Making cents

US independent school fees do not cover the costs of running the school and educating the pupils: financial and fundraising innovation is required. Amada Torres reports on how they capture alternative sources of income

During the last 10 years, independent school tuition in the US has soared. According to National Association of Independent Schools (NAIS) data, US day school tuition growth outpaced inflation by 25 per cent between 1999 and 2009, and seven-day boarding school tuition increased by 32 per cent over inflation during the same period. Yet, despite the escalating fees, tuition does not cover the costs schools incur to educate each child.

NAIS statistics from 2007-2008 show that income from tuition and fees covered only 81 per cent of the cost to educate each child at an NAIS-member day school (when accounting for tuition assistance such as financial aid) and just 38 per cent of the cost to educate a child at an NAIS-member boarding school.

US independent schools rely heavily on current parents for contributions to annual giving. In the current economic climate, many school administrators fear that parents will be unable or unwilling to donate to the annual fund on top of growing tuition payments.

Schools, however, are reluctant to cut back on curricular offerings or faculty pay and benefits, which are major cost drivers. To balance their budgets, innovative school leaders have been exploring new financial models that include non-tuition revenue alternatives and costcontainment measures.

Learn from others
To identify what sources of income independent schools have developed in addition to tuition, annual giving, and endowment, NAIS surveyed business managers of independent schools between December 2005 and January 2006. 531 people responded to the survey. The results, as well as descriptions of some successful programmes, were reported in the NAIS booklet Reducing Tuition Reliance through Alternative Sources of Income.

The most frequently mentioned sources of non-tuition income were summer programmes and auctions, with 78 and 72 per cent of survey respondents, respectively, reporting that they derived income from these programmes. Other alternative revenue streams included extended-day programmes (63 per cent), facility rental (60 per cent), and parent association events (59 per cent). Fourteen per cent of respondents offered tutoring services, and a handful of schools had adult-learning programmes.

Six per cent of respondents reported income from other sources, including affinity credit card programmes, apartment building rentals, art sales, bookstores, car raffles, catering services, mobile-tower site leasing, community art events, enrichment classes, gala events, golf tournaments, grocery certificates, music lessons, SAT preparation classes, sporting events, transportation services, holiday programmes, vending machines, and walk-a-thon events.

Among the programmes profiled in the report was one from Georgetown Prep School, which leveraged 3.7 acres of its campus outside Washington, DC, in a “contract to ground” lease. The company that acquired the 99-year lease on an unused section of the campus developed a 473-unit luxury apartment complex and the school derives significant annual income from rent.

Use what you have
NAIS recommends that schools also consider taking advantage of the other forms of capital that they have in abundance: social capital (using the networks of highly connected constituents to seek new revenue opportunities and partnerships) and intellectual capital (using the talent of faculty and staff to develop profit-generating products and services). The San Francisco School used its connection to a student’s father, the owner of a toy company, and the creativity of its students to develop board games that generate revenue for the school.

Three-quarters of survey respondents reported that the proceeds generated by their programmes or events were used to finance their schools’ operating costs. The second most common use of these monies was financial aid (23 per cent), followed by special programmes (16 per cent), and facilities (16 per cent).

Amada Torres is the director of academic research at the National Association of Independent Schools. Reducing Tuition Reliance through Alternative Sources of Income is available at www.nais.org.

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