Five HBCU Financial Trends to Watch in 2018

The Washington Post today revealed its list of the major financial stories impacting higher education in 2017, with policy deregulation, free college initiatives, and the GOP tax plan among the top stories of the year.

Higher education has grown for decades as a business structure built on principles of land acquisition, an invaluable product (college degrees and workforce training) and job creation for towns, cities, and states.

Now, that model is dying because college campuses have too few students, degrees are too expensive and jobs are being replaced by automation, and the best places to live and work in America aren’t necessarily in the rural south, where a majority of HBCUs are located.

Rural America’s Population is Shrinking for the First Time Ever

Rural America at a Glance, 2017 Edition -the U.S. Department of Agriculture’s annual report on rural economic and population trends in the nation’s “nonmetro” areas-didn’t include too many surprises, but did find wide regional variation. It also confirmed (as we’ve reported) that rural America’s overall population is in fact shrinking for the first time on record.

Some HBCUs have responded by selling land, cutting positions and razing facilities. Others farm out campus operations to private contractors, with auxiliary services like the campus bookstore and food services emerging as common targets for cost savings.

But can these campuses move fast enough? Here are five financial trends to watch at HBCUs nationwide as the campuses learn to deal with new industrial norms.

Facility Fire Sales – Several HBCUs have quietly leased out old dormitories and academic halls to businesses looking for cheaper office space and quality parking outside of traditional commercial zones. Look for more HBCUs to convert library, athletic and office space to private leasers in the next year, and for schools to move in selling valuable radio and television broadcasting space and equipment to help offset revenue losses from down tuition and endowment underperformance.

Privatizing the Campus Experience – While the bookstore and food service contracts are typical outsourcing targets for HBCUs, look for several campuses to hand out contracts for residence life agreements, public safety, groundskeeping and maintenance, and campus health centers. Contracting these operations will save campuses millions in benefits, legal costs for labor negotiations and lawsuits, and will also reduce executive salaries over departments like student affairs and finance and management.

Consolidated Service Contracts – For private HBCUs, consolidating service contracts for telecommunications, office supplies, cable and Internet access and vehicles with other black colleges will create savings and force vendors to deliver high caliber services to campuses.

Cutting Executive Pay Bloat – Soon, HBCU boards and presidents will realize that one assistant or associate vice president making $100,000 per year is not worth two managers in a service division, or 1.5 full-time faculty members who can teach more classes. HBCUs will dial back on having a stable of vice-presidents, assistants and associates, in favor of investments in faculty who will need to teach more classes on-site and online in the near future.

Cutting More of the Arts and Social Sciences – If programs can’t make money, they won’t hire faculty or teach students. Look for several prominent HBCUs to cut or combine underperforming academic programs with more competitive degree offerings to justify continuing state funding for public HBCUs, or to help keep struggling private HBCUs afloat.

Leave a Reply