Morehouse College Endowment: Size, Investment, and Impact
Historically Black Colleges and Universities (HBCUs) have played a vital role in American higher education, fostering generations of leaders and driving social and economic mobility for Black communities. However, these institutions have faced persistent financial challenges rooted in historical underfunding and systemic inequities. Understanding the endowment size and investment strategies of HBCUs like Morehouse College is crucial for addressing these disparities and ensuring their continued success.
The Historical Context of HBCU Funding
For over 150 years, Historically Black Colleges and Universities’ rich legacy pushed the country to address inequalities and strive for a more democratic society. During Reconstruction, when many colleges and universities refused to admit Black men and women because they were deemed inferior, HBCUs provided a pathway to higher learning for African Americans. As early as 1871, Black politicians were advocating for the establishment of higher education institutions for Black people.
Despite their crucial role, HBCUs have historically been underfunded compared to predominantly white institutions (PWIs). The Second Morrill Act of 1890, while establishing nineteen public colleges for Black students in seventeen former Confederate states, also maintained de jure segregation through a “separate but equal” system. The mechanism embedded in the Second Morrill Act that led to unequal funding for Black land-grant institutions is the federal-state matching grant. The act declares that these land-grant institutions shall receive an appropriation from the federal government as well as a one-to-one match from the state government. However, over time, some states did not provide this one-to-one match to their 1890 institutions. This disparity has persisted throughout their history. Repeatedly throughout the twentieth century, HBCUs would point to the public funding provided to predominantly white institutions and seek redress, but would only occasionally make progress in closing the gap.
The GI Bill, enacted in 1944 to expand access to higher education to veterans, led to increased enrollments at colleges and universities across the nation, which in turn caused trustees and other leadership at these schools to demand increased funding and improved infrastructure from their state legislatures. These post-war surges in enrollment impacted HBCUs differently, however; despite increased enrollment, HBCUs were cut off from state and federal resources provided to predominantly White-serving institutions.
The Importance of Endowments for HBCUs
Endowments are vital to the life of an institution, particularly any college that cannot count on ongoing support from a state government. Endowments allow a college or university to make commitments far into the future, provide a higher quality of service, all while knowing that resources to meet those commitments will continue to be available. Endowments provide financial stability to an institution, leverage other sources of revenue to offset the cost of tuition for students that cannot afford it, and provide opportunities for innovative research and creativity in teaching.
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A healthy endowment has diversified assets that allow a college to make investments in the market, as well as assets that are liquid and accessible to cover improvements to infrastructure, hiring faculty, enhancing programs and services, as well as providing student scholarships.
Increasing the endowments of HBCUs is not really just about the money, it is about investing in the stability and security of these institutions. Much like the wealth gap between Black families and white families, there is an endowment gap between HBCUs and similar but predominantly white-serving institutions, and filling it is a challenge despite recent donations to HBCUs.
Morehouse College: Endowment Size and Recent Developments
Morehouse College, a private, all-male HBCU located in Atlanta, Georgia, is one of the nation's leading institutions for educating Black men. As of June 30, 2021, Morehouse College had an endowment of $278 million. While this figure represents a significant achievement, it is important to contextualize it within the broader landscape of college endowments.
In 2020, MacKenzie Scott, novelist, philanthropist, and ex-wife to Jeff Bezos, made multimillion-dollar donations to twenty-two HBCUs, including Morehouse College. Months before Scott bestowed $20 million each on Spelman, a women’s college, and Morehouse, for men only, the Atlanta colleges each also received from the United Negro College Fund (UNCF) a portion of $120 million given to UNCF by Netflix CEO Reed Hastings and spouse Patty Quillin, a documentary film producer.
Investment Strategies and Challenges
HBCUs, including Morehouse, face unique challenges in managing and growing their endowments. Despite having millions in the bank, many HBCUs still lack the capital needed to engage investors and expand their assets. An HBCU with an endowment of $20 million may need to put up a significant portion of that, perhaps as much as $10 million, to engage with investment companies to diversify funds. Without heavy alumni giving to ensure consistent endowment capital it is hard for HBCUs to take more investment risk.
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Traditionally, the endowment funds of black colleges and universities tend to lag the performance of their predominantly white peers. For the most part, the endowment funds of black colleges and universities are not as heavily invested in equities as is the norm for most predominantly white institutions. Many black colleges greatly rely on endowment yield to fund current operations, which at most black colleges requires an annual return from a fixed portion of their endowment fund. Therefore, endowment funds of the black colleges and universities are often heavily invested in government securities and other investments carrying little risk - securities that will produce a small but secure revenue stream. This investment strategy shelters these endowment funds from large losses in down markets but also provides lower returns in periods when stocks are rising.
The Impact of Philanthropic Gifts
Some HBCUs have recently been the recipients of some generous individual philanthropic gifts. Scott’s unrestricted gifts were the first time HBCU leadership was able to decide where the money should go versus the typical approach, when donors dictate how the funds should be used. These success stories spotlighting the benefits received by well-known institutions, however, draw attention away from the fact that many smaller and less famous institutions failed to benefit from any windfall in donations over the past year.
Another problem with relying on philanthropy to fund HBCUs is that there are two factors that serve as a drag on such giving. The first is that many philanthropists-individuals and organizations alike-hesitate to donate to HBCUs solely based on low alumni giving.
The Endowment Gap and its Consequences
When reviewing the current status of endowments, The Century Foundation found that the endowments of public and private non-HBCUs were significantly larger than those of public and private HBCUs. (See Table 2.) The endowments per FTE at public non-HBCUs on average were found to be three times the size of public HBCUs. (See Figure 1.) When looking at private institutions, the numbers were even steeper: the size of private non-HBCUs endowments per FTE were seven times the size of private HBCUs.
The factors are a myriad from low African American wealth to limited investment models for their endowments. The latter being something of a chicken and egg situation whereby when you have less you are more conservative with your investment strategy, but this also leads to minimal returns.
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The Future of HBCU Endowments
HBCUs still need to make better known to the American public how much they contribute to the country’s progress and prosperity, advocates say. One of the critical things about that is the sense of culture, the sense of community, the sense of belonging that happens here.
The donations from Scott, Hastings, and others will make a significant-perhaps game-changing-contribution to these institutions. Once supporters get in the habit of opening their wallets, they keep giving.
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