Business Cycles and HBCU Appropriations

The demand for postsecondary education has steadily increased since the 1970s. However, state government’s pecuniary investments in higher education have steadily declined over this same period, a decline that is magnified during recessions. This paper examines the effect of state level business cycle measures on the funding of Historically Black Colleges and Universities (HBCUs), relative to other schools. We find that when controlling for school characteristics, HBCU funding is very responsive to the business cycle—particularly downturns. Generally, HBCUs receive less funding than other institutions, but this result is exacerbated during periods of economic downturn. Our results are driven by 4-year institutions—the most common type of HBCU—and dissipates when only considering 2-year institutions. Additionally, when examining the results within each state, we find that during periods of increased unemployment, Kentucky, Maryland, North Carolina, Ohio, South Carolina, and Virginia provide fewer funds to 4-year HBCUs. We also find that Florida, Kentucky, Louisiana, Pennsylvania, Tennessee, Texas, and West Virginia do not appropriate fewer funds to 4-year HBCUs within their states, independent of any unemployment effects. The remaining states have provided less funding for 4-year HBCUs, in general, over the time of our sample. We also examine states that have at least one public 2-year HBCU. The results suggest that Alabama appropriates more funds to 2-year HBCUs, relative to other 2-year schools, during economic downturns and otherwise; South Carolina provides fewer funds to HBCUs during periods of higher unemployment. In discussions with each states’ higher education executive association, we find that the mechanism through which funding disparities persist are difficult to assess due to the influence and autonomy state governors and legislatures possess in determining appropriations.