How HBCUs can use diverse sources to close funding gap

CHICAGO, August 30, 2022 – Established more than 170 years ago as bedrocks to help close the Black wealth gap, Historically Black Colleges and Universities (HBCUs) make irreplaceable economic contributions to the communities in which they operate. They are also traditionally underfunded. By maximizing new federal funding opportunities for higher education, along with public-private partnerships (P3s), HBCUs can close their funding gap, attract and retain more students and better position themselves to thrive in the future.

The United Negro College Fund (UNCF) estimates HBCUs contribute nearly $15 billion in total economic impact for their local and regional economies and create 134,090 jobs for their local and regional economies. Of this total, only 57,868 are on-campus jobs, meaning the majority are off-campus. ​As a result of HBCU-related spending, for each job created on campus, HBCUs create another 1.3 public- and private-sector jobs off campus. Every dollar spent by an HBCU and its students produces positive economic benefits, generating $1.44 billion in initial and subsequent spending for its local and regional economies.

"All colleges and universities are facing headwinds related to the current economic and social environments, including supply chain issues, inflation, human capital shortages, and budget constraints,” said Herman Bulls, JLL Vice Chairman of the Americas and Founder of the Public Institutions business group. “These financial challenges are exacerbated for many HBCUs since they generally do not receive priority for funding and grants, nor do they have large endowments.”

Federal funding to the “rescue”

When it comes to funding, more than half of the 101 HBCUs are public institutions mainly funded by state governments and federal grants, while the rest are private institutions that rely heavily on endowments and donations. Endowments at HBCUs are a fraction of what they are at predominantly white institutions (PWI). Since state-sponsored income has declined over the years, to keep their doors open, HBCUs have had to look to other sources of capital – tuition, loans, government and research grants for research and auxiliary services like dining, bookstores, parking and student housing.

Regardless of public or private status, all HBCUs could benefit from the American Rescue Plan (ARP), which dedicated $36.9 billion to the Higher Education Emergency Relief Fund (HEERF III) to support higher education institutions (HEIs) with costs associated with remote learning, COVID-19 monitoring and mitigation, offsetting student expenses and replacing lost revenue for schools. The ARP also allocated $2.7 billion specifically for HBCUs.

Additionally, the historic $1.2 trillion Infrastructure and Investment Jobs Act (IIJA) passed in November 2021 created grant opportunities for universities and research centers and ways to partner with grant recipients to conduct research and pilot projects, along with future benefits potentially stemming from efforts to expand U.S. broadband capabilities.

“Higher-education institutions, along with their facilities teams, can benefit from IIJA funding both directly and indirectly,” said Eric W. Conrad, JLL Executive Vice President of Education. “For example, the $47 billion earmarked for climate-change resilience measures can prepare buildings in vulnerable locations. Colleges and universities in locations susceptible to weather-related issues like storms, wildfires and flooding can benefit from these dollars to update their buildings.”

Combining the strengths of the public and private sectors

Public-private partnerships leverage the private sector through a partnership agreement to provide capital and expertise, to develop and/or operate and maintain infrastructure and facilities on publicly owned land. For higher education, they can specifically create more funding opportunities for HBCUs by becoming a bridge between the various public resources available and what the private sector can provide.

“P3s are designed to maximize and combine the strengths of both the public and private sectors,” said David Houck, JLL Executive Managing Director and leader of the firm’s Higher Education practice. “As higher education institutions grapple with ways they can update and modernize their infrastructure and facilities, P3s can come in and take some of the weight and the risk off of the institution.”

HBCUs like Morehouse College in Atlanta, Georgia, North Carolina Agriculture & Technical State University in Greensboro, North Carolina; and Prairie View A&M University in Prairie View, Texas, are just three of the HBCUs that have used P3s to finance and develop campus commercial real estate projects.

P3s also facilitate HBCUs being able to leverage their commercial real estate assets – land and buildings – where value is involved to support programs that allow HBCUs to provide the highest-quality education and appeal to new students.

Closing the Black wealth gap

As HBCUs produce more than 50,000 graduates annually, they serve a vital social and economic impact when it comes to closing the Black wealth gap in the U.S. since a college graduate makes a higher salary when compared to what non-graduates make. In fact, according to Federal Reserve Bank of New York, the wage gap between those with college degrees and those without just hit $22,000 per year – a record high.

The competition for students is fierce, and, sometimes, PWIs can often offer students more financial aid. They also they have a higher percentage of students who are recipients of Pell Grants, because HBCU students typically qualify for more financial aid. Additionally, 40% of HBCU students are first-generation college students, which provides a launching pad for social mobility.

“These schools are jewels for our society, and we need to find a way to help them prosper and be ready for the future,” Bulls said.  

For more information on the JLL Education industry practice, please visit: us.jll.com/education.