs have their endowments double by single gifts and others receive their largest gifts ever. Yet once we closely examine where the large gifts went it became incredibly clear that the bombardments were mostly targeted at wealthy institutions. Let’s examine where the money went.
Before we dive deeper, I believe it is important to understand what an endowment is and how they contribute to the financial success of institutions. Per Investopedia, University endowments are comprised of money or other financial assets that are donated to academic institutions. Endowment funds support the teaching, research, and public service missions of colleges and universities. More importantly, a strong endowment can reduce the debt burden on students and shield institutions from economic downturns. Endowment funds are a surefire way to ensure an institution’s longevity. HBCU Money created a great infographic to show universities use the investment returns on the principal endowment to fund strategic goals while simultaneously growing the endowmen
For the 2020 Fiscal Year, there were 110 universities that had an endowment in excess of $1 billion with Harvard leading the way with a $40 billion endowment. No HBCU was able to meet the threshold for inclusion. This is due to a variety of reasons including but not limited to lack of institutional capacity to fundraise, and systemic racism. As it relates to HBCUs, Howard sported the largest endowment valued at $712.4 million which was nearly double the next HBCU, Spelman, at 377.4 million. As a whole, HBCUs' endowment size reached $3.9 billion at the end of 2019. Of the 101 HBCUs, the top 7 in endowment size are all private institutions and account for $1.99 billion or 51% of the total endowment size of HBCUs collectively. These schools who make up half of HBCUs' endowment size only account for 8.6%(25,121 students) of the total HBCU student population.
The 2020 philanthropic season has inevitably elevated HBCUs endowment totals to unseen heights. When the next National Association of College and University Business Officer(NACUBO) report comes out for FY2021, Howard likely will be significantly close to a $1 billion endowment and I suspect that many schools will have their largest year-over-year increase in endowment value. However, I suspect that the top 7’s share of the HBCUs’ total endowment size will increase from 51%. While it is true some less endowed schools like LeMoyne Owen were able to quadruple their endowment, the biggest beneficiaries of the 2020 philanthropic season were the most endowed HBCUs. In the graphic below, I examined the top 7 schools by endowment size and found that each school received its largest gift in 2020
They say wealth begets wealth and when we actually crunch the numbers, it is hard to argue with the proverb. The above table lets us examine the largest donation these schools received in 2020. Howard received $10 million from the Karsh Foundation and $40 million from Mackenzie Scott, Spelman received $40 million from Patty Quillin and Reed Hastings, another $20 million from Scott and $10 million from the Klarmans’, Hampton received $30 million from Scott, Xavier received $20 million from Scott, Morehouse received $40 million from Quillin and Hastings and another $20 million from Scott, Meharry received $34 million from Michael Bloomberg, and Tuskegee received $20 million from Scott. In 2020, each school received its largest gift ever and they accumulated $284 million on 8 figure donations alone. If you believe that Mackenzie Scott’s donations alone would help close the wealth gap between these institutions, you would be disappointed to find out that these schools were well represented in Scott’s distribution of funds. To date, Mackenzie Scott has donated $560 million to HBCUs and these HBCUs account for $150 million of that total or 26.7% of Scott’s donations.
If we were to exclude Mackenzie Scott’s donations, the only schools outside of the top 7 to receive an 8 figure gift in 2020 were LeMoyne Owen and the three black medical schools, Charles R. Drew, Howard, and Morehouse Schools of Medicine. This is important because while the sector undoubtedly had its best philanthropic year ever, if your institution did not receive the golden ticket from Scott your institution’s outlook has likely not gotten any better.
Finally, in an effort to objectively illustrate why I believe the HBCU wealth gap has likely increased I decided to project how the top 7 HBCUs faired in 2020 and the implications it has on HBCUs collective endowment size.
FY2021 Projections of the Top 7’s Endowment Size
1) Howard — $1.2 Billion (+68%)
Projecting Howard to increase their endowment by 500 million, or 68%, may seem a bit too optimistic but the truth is it has already happened. We officially have an HBCU with a billion-dollar endowment, expect more press on this when the next NACUBO report is published. The endowment gap between the #1 and #2 HBCU will increase as Howard’s endowment will be almost 2.5 times more than the number 2 HBCU, Spelman.
2) Spelman College — $490 Million (+30%)
First and foremost, shoutout to Spelman for having by far the most transparent accounting documents on the web as it relates to HBCUs.
Projecting Spelman’s endowment to increase by almost 30%, or 112 million, does not seem too far-fetched when we see what Howard has done. Dr. Campbell has already announced her retirement effective June 30, 2022, and in her letter, it states that Spelman’s endowment is nearly $500 million.
3) Hampton University — $320 million (+13%)
At last, we get to the first modest gain in an HBCU’s endowment, while a 13% increase($40 million) is a great gain, Hampton did not have the year some of their counterparts had. Dr. Harvey, who is also retiring in June 2022, announced in a press release for his book where Hampton’s endowment sits.
4) Morehouse College — $250 million (+59%)
The first and only leapfrog I project in the wealthiest 7 HBCUs has Morehouse jumping past Xavier. After a monster 2020, it should be of no surprise that Morehouse was able to increase its endowment by nearly $100 million(59%). Their Vice President for Institutional Advancement already announced earlier this year that Morehouse’s endowment is at $250 million, so do not be surprised if by the end of 2021 that they are approaching Hampton.
5) Xavier University of Louisiana — $210 million (+18%)
I project Xavier to surpass the $200 million threshold and to have increased its endowment size by $32 million(18%). With the Mackenzie Scott donation guaranteed to boost Xavier by $20 million, I project corporate philanthropy and other smaller philanthropic gifts to chip in another $12 million to their endowment. Xavier is a powerhouse producer of Blacks going into medical fields and has always leveraged that fact to its benefit. It would not surprise me to see Xavier report a slightly larger sum.
6) Meharry Medical College — $180 million (+15%)
I believe Meharry is the hardest of the schools to project. While it is true that they received $34 million from Michael Bloomberg, the nature of that donation was to provide $100,000 grants to students over the next 4 years. Therefore, I do not believe their endowment will leap to over 200 million. What remains to be seen is how Bloomberg’s donation spurred smaller donations to the Medical College. I give Meharry a conservative projection of $180 million, a 24 million increase(15%) from its previous total.
7) Tuskegee University— $160 million (+24%)
Rounding out the top 7 is Tuskegee. Tuskegee received $20 million from Scott, which undoubtedly vaulted their endowment past $150 million. Tuskegee has a well-established and nationally acclaimed engineering program that also helps to school net corporate philanthropy. Once we factor in private giving, an $160 million endowment seems like a fairly conservative projection. A $160 million endowment is good for a $30 million increase(24%) from their 2020 total. Tuskegee, however, could be bumped out of this spot by a public HBCU in the near future.
If my projections are anywhere near accurate the top 7 HBCUs will have increased their combined endowment size by almost a billion dollars to $2.81 billion. Collectively, HBCUs endowments would have to reach more than $5.5 billion for the top 7 HBCUs to not have more than their current 51% share of endowments. This would require that HBCUs outside the top 7 accumulating about $600 million in gifts. We know Scott gave out $410 million so the question becomes do you believe that corporations and private donors doled out an additional $190 million to individual HBCUs. When looking at the numbers this seems unlikely, especially when you factor in the large sum of philanthropy that the United Negro College Fund and Thurgood College Marshall Fund received, that will not increase their member-schools endowment. So while 2020 may have been HBCUs' best philanthropic year ever, the wealth gap between HBCUs widened even further. Yet none of this should be surprising when considering across the globe in 2020 the biggest winners were the wealthiest people.
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