Costs and Revenues

1. Costs and Revenues

2. In a people-led industry with a rising demand for personalization, can we look again at reducing costs and finding additional revenue? Is it enough?

3. Tuition rising Tuitions continue to rise as school leaders feel the pressure to stay competitive. William Daughtrey, William Hester, and Kevin Weatherill (Peabody College at Vanderbilt University), Tuition Trends in Independent Day Schools

4. High cost per student: How it compares Cost per NAIS student in 2012-13: $22,444 Cost per public school student in 2012-13:$12,608 NAIS Data and Analysis for School Leadership (DASL) National Center for Education Statistics, FAST FACTS

5. A view from 2003 at what was limiting school financial sustainability at that time (and likely still is today) Keeping classes small Extending financial aid Keeping tuition affordable (by subsidizing actual costs with fund-raising) Using endowment income Limits to sustainability Sarah Daignault, then executive director of NBOA, quoted by Donna Orem in “Defining Our Problems/Transforming Our Future,” NAIS Independent Ideas blog

6. Significant growth in administrator pay What drives the high cost? Similar trend in higher ed: “According to the Department of Education data, administrative positions at colleges and universities grew by 60 percent between 1993 and 2009…10 times the rate of growth of tenured faculty positions.”Paul F. Campos, “The Real Reason College Tuition Costs So Much,” New York Times William Daughtrey, William Hester, and Kevin Weatherill (Peabody College at Vanderbilt University), Tuition Trends in Independent Day Schools

7. Demand for better academics and more personalization (small class size) Parents’ Top Three Reasons for Considering Private School: Provide an education that will challenge your child: 97% Help your child develop and/or maintain a love of learning: 96% Small class size/individual attention: 84% The Enrollment Management Association (formerly SSATB), The Ride to Independent Schools What drives the high cost?

8. Median class size has stayed the same or become smaller. What drives the high cost? Median class size in 2014 was 14-15. Amada Torres, “The Budget Outlook,” 2014-2015NAIS Trendbook

9. Heads respond reluctantly: How important will each measure be in cutting costs over five years? What can be cut/changed? Two ranked highest: Combining or consolidating admin. roles: 33% Increasing class sizes: 31% William Daughtrey, William Hester, and Kevin Weatherill (Peabody College at Vanderbilt University), Tuition Trends in Independent Day Schools

10. Cost-cutting strategies worth reconsidering

11. What does “small class size” mean to parents? Is there flexibility in your class size? 48% of ind. school parents believe “small class” means 16 to 25 students, higher than the actual median of 14 to 15 (2014 DASL figures). Amada Torres, Financing a Private School Education: The Role of Financial Aid

12. Example of a data-driven analysis “[At one public school district], leaders started with a per-student cost analysis to help inform their thinking. …. Not surprisingly, they found that smaller classes taught by senior teachers cost the most per pupil… [prompting them] to rethink the smallest classes with high-priced teachers and check whether these courses were anchor courses of most value to their students or fringe courses of lesser overall importance.” Lucretia Witte, “How Independent Schools Can Handle Rising Costs and Competition,” NAIS Independent Ideas blog Do you know your cost per student, per class?

13. Five strategies for cutting costs Offset the costs of small classes with some larger ones. Rethink the frequency of how often a school needs to offer certain classes. Consider nontraditional providers or partnerships to make class costs more affordable. Leverage learning labs. Allow students to opt out of redundant classes. Marguerite Roza, “How to Contain Costs of School Offerings amid the Demand for Personalization,” NAIS Independent Ideas blog Are there ways to rethink how, where, and how often academics are delivered?

14. Possible benefits to the financial models at schools with varying degrees of financial health Expanding opportunities for new courses and electives Key for schools — even those in good financial health — looking to differentiate their offerings in a competitive market Replacing existing small-enrollment classes on campus Key for schools looking to realize cost reduction NAIS Interview with Brad Rathgeber, executive director of One Schoolhouse Are you exploring strategic uses of online learning?

15. Benefits of online learning to one school’s financial model Albert Throckmorton, head of school at St. Mary’s Episcopal School (Tennessee), explains that online learning has allowed his school to spend less money than it would have otherwise to expand its academic offerings and increase the value of its diploma. The school has added two dozen courses to its course catalog. NAIS Interview with Albert Throckmorton, head of St. Mary’s Episcopal School Are you exploring strategic uses of online learning? Additional benefit: According to surveys with alumnae, taking an online class is now treated at St. Mary’s as a college-preparatory skill. One online course is required of all students, and online courses are part of the official transcript.

16. Have you taken a recent look at the possibilities of partnerships? Independent School Benefits Consortium (ISBC), an example of a cost-saving consortium “We all realized that health benefits for our employees are one of the major expense items in school budgets. We wanted to do whatever was possible to continue providing a great product but also reduce our risks and costs…. We started the ISBC with 24 Ohio schools, but it has since expanded to 52 schools in six states. We recently celebrated the fact that our efforts had resulted in more than $2 million in overall premium savings, while expanding plan offerings and enhancing customer service for all schools.” [Emphasis added] John S. Farber, “The Independent School Financial Model Is Broken: Here's How We Fix It,” Independent School magazine (Fall 2012)

17. New school models attempt to meet the demand for personalized learning and keep costs low. A look at other private school models TEACHERS AS GUIDES“[Acton Academy] has learning guides — they aren’t called teachers — whose role is to push students to own their learning. The model enables the academy to have far fewer on-site adults per student than a traditional independent school and to operate at a cost of roughly $4,000 per student per year.” Michael B. Horn, “The Rise of AltSchool and Other Micro-schools,” educationnext.org CREATIVE FACILITIES USE“[Blyth-Templeton’s] leaders’ philosophy on facilities is that many cities have space that is unoccupied and they can use that to greatly reduce costs and embrace a core value of environmental sustainability.”Donna Orem, “A New School Model at a Distinctively Lower Price,” NAIS Independent Ideas blog

18. A look at higher ed One data-driven effort to reduce costs and lower overall tuition and fees at University of St. Joseph The college’s specific goal — beyond competing for students in a competitive small-college market — was to create a thriving campus environment, and research revealed that students who live on campus are more likely to graduate and be involved in activities. “The university was able to lower the price for room and board from $15,659 to $11,095 — a 29 percent reduction. At the same time, the university is increasing tuition by 2 percent — an increase of $690 for the year. [Rhonda Free, president of University of St. Joseph] said the university was able to cut room-and-board costs by negotiating better contracts for food services and by reducing some amenities on campus.” Kathleen Megan, “St Joe’s, UB Cut Costs for Students Next Fall,” Hartford Courant

19. The struggle to find worthwhile and manageable alternative revenue streams

20. The importance — and challenge — of finding alternative revenue streams Finding alternative revenue streams “Traditionally, many independent schools have viewed net non-tuition revenue as something of a holy grail, given the overlooked and/or indirect costs (energy usage, facilities wear and tear, etc.) that often erode profits. But with financial sustainability an increasingly urgent concern, growing numbers of schools are taking a second look at a broad array of programs that can add much-needed support to the bottom line.” Darren Dahl, “Nothing but Net,” NBOA’s Net Assets

21. Heads find few auxiliary programs to be significant sources of revenue. Finding alternative revenue streams William Daughtrey, William Hester, and Kevin Weatherill (Peabody College at Vanderbilt University), Tuition Trends in Independent Day Schools

22. Looking beyond your current “customers”“[Camps, after-school programs, etc.] are wonderful ways to add non-tuition dollars to your operating budget. The problem is that the people who are writing checks for these ‘extras’ are mostly part of our existing school families…. The smart move today is to reach out to new constituents/customers who are not already making major financial investments in our schools.” Looking more broadly at alternative revenue sources John S. Farber, “The Independent School Financial Model is Broken: Here's How We Fix It,” Independent School magazine Not being restrained by your mission “In order to serve its mission well, the [Columbus Zoo in Ohio] owns a golf course and a water park and is building a hotel. None of these secondary endeavors will save endangered species, of course, but they will generate money that can be used to save endangered species.”

23. Set a high bar for programming. Tips from schools with success in alternative revenue sources Recognize all the goals and track all the benefits. “Philosophically, we see our facility rentals more as an admissions tool than a source of auxiliary income.…” David Wright of University School (Ohio) “is working on an objective system for correlating new student recruits with auxiliary programs.” “If excellent people are hired to offer excellent programming after school, parents — who are very discerning customers — will enroll their children not only to take advantage of the actual classes, but also to take advantage of the convenience,” says Betsy Neiva, now director of auxiliary services at Germantown Friends School (PA). Darren Dahl, “Nothing but Net,” NBOA’s Net Assets

24. Know the total costs. Tips from schools with success in alternative revenue sources Get commitment from the administration. “Summer programs can be a great source of revenue for schools if they can control expenses and scale effectively,” says [Nat] Saltonstall [of Beaver Country Day School (MA)]. He adds...“to be successful, [such programs] require a strong commitment from the administration.” “It’s critical to understand the total costs of running an auxiliary program before launching it. In creating a budget, [Jeff] Malloy [of Oak Hall School (FL)] underscores the importance of factoring in all expenses, including facility costs (cleaning, utilities, wear and tear), promotional costs and any necessary insurance adjustments.” Darren Dahl, “Nothing but Net,” NBOA’s Net Assets

25. Find win-win uses for leasing land. Tips from schools with success in alternative revenue sources At McDonogh School (Maryland), there is a “200-acre business park on … the school’s property [that] features similar architecture and well-manicured landscaping and ponds that wouldn’t look out of place on the school’s grounds. There’s a nice synergy between the school and its corporate partners…. Students have visited the park to learn about the businesses and the measures they took to protect the environment during construction.” And “it’s brought revenue that over a 50-year period will help our endowment grow.” Leah Thayer, “Leveraging the Land,” NBOA’s Net Assets

26. Resources • William Daughtrey, William Hester, and Kevin Weatherill (Peabody College at Vanderbilt University ), Tuition Trends in Independent Day Schools • National Center for Education Statistics, FAST FACTS • Donna Orem, “Defining Our Problems/Transforming Our Future,” NAIS Independent Ideas blog • Paul F. Campos, “The Real Reason College Tuition Costs So Much,” New York Times • The Enrollment Management Association, The Ride to Independent Schools • Amada Torres, “The Budget Outlook,” 2014-2015NAIS Trendbook • Amada Torres, Financing a Private School Education: The Role of Financial Aid • Lucretia Witte, “How Independent Schools Can Handle Rising Costs and Competition,” NAIS Independent Ideas blog • Marguerite Roza, “How to Contain Costs of School Offerings Amid the Demand for Personalization,” NAIS Independent Ideas blog • NAIS Interview with Brad Rathgeber, executive director of One Schoolhouse • NAIS Interview with Albert Throckmorton, head of St. Mary’s Episcopal School (TN) • John S. Farber, “The Independent School Financial Model Is Broken: Here’s How We Fix It,” Independent School magazine • Michael B. Horn, “The Rise of AltSchool and Other Micro-schools,” educationnext.org • Donna Orem, “A New School Model at a Distinctively Lower Price,” NAIS Independent Ideas blog • Kathleen Megan, “St Joe’s, UB Cut Costs For Students Next Fall,” Hartford Courant • Darren Dahl, “Nothing but Net,” NBOA’s Net Assets • Leah Thayer, “Leveraging the Land,” NBOA’s Net Assets