5 Things to Consider Before You Vote to Approve a Large Tuition Increase
Jack Lew, former treasury secretary of the United States and an Orthodox Jew, used to quip that it was easier to balance the budget of the United States than it was to balance the budget of a synagogue. This analogy holds true for Jewish day school budgets too. Getting them to balance is not always easy and it may seem tempting to approve, yet again, a large tuition increase.
Before you vote for a 4% or 5% annual tuition increase, here are five questions to ask yourself (and your fellow board members) first:
- Does your school have opportunities to capture more non-tuition revenue? Non-tuition revenue typically includes fundraising dollars, income from endowments, federation funding and government funding. For many schools, this non-tuition revenue can represent 20% or more of a school's budget. There may be other sources of revenue as well. If your school owns its real estate, can it rent its facility to a summer camp or after-school program
- Has the average tenure of teachers and other faculty increased over the years? While tenured teachers and faculty are generally perceived as positives, no school can afford a teaching staff or faculty that consists solely of individuals with 10+ years of experience. In order to manage their costs, schools should continually balance the mix of staff and may sometimes need to hire a junior or mid-level staff member to replace a more senior one.
- Are there too many administrators in your school? In his aptly titled book "Mind the Gap", former head of school Richard Soghoian argues that private schools would be better served hiring fewer, better- paid administrators. Soghoian adopted such a strategy during his tenure at Manhattan's Columbia Grammar and Prep. The result was a leaner school cost structure and an average to below average tuition.
- Are scholarship funds being allocated appropriately? It is sobering to realize that more than half of families in Jewish day schools are scholarship recipients. The overwhelming majority need these subsidies in order to enroll their children in day school. Yet many day schools use scholarship funds as incentive funds to recruit new families to their school. Many schools readily offer a discount of $1000-$5000 per child off tuition to a (typically new) family that asks for it, irrespective of their need. These practices hurt schools in at least two ways. First, schools wind up giving out more scholarship than they would otherwise need to. Second, parents know that tuition is negotiable and they will negotiate for (non-need based) discounts.
- Would attracting 5 or 10 more students obviate or mitigate a tuition increase? For schools with excess student capacity, the addition of just a handful of additional students might bring more revenue than a 1%-2% tuition increase. One Orthodox school in New Jersey held tuition nearly flat for several years in a row by partnering with their existing parents to help bring new families into the school.
There are, of course, many good reasons to support a tuition increase. Tuition should ideally be set at the cost to educate (excluding scholarship), and schools that price tuition way below the cost to educate essentially give a scholarship to each and every one of their families. This is not considered best practice and those schools should probably raise their tuition.
Most schools, however, charge a tuition that equals or exceeds the actual cost to educate a child and need to consider a cost benefit analysis before approving a tuition increase. For the average day school, a 1% tuition increase will garner just $25,000 in additional revenue and will force more middle-income families to become scholarship recipients. So, scholarship invariably goes up once tuition increases. Let's exhaust all other possibilities before raising our hand in support of yet another tuition increase!