How Cloudy is Howard’s Financial Future?

In what seemed like the blink of an eye, expectations of Howard University’s financial future soured from an A rating by credit analysts in 2011 to an eminent collapse prediction by the vice chair of the board of trustees just before May’s commencement convocation.

A combination of internal fiscal forces, Black America’s economic fortunes, health care delivery woes and national demographics has created a perfect storm for the institution characterized by one financial analyst as “the flagship university of Black America.”

“Our beloved University is in genuine trouble,” Board of Trustees Vice Chair Renee Higginbottham-Brooks said in an April 24 letter to the board. The letter, disclosed June 7, indicated that “crucial decisions” are needed to immediately address declining student enrollment, a $10 million cut in federal funds, a “serious drain on the budget” from Howard University Hospital and a nearly a staff payroll that has one university employee for every two Howard students.

Board of Trustees Chairman Addison Barry Rand responded three days later that, “Howard University remains academically, financially and operationally strong.”

The debate over the state of Howard reflects the mounting dilemma for historically Black colleges and universities, according to experts in higher education finances.

“Generally, all colleges and universities have been struggling but HBCUs have been hit especially hard,” Kenneth Redd, director of research and policy analysis for the National Association of College and University Business Officers (NACUBO). It is the umbrella group for 2,500 colleges, universities and higher education service providers.

The financial dilemma created by a pummeling in equity market following the 2008-2009 economic downturn, along with fewer potential students and tightened federal education loan eligibility was worsened for Howard by a $10 million hit for fiscal 2013, caused by sequestration of federal spending, on Howard’s estimated $234 million annual federal appropriation. The appropriation is the largest federal funding for any Black school and amounts to 29 percent of the school’s operating budget. “For any entity, $10 million less than they expected is obviously going to be a big hit,” Redd said.

According to the numbers, Howard’s enrollment fell by 500 students since 2011, mostly due to both a declining population of 18 year-old potential freshmen and tougher eligibility requirements for student loans, especially the PLUS loans that have been a crucial element for many students’ families. PLUS loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay education expenses.

One Howard financial aid staffer, who asked to remain anonymous, said she gets “calls constantly from parents who say they just don’t have the money for tuition.”

Redd echoed an oft-repeated assertion by financial analysts and estate planners that the effect of the 2008-2009 recession was deeper on African Americans than any other population segment.

Higginbottham-Brooks’ letter also cited the university’s operations need to be addressed. “We have too many employees on our payroll (approximately 5,000 employees to serve less than 10,000 students) and we cannot afford this!” the Dallas attorney’s letter said.

Howard insiders have also noted the financial demands on the university’s budget of Howard University Hospital. “…We need to either sell it or get the D.C. government to properly reimburse us for the care provided to its citizens,” the vice chair’s letter warned, noting that the hospital is filling the void in D.C. health care delivery created by the closing of D.C. General Hospital by the District government.

After admissions to the 290-bed hospital reached a record level in 2010, Moody’s concluded, admissions have dropped and, with the closing of D.C. General Hospital, Howard University Hospital, which accounts for 32 percent of the university’s revenue, has seen a 45 percent increase in Medicaid patients and a 43 percent increase in Medicare patients.

The board chairman and University President Sidney A. Ribeau have not spoken publicly about the issues raised in the Higginbottham-Brooks letter.

But Ribeau addressed some of the budget issues in an April 3 state of the university speech, acknowledging the budget turmoil caused in 2012 by the enrollment slump and slashed incoming funds from the federal appropriation and the hospital.

“To be in the difficult situation of facing revenue shortfalls in each of these three areas in the current fiscal year has resulted in a significant negative impact on our operating budget,” he said.

But Redd is still optimistic about the future of the school that has been referred to as the “flagship university of Black America” along with other financially troubled HBCUs.

“They have gone through crises before and somehow found a way to survive and thrive,” he said.

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How Cloudy is Howard's Financial Future?


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