NBOA

Independent SchoolFinancial Sustainability:Past, Present and Future

Independent Education Trustee WorkshopWashington, DC

September 30, 2014

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Today’s Speakers

Jeffrey Shields, FASAE, CAEPresident and CEO

Genevieve Madigan,Vice President,

Professional Development and Research

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Program Goals

• Discuss the financial climate for independent schools leading up to, and including, the economic downturn in 2009

• Explore current data specific to the Washington, DC, region from the most recent NBOA Business Office Survey, in addition to other sources

• Share insights on future challenges facing independent schools

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Before the Economic Climate Changed…(circa 2008)

•Tuitions up 30% (real dollars) over 10 years

•Overall staff up 32% over 10 years

•Student: teacher ratios getting smaller

•Financial aid grant dollars up 38%

•Enrollment up 20%

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“New Normal”•Charge only what people can pay•Design your program to that revenue number

“Full Steam Ahead”•Charge what it costs•CPI + 2 or more when needed

Different Ideas

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Increase enrollment without increasing staff“Sunset” an old program for every new one

Right size: re-think class size, workload, # of teacher specialists, assistants, school size

Devote 1/3rd of each fundraising dollar raised to endowment

NAIS: The New Normal

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Decide whether you are a price, product, or process school (you can’t be all 3!)

Acknowledge that the 20th century “factory” model of education will not prepare students for the 21st century

Design a 21st century school that individualizes learning using technology

Dedicate 2% of your budget to faculty professional development

ISM: 21st Century Model

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26.4% were going to increase the average class size but only 11.7 % did.

58.8% were going to decrease planned salary increases but only 32.3% did

2013 NBOA Business Officer Survey: In response to the economic decline, what strategies did you implement?

Most popular Strategies-

• Increase average class size

• Increase teaching loads

• Increase employee contributions for benefits

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Strategic Reactions

Increase Number of Students Per ClassroomPlanned Implemented

‘10 Survey 26.4% 11.7%

‘11 Survey 19.9% 10.7%

‘12 Survey 16.2% 11.6%

‘13 Survey 17.9% 9.9%

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Strategic Reactions

Increase Teaching Load

Planned Implemented

‘10 Survey 26.6% 12.8%

‘11 Survey 18.4% 10.9%

‘12 Survey 14.2% 8.1%

‘13 Survey 14.8% 9.1%

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Strategic ReactionsIncrease Employee Contribution for Benefits

Planned Implemented‘10 Survey 17.5% 11.7%

‘11 Survey 20.7% 12.7%

‘12 Survey 13.5% 13.2%

‘13 Survey 18.1% 8.3%

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Strategic Reactions

Same goes for:•Reduce Faculty FTE•Reduce Staff / Admin FTE•Decrease Planned Salary Increases

•Reduce Salaries•Reduce Benefits

Source: NBOA Business Office Survey 2009-12

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13 Years of Tuition or…?

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There is NO Silver Bullet

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The Future…?

NBOASource: NAIS and US Bureau of Labor Statistics

Average yearly CPI increase for the past 12 years is 1.96%.

Has your school had a tuition increase in any given year that was less than 2%?

It’s not just about affordability, but about managing expectations.

Tuition Increases: CPI versus Reality

2002 2013 (CPI Only) 2013 Actual

Day 14000 17700 22700

Boarding 27400 34575 46800

$2,500

$7,500

$12,500

$17,500

$22,500

$27,500

$32,500

$37,500

$42,500

$47,500

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Increase in FTEs

Source: NBOA Business Office Surveys 2008-12

2008 2009 2010 2011 2012 2013 2014

US Schools 84 80 85 83 86 83 84

Mid Atlantic NaN NaN NaN NaN 69 75.7 77.5

5

15

25

35

45

55

65

75

85

95

Total School Employees

FT

Es

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Independent School Revenue StreamsIn general, all operating revenues fall into one of four

buckets, and you only have direct control over one of them- tuition.

1. Tuition2. Fund Raising3. Endowment4. Auxiliary Services

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Independent School Expenses

Greatest % of your budget, in descending order (typical school)

1. Compensation and Benefits2. Facilities3. Financial Aid (actually a revenue offset, but for our

purposes we will discuss it here)

4. Technology 5. Equipment and Supplies

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AN OVERVIEW OF DATA FOR YOUR SCHOOLS

• Demographics• Tuition• Enrollment• Financial Aid

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Demographics- An example

2012 projected 2017Connecticut 6,407 10,330 New Jersey 15,094 25,180 New York 23,290 38,415

Families with one or more children aged 14-17 and income over

$350,000

Source: NAIS Demographic Center

What are the trends in terms of students for your market? “Kindergarten bust or Middle School explosion?”

What are the income levels for your market? Where are the families who are most likely to attend your school?

NBOASource: NAIS Facts at a Glance

Tuitions Continue to Rise

• NAIS Average Median Boarding tuition, 12th grade: $46,775

• Median Day Tuition, 9th and 12th grade median: $22,700

• Median Boarding Tuition, 12th Grade: $48,825

• Median Day Tuition, 9th and 12th grade median: $33,128

IE 2013 AveragesNAIS National Averages

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Tuition Reliance: National Perspective

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Tuition Reliance: Washington, DC, Metro Area

Tuition Revenue

80%

Other Earned Revenue

8%

Annual Giving7%

Funds from Interest and Surplus/Reserves

1%

Funds from Endowment4%

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Trend is going in the right direction, but…..

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The total number of students in independent schools remains unchanged.

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US Schools

• 35.9% Remained the same

• 47.3% Increase

• 9.1% Decrease

Financial Aid

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Financial Aid: How has the 2013/14 financial aid allocation ratio changed compared with prior years?

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Fin

anci

al A

id M

etri

cs

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Financial Aid: Mid Atlantic Region

Source: NAIS Facts at a Glance

National

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Do you offer Full Financial Aid Awards?

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Highest Value of Partial Award(if full awards are not provided)

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Merit Based Financial AidE

nro

llme

nt

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Tuition Remission

Enr

ollm

ent

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Remission: The Details

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Financial Aid: Allocation

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DEBATE THE PROPOSITIONS

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Debatable Propositions

•Purposely Controversial

•Can take a stand: for or against

•Spark new thinking around both long-held beliefs or revolutionary concepts

•Eradicate “cherished theories”: things you believe, but have no evidence to support

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For example…

1. The value of the smaller class experience is not as great as the cost.

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or…

2. Financial aid should only be used in service of mission, not to increase enrollment.

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3. Online learning can replace the personal connection between teacher and student in the traditional classroom.

and…

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how about…

4. Fund raising activities should be strictly for capital improvements only – not to close the gap between operating revenues and expenses.

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HOT TOPICS IMPACTING INDEPENDENT SCHOOLFINANCIAL OPS

• Value Added Costs• Role of the Board• Full-Pay International Students

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Added Value Costs

How do we add value without adding expense?

Read More About It: The value question for independent schools by Terry Armstrong www.claytonchristenseninstitute.org

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Role of the Board

•What is the role of Trustees in enrollment management?

Read More About It: Boards and Enrollment Management InSchools: Interview with Dr. William Mott by Rick Newberry enrollmentcatalyst.com

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Full Pay International Student Enrollment•Implications from mounting pressure to enroll more full-pay international students?

Read More About It: What China Means to American Boarding Schools by Trip Darrin admissionsquest.com

Net Assets Magazine May/June 2012

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Is your school tracking these FIVE financial indicators?

• The gap: • the cost to educate a student at your school and net tuition as well as Gross Tuition vs. Net Tuition (NBOA Financial Position Survey)

• Financial Aid and Tuition Remission as a % of gross tuition revenue (NBOA Business Office Survey, Financial Position Survey and school’s own data)

• Expendable Financial Resources: the “reserve” which a school has on hand to cope with a short-term financial shock. Expendable financial resources provide a way for a school to invest in new programs or facilities. (NBOA Financial Position Survey)

• Market Demographics (NBOA and NAIS)

• FTE / Student Ratio (NBOA and NAIS)

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• Over 1,150 US member schools – and growing!

+Canadian schools+For-profit companies+Other non-profit groups+Retirees

• Headquartered in Washington, DC

• 13 FTE (distributed staff model)

• www.nboa.org

Who Is…

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Tuesday, October 7, 2014 – 8:30am – 3:00pmHolton-Arms School, Bethesda, MDRegister at: www.nboa.org/events/business-office-now/

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Business Office NOW from NBOATuesday, October 7, 2014 – 8:30am – 3:00pmHolton-Arms School, Bethesda, MDRegister at: www.nboa.org/events/business-office-now/

In ONE DAY your business operations staff will have the answers to the following questions for your school:

• How can my school develop a more sustainable financial future?

• What will our school’s financials look like in 10 years?

• How do our investments in IT compare with other schools with the same budget size and enrollment?

• How can we recoup more of our costs from our facilities rentals?

• What are the most pressing legal issues that my school should be aware of in human resources?

• What is the future of online learning for independent schools?

NBOA

Jeffrey Shields, FASAE, CAE

President and CEO

1400 I Street, NW p 202.407.7141 jeff.shields@nboa.org

Suite 850 f 202.354.5040 Twitter: @shieldsNBOA

Washington, DC 20005 c 202.253.7290

www.nboa.net

Genevieve D. Madigan

Vice President, Professional Development and Researchwww.nboa.net

1025 Shadeland Ave.

Drexel Hill, PA 19026

1400 I Street, NW p 202.407.7144 genevieve.madigan@nboa.org

Suite 850 f 202.354.5040 Twitter: @GenMadigan

Washington, DC 20005 c 716-998-8130

 

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