Finance 101… 100… 99… 98…: Making Sense of Howard University’s Financial Struggles
Good news, D.C.: It turns out we actually have two Howard Universities.
The first Howard “remains academically, financially and operationally strong,” according to a June letter from Howard Board of Trustees Chairman Addison Barry Rand. It’s balanced its budget for three straight years, returned its endowment to prerecession levels, and steadily increased its six-year graduation rates. This Howard’s “finances are stable, its endowment is secure, and its budget and cash flow are actively managed,” university spokeswoman Kerry-Ann Hamilton said this spring.
The other Howard isn’t in such good shape. Its undergraduate enrollment dropped by more than 6 percent this past academic year from the previous year to its lowest level in the past decade, due to a sharp decline in the percentage of accepted students who chose to enroll. It’s cutting about 75 staff positions as part of an “administrative renewal” process. Its struggling hospital saw its revenue decline by nearly $20 million this year and may need to be sold. Its heralded Howard Town Center development project, which was supposed to bring the university more than $1 million per year and receive an $11 million tax abatement from the city, has ground to a halt after Howard canceled its agreement with the developer of the property in June. An internal staff memo signed by Howard President Sidney Ribeau in January and obtained by Washington City Paper in April stated that Howard faced a “significant budget challenge” due to “a significant decrease in student enrollment in the fall semester, along with other revenue shortfalls and an anticipated reduction in Howard’s federal appropriation due to sequestration.”
Most alarming were two letters this spring that raised questions about the continued existence of the university. Renee Higginbotham-Brooks, vice chairwoman of Howard’s board of trustees, wrote a letter to the board in April warning that Howard is “in genuine trouble” and “will not be here in three years if we don’t make some crucial decisions now.” Thirteen Howard deans followed up in June with a letter to the board stating that “fiscal mismanagement is doing irreparable harm to the University’s academic programs, institutional reputation, and future viability” and “placing the very survival of the university at risk.” This Howard, the deans wrote, had lost its top-100 ranking from the Center for Managing University Performance, cut its research expenditures, and seen a “precipitous” decline in its undergraduate enrollment due to a “burdensome 44 percent increase in tuition” over four years.
So will the real Howard please stand up?
The answer, for now, is basically no. My request for an interview with Howard’s president or chief financial officer was denied. I reached out to more than a dozen trustees, but only two responded. One is Higginbotham-Brooks, who declines an interview and says only, “I acknowledge that I wrote the letter and that this is a matter for the board of trustees and the university to deal with.”
The other, Richard Wright, a professor at Howard’s School of Communications, says that as a trustee of the university, he’s not permitted to speak publicly about the school’s finances. But in his capacity as a faculty member, he weighs in.
Wright says that some of Higginbotham-Brooks’ assertions, like the claim that Howard might close within three years, are “untenable,” but that for the most part her letter didn’t really say anything the Howard community wasn’t already aware of. “It’s been clear at the university for past three to five years that we face financial challenges,” Wright says.
Corey Briscoe, who served as the undergraduate representative on the board of trustees from 2010 to 2011 and now works as an operations consultant, expresses a similar sentiment. Higginbotham-Brooks’ letter, he says, merely reflects “one of the many board views on the state of the university.” But he, too, acknowledges the university’s financial straits.
“It’s clear more than ever,” he says. “It has been in Howard’s history and the history of many higher education institutions that we’re in a tough bind financially. A lot of it is due to the economy. There are tough cuts that we’ve had to make as an institution.”
Howard actually posted three straight years of operating surpluses from 2010 to 2012, though the university expects just to break even in fiscal year 2013. Its operating revenue is projected to be $21 million less than last year, offset by an $11 million cut in expenses, according to the most recent treasurer’s report. Reaching the university’s goal of a $20 million surplus this fiscal year, the report states, will require “dramatic fourth quarter cost saving actions.”
The hospital is a particularly thorny issue. It’s located in the heart of a booming part of town, serving increasingly densely populated neighborhoods like Logan Circle and Shaw. Yet it’s hemorrhaging patients, with a 12 percent drop in admissions last year, no doubt thanks in part to its notoriously poor service. Higginbotham-Brooks wrote in her letter that the hospital has “become a serious drain on the budget of the University and we need to either sell it or get the D.C. government to properly reimburse us for the care provided to its citizens.”
The city is unlikely to bail out a mismanaged hospital in a prospering neighborhood, so a sale could become the most appealing option. Hamilton, who denies that the university is considering selling other assets like its TV station, WHUT, says of a potential hospital sale, “We are exploring options to ensure it continues to fulfill the historic mission and remain viable.”
But Wright balks at the notion of selling the only teaching hospital on the campus of a historically black university in America. “It’s not there to make money,” he says. “Blaming the hospital for the challenges we face at the university, many of us faculty don’t feel that’s a responsible thing to do.”
The university’s location, in the once-blighted but now rapidly developing Shaw-Pleasant Plains area, could provide a healthy stream of revenue, given all the real estate Howard owns. But the university has chosen to devote most of its undeveloped lots to campus uses like much-needed student housing. The one property that was slated for lucrative private development, Howard Town Center, is now up in the air.
But there’s one potential source of new revenue. Howard announced earlier this month that it is partnering with the education company Pearson to launch Howard University Online, the largest fully online academic program at any historically black college. Howard Provost Wayne Frederick says that while its “revenue enhancement” made it a higher priority for the university, it was already on the docket prior to recent reports of Howard’s financial struggles and should not be seen as a way to make up the shortfall.
“This really has an academic thrust behind it rather than a financial thrust,” Frederick says.
Hamilton continues to sound a positive note about the university’s prospects. “Howard University faces revenue challenges,” she says, “but we remain engaged in a proactive and aggressive multipronged and multiyear effort to address those pressures, which has resulted in four consecutive years of positive operating results and an endowment that is above prerecession levels.”
Howard’s rising tuition—undergraduate tuition and fees have increased steadily from less than $10,000 in 2000 to more than $22,000 last year, though they remain considerably lower than at other private D.C. universities—coupled with the ability of black students who might once have been limited to historically black colleges to attend cheaper public universities, puts it in a difficult position. Briscoe says a university effort while he was on the board to pare back low-demand “philosophical” courses and invest in the “rising needs of a global community” with programs like sciences and engineering will help keep Howard relevant. Hamilton says demand for Howard remains “incredibly strong,” with more than 26,000 applicants for the coming academic year. (Howard’s 53.9 percent acceptance rate as of fall 2011 places it among the most selective historically black colleges.)
So while more cuts might be in the cards, the consensus is that it appears very unlikely that the university would actually disappear in the next few years, as Higginbotham-Brooks’ letter threatened.
“I think Howard’s going to be around,” says Briscoe. “We’re a strong university. We’ll continue to do what we have to do to ensure that sustainability. And the administration is making tough decisions to ensure that’s a reality.”