Retiring Association of Christian Schools International (ACSI) President Ken Smitherman is sounding the alarm. According to a study of ACSI tuition statistics, over the past twenty years ACSI member school costs have risen an average of five percent a year.
(Quick math: At these rates, a $3,000 tuition in 1988 now costs more than $7,500—a 152% in- crease. Compare that rate of increase with the Consumer Price Index, which rose an average of 3.06% per year during the same period. If ACSI tuition costs had held to the CPI, a $3,000 tuition would be just over $5,300—a 77% increase.)
“Given recent economic trends,” says Smitherman, “these tuition rates are not sustainable.” Affordability, he says, is one of five critical challenges facing the Christian school movement in the next decades. In his 60-minute workshop, he discusses finances for more than half the time.
And Smitherman’s concern is not isolated. In a recent blog, National Association of Independent Schools (NAIS) President Pat Basse noted the fol- lowing:
Schools that have experienced a downturn in applications and/or “pushback” from parents on tuition increases have reached their “price-break point” and should consider moderating tuition increases in the future. Some of these will consider freezing tuition or even reducing tuitions. All will likely effectively reduce tuitions for a larger proportion of current and future families by increasing financial aid.
The 25-year average trend of CPI+3 (Consumer Price Index, plus three percentage points) is unsustainable for much longer and…financial sustainability for the future would recommend much more modest increases.
The current crisis might recommend, even for schools with continued strong admis- sions indicators, a more modest increase in tuition than in the past — as acknowledgment to the anxiety parents are feeling about their own capacity to pay and give. A data point to consider here: 2007 was the first year since 1966 when family income for the top 5 percent actually declined. And 2008 is certain to be another such year, probably a much greater decline.
In general, ACSI and NAIS represent two ends of the socioeconomic spectrum of American private schools. Both models, however, are feeling an identical pinch.
On the one hand, ACSI schools have more typically appealed to parents on the basis of affordable pricing. Many ACSI schools advertise tuition in monthly increments—the message being that families can figure out how to afford private education on the same terms as they justify car payments or the Christmas savings club.
The parents who first enrolled their children in ACSI schools in the 1960s and 1970s were mostly the product of public schools. As public schools became increasingly secular, they opted for the new Christian schools with public school equivalent academics, gaining the bonus of Christian faculty, Bible study, and devotional activities. Despite
near universal efforts to control costs through low salaries and other “efficiencies,” however, tuition continues to balloon.
NAIS schools tend to appeal to more affluent families for whom private schooling is an automatic expectation. Old boarding schools with historic reputations are the backbone of the NAIS tradition, and the distinctive culture of each school is its main attractive feature. As you can infer from Basse ’s comments above, there has been a natural expectation among many NAIS member schools that private education is expensive and mainly for those families who can afford the rapidly rising costs. If you apply the above mentioned CPI+3 formula to the 20-year inflation average, NAIS school prices have risen by an average of greater than 6% each year. (At that rate, a $7,000 tuition in 1988 would now be $21,408—a 206% increase.)
Perhaps no more.
Before we start accusing private schools of mismanagement or malfeasance, it is important to remember that there are legitimate economic reasons for these costs. Research by Independent School Management, Inc. has associated the cost of running private schools with cost structures in other service industries. The problem with services like education, social work, legal, etc. is that technology cannot decrease costs and increase productivity to the extent possible in manufacturing and other industry sectors. Our basic delivery method is people. The longer they are with us and the more value they contribute to our schools, the more expensive they get.
So, what will we do? If even wealthy families are nearing the break-point on how much they are willing to spend on tuition, where does that leave the rest of us? There are at least two areas which many schools could focus on to begin to alleviate the mounting stress.
Pricing and Value
Since most school budgets are heavily dependent on tuition, it is unrealistic to expect that Christian schooling will somehow become less expensive over time. However, it is worth considering both how well the program is supported by our tuition structures and the impact on families over time.
If we think outside of the typical tuition box, we can spread the cost of quality education to reduce both the short-term cost crunch and to lessen the impact of cost increases over time. In the past three years, I have worked with schools that have been willing to address this challenge head-on. The results have been to strengthen the value to parents and to predict more manageable tuition increases.
In the midst of record state budget deficits, there is also an opportunity for Christian school to demonstrate superiority over public school offerings. California is poised to lay off 20,000 state workers, one result of which will be reduced staffing and deep programming cuts. Private schools will continue to offer art, music, and other educationally vital programs. All of a sudden, the qualitative difference between “free” education that is susceptible to economic shifts or legislative mismanagement and private schooling that enriches and shapes students consistently is evident.
Leveraging the Right Things
When examining a school’s finances, I frequently encounter operational costs associated with unfunded capital projects or budget deficits. I’m not a debt hawk, but I have been shocked recently by the extent to which heads and boards are willing to leverage their schools’ assets and growth projections. The days of easy credit may be gone for now, but in my view, easy money for schools is a slippery slope that both drives up costs and puts a school’s entire mission at risk.
It is also often true that a heavily mortgaged school has not learned to raise money on the basis of its mission. Developing a prevailing attitude of investment in mission within a school community takes effort, patience, and considerable skill. A school that has been making ends meet with fish fries and magazine sales will likely not be able to instantly generate the commitment and enthusiasm necessary for a multi-million dollar campaign.
If we cut corners with credit, we exacerbate the inflationary pressure that seems to be putting so many schools at risk. Board financial policies need to spell out the tolerance for debt maintenance in our operating budgets. Percentages of total debt to annual revenue need to be defined. And we need to learn to ask people to give to the reason that we exist—our mission. If I did not believe in the value of authentic Christian education to students, families, the church, and our culture, recent financial trends might make me more anxious. As it is, however,
I have a great deal of confidence in the future of Christian education. But we must face reality, and we must respond with creative plans and the determination to do what we do with greater attention to excellence than ever before.