A Fortunate Dilemma: How HBCUs Leveraged a $560 Million Windfall

By Christopher Connell    //    Volume 30,  Number 4   //    July/August 2022
Takeaways

  • Take a strategic perspective when deciding the best use for unexpected gifts.
  • Endowment growth can fuel operations over the long-term, but urgent needs that serve students and the academic mission also merit investment. Find the right balance for your institution.
  • Share the good news. Promote the important recognition a large gift brings to your mission.
  • Consider ways an unexpected gift could transform institutional fundraising. Will it attract new donors? Will existing donors begin to do more? Will it move the needle on state support?

In homes across America in the late 1950s, families gathered around their televisions each Wednesday evening to watch “The Millionaire,” a half-hour CBS show about a rich man who dispatches an assistant to deliver checks for $1 million to unsuspecting people he’d never met but whose lives he was dramatically altering. Before the show ended its six-season run in 1960, more than 200 folks had shared in the anonymous John Beresford Tipton’s wealth. In 2020, 23 historically Black Colleges and Universities (HBCUs) were similarly surprised with unprecedented anonymous gifts intended to change lives that would alter the trajectories of the institutions. These unsolicited and unrestricted gifts ranged from $4 million to $50 million, for a total of $560 million to HBCUs—a portion of that year’s remarkable philanthropy from philanthropist, activist, and novelist MacKenzie Scott, who has committed to giving away half of her share of the Amazon fortune.

The Chronicle of Philanthropy calculates Scott has distributed $8.5 billion in gifts since the summer of 2020 to non-profit organizations. Many of the groups she has supported are devoted to advancing racial and gender equity, education, economic development, public health, and other underfunded causes. Some Hispanic-serving institutions and tribal colleges also shared in her largesse.

These gifts started in mysterious ways, with an email and follow-up phone call in which neither the source of the money nor the amount was immediately revealed. Only later did the colleges learn from whom the gifts came. Unlike the fictional Tipton—who bound his millionaires to a vow of secrecy—this self-effacing philanthropist did allow her beneficiaries to publicize their good fortune after Scott revealed the gifts in blog posts on Medium.

Many of the 101 accredited HBCUs are more than a century old, founded after the Civil War. About two-thirds are public, the rest private. Almost a quarter of the 279,000 students enrolled at HBCUs in 2020 were White, Hispanic, or from other minority groups, according to the National Center for Education Statistics. But the institutions retain their Black identity and culture even as they have become more diverse, and they have garnered new attention amid heightened concern about racism and inequality in America since the #BlackLivesMatter movement began in response to police killings of unarmed Blacks.

While only nine percent of all Black college students attend an HBCU, the institutions have long produced more than their share of Black doctors, lawyers, engineers, and other professionals. They awarded 13 percent of all bachelor’s degrees earned by Black collegians in 2019-2020, according to the National Center for Education Statistics.

And for these institutions, most with only modest endowments, gifts as large as MacKenzie Scott’s can be transformational. According to the American Council on Education, HBCU endowments on average lag those of predominantly White institutions by at least 70 percent.

Public HBCUs were long underfunded by their states and even where those gaps have narrowed, states no longer are as generous to any of their public institutions as they once were.

“In 2008, 70 percent of our resources came from the state. Today, it’s about 30 percent,” said Ray L. Belton, president of the Southern University System and chancellor of Southern University and A&M College. “That necessitates institutions’ becoming more self-sufficient.”

Southern did not share in the Scott bounty, but is about to launch a capital campaign to add $50 million to its endowment. Far from feeling envious, Belton says he is delighted at the big gifts other HBCUs received. “It’s illuminated our value,” said Belton, who is retiring this spring. “It provides us a platform to talk about what’s happening on these campuses and their critical needs. It’s enabling us to fulfill lofty goals.” For Southern that means finding $600 million to carry out its long-term master plan. It’s already secured $166 million for new programs and facilities, including its Valdry Center for Philanthropy, one of only three such research centers in the country.

Prairie View A&M University in Texas received the single largest Scott gift, $50 million, and President Ruth Simmons immediately put $40 million into its endowment, boosting it to $130 million. Simmons is no novice at fundraising. Once lauded by Time magazine as America’s best college president, Simmons led a campaign when she headed Brown University that raised $1.6 billion. She came out of retirement in 2017 to guide Prairie View’s fortunes.

She turned to just a small circle of top advisers—her provost, her vice president for finance, and two others—to decide what to do with the windfall. “When you get a gift of that size, you don’t want to treat it like an ordinary occurrence and fritter it away in small things,” said Simmons, 76, who is stepping down this summer to resume retirement.

Prairie View put the remaining $10 million of Scott’s gift to immediate use, including aid to help juniors and seniors stay in college and finish their degrees during the COVID-19 pandemic. In addition, she designated funds for faculty development, research, and recruitment, including start-up packages like those that leading colleges and universities use to lure top talent.

Simmons is especially appreciative that Scott gave her gifts with no strings attached. “There’s no doubt that the more unrestricted funds you have access to, the more you can soar as a university, particularly as a state university,” she said.

At Prairie View and elsewhere, Scott’s gifts have supercharged ongoing fundraising. Prairie View alone has received three $5 million-plus gifts in the past 15 months.

John Osby, chair of the Prairie View A&M Foundation Board of Trustees, credits Simmons with positioning the university to warrant such a major infusion of support. “I wish I could say we had a role, but it all centers around Ruth,” said Osby, an alumnus and retired E. I. DuPont engineer. “It was Ruth’s outreach and vision that caused the gift to come to the university in the first place.”

Osby added, “She taught me, ‘John, first put the vision out there that you want, and people will gravitate toward that vision and donations will come.’ This is the biggest testament to that.”

Most leaders of the 23 HBCU recipients appear never to have met or even talked on the phone with Scott, who relied on expert advisers to vet and contact the recipients.

Simmons did know the philanthropist from their mutual connection to Princeton University, where Simmons was once vice provost. She had recruited novelist and future Nobel Laureate Toni Morrison to the faculty, and Morrison, who died in 2019, had mentored Scott, who took her creative writing class and graduated in 1992 with a degree in English. While Simmons said she knew Scott “would never allow you to name anything for her,” the university’s new Tony Morrison Writing Program is intended “as a kind of homage” to the philanthropist.

The reporting requirement for the Scott gift “is so minimal that it’s shocking,” said Simmons. “Just as there was no need to submit a proposal, there’s no need to develop a song and dance for her. It is a beautiful thing, the way she makes gifts.”

The calls from Scott’s people—higher education experts who had quietly and thoroughly vetted HBCUs on their own—came out of the blue for all 23 HBCUs. There is no application form or process for a Scott grant. Simmons said that she has been approached by other college leaders seeking Scott’s email address or other information on how to reach her, “but knowing the way

MacKenzie works, I always refuse…I explain that you can’t write a proposal for her. The best thing you can do is draw attention to the wonderful work you are doing because that’s how they find you.

If you keep doing that, there’s a chance they may reach out to support you.”

North Carolina A&T State University (NCA&T) in Greensboro, N.C., received the second largest of the Scott gifts, $45 million. The university has the largest enrollment of any HBCU (13,300), awards the most bachelor’s degrees in engineering to Black students, and generates the largest amount of external funding for research ($78 million) among these institutions. It also recently completed a capital campaign that over five years raised $191 million, the largest amount ever raised by a public HBCU. Consultants had advised the university before the campaign began that the most it could conceivably raise was $85 million.

Even without Scott’s $45 million gift, NCA&T smashed its fundraising record by pulling in $49 million in 2021 alone from alumni, corporations, and other sources, nearly tripling its previous high. “The incredible generosity of our supporters has created a new financial reality that holds great immediate and long-term potential for our university,” said Chancellor Harold L. Martin, Sr. “We are now moving into a level of competitiveness in generating private support that has not been witnessed among HBCU campuses.”

Once supporters get in the habit of opening their wallets, they keep giving. “We are now raising more than $20 million a year,” said Kenneth E. Sigmon, Jr., president of the university’s foundation and vice chancellor for university advancement. Sigmon, former vice president for development at the Oklahoma State University Foundation, heads a staff of 32, three-quarters of them front-line fund-raisers for annual giving, major gifts, planned gifts, and corporate and foundation relations.

His office’s professionalism is demonstrated by the detailed donor-impact reports sent yearly to supporters. “We want them to see and be reminded of the impact of their gift,” said Sigmon. While Scott’s staff does not require detailed accounting for its gifts, NCA&T nonetheless prepared an eight-page report showing how it used her $45 million gift.

It put $40 million straight into the endowment and tapped the remaining $5 million for other purposes, including funding a pair of faculty sabbaticals for the first time in its history. It also created a February One Scholars Program—recognizing the day in 1960 when four NCA&T students refused to leave a segregated lunch counter and helped galvanize sit-ins across the South. The program provides full-ride scholarships for 15 students in the College of Arts, Humanities and Social Sciences, the College of Education, and the Hairston College of Health and Human Sciences. The university established research centers in those three colleges, including one at Hairston that will examine health disparities, an issue of paramount concern after minorities suffered the heaviest toll in the pandemic. NCA&T also created an artist-in-residence program.

Known for its gospel choir, marching band, and jazz program, it is providing new scholarships for music students and upgrading their rehearsal spaces. The Scott gift also gave it the wherewithal to build its brand across the Piedmont region with billboards, magazine ads, and television commercials—a $700,000 effort over two years designed to accelerate its stature and growth. On Chancellor Martin’s watch the average GPA of incoming classes has grown from 3.0 to 3.7 and enrollment keeps growing.

“We had the luxury of taking the bulk of this gift and putting it into our endowment where it becomes a perpetual investment,” said Sigmon. “You don’t want to spend it all, meet short-term goals, and then five years from now you’re right back in the same situation.”

Endowments, by their nature, are gifts that keep on giving.

Howard University in the nation’s capital boasted the largest endowment among HBCUs as of June 30, 2021: $795 million. Spelman College, a women’s college in Atlanta, was next with $530 million, followed by Hampton University with $380 million and Morehouse College with $278 million. Meharry Medical College, one of four historically Black medical colleges that shared a $100 million gift from philanthropist Mike Bloomberg in 2020, boasted an endowment of $187 million.

Some 142 U.S. colleges and universities report endowments of $1 billion or more, led by Harvard University’s eye-popping $52 billion, according to the annual survey by the National Association of College and University Business Officers. The median endowment for the 734 institutions surveyed was $200 million.

A $1 billion endowment is a significant sum, but the rule of thumb is that schools should spend no more than 4 or 5 percent of theirs annually. In fact, NACUBO calculates the average spending rate in 2021 was 4.54 percent, with half the proceeds going for student aid, about a quarter for academic programs, research, and endowed faculty positions, and almost a tenth for facilities operation and management. At that spending rate, a $1 billion endowment yields $45 million and a $200 million endowment just $9 million. As endowment grows, so does an institution’s good fortune. Spelman announced in March 2021 the public phase of a $250 million campaign, its largest ever, with $240 million already raised during the three-and-a-half year “quiet” phase of the campaign—a testament to donors’ loyalty but also the necessity of constantly seeking such support.

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. The couple are longtime supporters of HBCUs and the NAACP Legal Defense Fund.

When the Scott gifts became public, Spelman President Mary Schmidt Campbell told the Washington Post she read it as an affirmation that Black colleges know what they are doing and do it well. “This is a sector that has been working for 150 years, in some cases almost completely without that affirmation,” she said. Spelman produces more female future PhDs in science, technology, engineering, and math (STEM) than any other U.S. institution. The National Science Foundation reports that although HBCUs enroll only 9 percent of Black undergraduates, they award almost 18 percent of STEM bachelor’s degrees, and one-third of all Black students who earn STEM doctorates attended HBCUs as undergraduates.

Marybeth Gasman, a Rutgers University education scholar, author, and authority on HBCUs, along with data analysts from the company Trivium BI, did a deep dive into the characteristics of which HBCUs received Scott’s grants and which did not. In general, HBCU recipients attracted larger freshman classes, had higher retention rates, and experienced six-year graduation rates that were twice as high as those of the non-recipient HBCUs. They also had fewer students who received need-based federal Pell Grants, meaning the non-recipients enrolled more students from lower-income families. Gasman believes that a few with lower-than-average graduation rates landed in the chosen group based on the strength of their leadership.

Scott, who in 2019 took the billionaires’ pledge to give away most of her wealth, wrote in a July 2020 blog announcing the first 116 beneficiaries of her largesse that, “All of these leaders and organizations have a track record of effective management and significant impact in their fields.”

The police killing of George Floyd in 2020 that sparked a national debate and reckoning about racism in America may have attracted new interest in HBCUs. While overall college enrollment fell during the COVID-19 pandemic, it rose at ten of the largest HBCUs, the Washington Post has reported. Howard, alma mater of both Vice President Kamala Harris and writer Toni Morrison, registered a 28-percent jump in enrollment.

Morgan State University in Baltimore, which received $40 million from Scott, got nearly 15,000 undergraduate applications and enrolled a record 2,288 freshmen last fall. That was 68 percent above the size of the class that started in 2019. Scott’s “monumental gift will change lives and shape futures,” said Morgan State President David K. Wilson. “It’s an unbelievably transformational gift.”

A few months later, a longtime Morgan State benefactor and alumnus, Calvin Tyler, Jr., who rose from UPS truck driver to the top executive ranks of the shipping giant, and his wife Tina increased to $20 million their donation for scholarships. Originally for students from Baltimore only, the Tyler scholarships are now available to attract talent nationally.

Morgan State’s engineers and other graduates are sought after by federal agencies and private industry alike, said Wilson. “By the time our students graduate, they are ready to compete with any student from the Ivy League, Big Ten, or anywhere else in the country,” said Wilson, an Alabama sharecropper’s son who was educated at Tuskegee University and Harvard. “They don’t take a back seat to any of them.”

Morgan State put almost all of its gift—$38 million of the $40 million—into its endowment to advance strategic initiatives, including $3 million to endow three new professorships in cybersecurity engineering, brain science, and psychometrics and predictive analytics. The state provided matching funds for those chairs. It’s using some of the remaining $2 million to launch a Center for Urban Health Equity and investing in a host of other priorities, including an institute for racial justice, a social-justice leadership training program, a student research center, and a creative writing award named for the Harlem Renaissance novelist Zora Neale Hurston.

Another of Maryland’s four HBCUs, the University of Maryland Eastern Shore (UMES), deposited its entire $20 million gift into its endowment to support student scholarships, faculty development, and “to bolster our sponsored research operations, which should, over time, better position us for government grants and contracts,” said David A. Balcom, vice president for university relations and institutional advancement. “UMES has received several large, unanticipated, anonymous contributions since Ms. Scott’s gift. Whether they were directly influenced by the gift is uncertain, but I think it is fair to say that Ms. Scott’s generous gift gave our campus a ‘seal of quality.’”

Far from discouraging other donors, small or large, fundraising professionals say that a college that lands a major donation is likely to draw more support from alumni, companies, and other loyal supporters.

“Wealth begets wealth and success begets success. People want to give to institutions that are successful,” agreed Gasman, associate dean of the Rutgers Graduate School of Education and executive director of the Rutgers Center for Minority Serving Institutions. HBCUs typically “do not get a large amount of philanthropic contributions or the kind of attention MacKenzie Scott’s money draws. The ‘legitimacy’ her giving offers may even be worth more than the money. Other people want to be affiliated with her donations.”

Added Gasman, “I’d love to see her give to every HBCU, even ones that are struggling, because I think HBCUs are always a good investment. They punch above their weight.”

Tougaloo College in Tougaloo, Mississippi, has just 700 undergraduates, but counts among its alumni more than a third of the African-American physicians in Mississippi, noted President Carmen J. Walters. Rep. Bennie Thompson (D-Miss.), who chairs the congressional panel investigating the January 6 insurrection at the U.S. Capitol, and NAACP President Derrick Johnson are also alumni.

The college received $6 million from Scott. Only Dillard University in New Orleans ($5 million) and Voorhees College ($4 million) in Denmark, S.C., received smaller grants. Tougaloo’s campus was a refuge for civil-rights activists during the 1960s when Freedom Riders were killed by Ku Klux Klansmen. Walters put most of Scott’s gift into endowment but also used some funds to replace windows in the historic, 120-year-old Woodworth Chapel, where Dr. Martin Luther King, Jr., Fannie Lou Hamer, Robert F. Kennedy, Julian Bond, and Stokely Carmichael, among others, once spoke from the pulpit. Some was also spent to meet other pressing facilities and technology needs.

Netflix’s Hastings and Quillin also recently donated $10 million to Tougaloo and Brown University to support a long-standing partnership that sends Tougaloo students to the Providence, Rhode Island, campus on semester exchanges and for summer classes and research. The program also sends Brown students to Mississippi for a weeklong intensive program learning the history of the civil-rights movement. Brown also reserves places in its School of Medicine for top Tougaloo pre-med students.

Tougaloo has received several anonymous million-dollar gifts in the past 18 months, and “it’s because people like MacKenzie Scott gave to HBCUs,” said President Walters, whose campus sits on a former slave-holding plantation. “Are we a worthy investment? Absolutely we are. And we want others to know we are a worthy investment.”

Norfolk State University got $40 million, one of the largest gifts. Asked why it was so fortunate, President Jauvane Adams-Gaston replied, “We know that Ms. Scott and her organization had a very thorough vetting process. They used a lot of data analytics to determine which schools to invest in. One of the things that made us very palatable to them was the strength of our academic enterprise and our administrative leadership.”

Added Adams-Gaston, “We had great exposure from this gift. It opened doors to new partnerships.” In fact, she said, it’s “led to really great things happening for the university. Our major gift contributions—$50,000 or more —increased by 222 percent from 2020.”

Of the $40 million from Scott, “We put $35 million into the endowment and $5 million into a strategic investment fund,” she said, which is providing more scholarships and faculty support, while also investing in an applied research center that could spawn public-private ventures that generate revenues down the road.

HBCUs still need to make better known to the American public how much they contribute to the country’s progress and prosperity, advocates say. “They are the place where African-American students first had the opportunity, often when there was no other opportunity in the nation, to pursue higher education,” said Adams-Gaston. “It’s our responsibility to see that people understand their needs.”

And she added, “This may be the only time in their lives that many of our students will be in a majority. One of the critical things about that is the sense of culture, the sense of community, the sense of belonging that happens here.” She points to a 2015 Gallup study that found alumni of HBCUs were more likely than Black graduates of other institutions to be thriving, particularly in the areas of financial well-being, purpose, and satisfaction with their lives. They felt the support and experiential-learning opportunities they had in college prepared them for life after graduation.

Norfolk State, which hasn’t conducted a capital campaign for almost 30 years, is readying one now. The institution resisted the temptation to spend more of Scott’s gift on immediate needs because “we hope that by growing the money we will be able to meet those needs more effectively than if we said, ‘OK, we’ll take this big chunk and use it all right now,’” Adams-Gaston said. “We looked at what is it a transformational gift does. Transformational gifts keep giving. That’s where our focus was.”

Fifteen miles to the north, Hampton University took a different tack with its $30 million from Scott. President William R. Harvey applied most of the gift—the largest in the school’s 154-year history— for immediate purposes, including completely upgrading science laboratories campus-wide, funding new scholarships for high school students who have demonstrated strong character, bolstering its cutting-edge proton-beam cancer treatment center, and even providing emergency grants up to $500 for faculty and staff facing difficulties making ends meet during the pandemic, as well as help for students.

Said Harvey, who stepped down in June after 44 years guiding Hampton’s fortunes, “HBCUs are not a monolith. We are a proud HBCU. Eighty-five percent of our students are a minority, but we’ve got students from all over the world … and any objective analysis will show that we are one of the best modest-sized institutions in the entire country. That’s who we are.”

HBCUs have played an important role in American life and the struggle to overcome racism and inequality since the era of Reconstruction and the second Morrill Land Grant College Act of 1890, which established 18 land-grant universities for Blacks. They have garnered more attention of late for good reasons and unfortunate ones, including a wave of bomb threats at 17 HBCUs in February during Black History Month. But they also are sharing a gusher of new federal dollars that dwarfs even MacKenzie Scott’s $560 million: over $2.7 billion through the American Rescue Plan, part of the federal government’s COVID relief and economic stimulus legislation, with at least half going to provide financial relief to students. North Carolina A&T alone received $93 million and Prairie View $84 million from that act. Southern University and its three campuses received $119 million in relief funds. President Joe Biden is fulfilling the pledge he made during his campaign for the White House to make major investments in HBCUs. At his urging, Congress delivered more than $3 billion to HBCUs in pandemic relief and other support to ameliorate chronic underfunding.

Some states are also making amends for years of shortchanging HBCUs. An analysis by Tennessee’s legislature concluded that the state underfunded Tennessee State University by more than a half-billion dollars over half a century, and Gov. Bill Lee in February requested $250 million to repair and improve the university’s infrastructure, on top of $68 million for a new engineering building. Maryland Gov. Larry Hogan in 2021 signed legislation providing $577 million over a decade to Maryland’s four HBCUs to settle a 15-year-old lawsuit over serious underfunding in the past.

While segregation at state colleges and universities ended decades ago, Forbes magazine calculates that compared to their predominantly White counterparts, the nation’s Black land-grant universities have been underfunded by at least $12.8 billion over the last three decades, adjusted for inflation. NCA&T alone was deprived of $2.8 billion since 1987 due to inequitable state allocations, the magazine reported. Still, in 2020, the North Carolina legislature appropriated $8,200 less per student at NCA&T than it did at North Carolina State University, where the per-student allotment was $16,400.

Despite philanthropy, despite more federal and state dollars, HBCUs often are still struggling financially. But for once, things are moving in the right direction, helped in no small part by MacKenzie Scott.

Christopher Connell is an independent journalist and former education writer for the Associated Press. He is the author of AGB’s Top Strategic Issues for Boards 2022–2023.