The Importance of Finances and the Education of Children
By Andrea Matney, CFO
It can seem strange or even awkward to consider how money impacts the education of our children. Is it really about money or about academics and providing experiences that help develop responsible, happy, intelligent, wonderful children? The answer is that you cannot easily separate the two. Providing a quality independent school education requires a significant investment because everything we do in independent schools requires money. While some in independent schools might prefer to sidestep the role finances play in providing a quality education, it is important to keep the role of finances in our children’s education front and center. All independent schools struggle to balance a high-quality education (which includes excellent teacher quality, top-notch facilities, advanced technology, a great support staff, and excellent co-curricular programs) with the need to find ways to raise money to bridge the gap between what the operating budget and tuition will fund and the actual total cost of such a program. Independent school financing balances several key considerations including small class size, affordable tuition, competitive teacher salaries, facility maintenance costs, endowment income, annual giving, and financial aid.
Small class sizes have long been shown to have a positive impact on children’s educational experiences and are a significant benefit of an independent school education. At FCDS, Upper, Middle, and Lower school class sizes average 13.5, 17.5, and 13.5, respectively, comparing favorably with public schools in Winston-Salem (which publicize average class sizes of 24 including special education classes and equity plus schools). Our class sizes also compare favorably with independent schools nationally, and with peer schools in the area. Smaller class sizes translate into more teachers, which means that we have higher overall cumulative teacher salaries. The salary budget item represents the most substantial portion of any school’s operating budget, including that of Forsyth Country Day School.
The key to providing a top-quality education is top-quality people. Independent schools must compete in the broad market for faculty, administrators, and staff members. Our goal is to hire the best person every time we fill a vacancy. Often, that means paying more than we would for a less-qualified candidate. Although national averages indicate that independent schools tend to pay their teachers less than public schools do, FCDS has made great strides in bringing its level of teacher compensation up to a level that approximates that of the local public schools. In part, this had been done through an exceptionally strong benefits program. Through the school’s recruiting efforts and focus on increased compensation for faculty, our teacher population is the strongest in the school’s history.
Facilities are another consideration in the balancing act of school finances. Determining the proper amount to invest in the development and upkeep of facilities to support both programs and enrollment demand is a key decision for every independent school. FCDS has been fortunate to have generous donors who have made it possible to: add new facilities that more than doubled its building space; complete deferred maintenance projects; and improve the overall facilities to support new programs. A 15-year capital plan has also been established that is incorporated into the long-range operating budget creating confidence in the ability of the school to maintain, over the long term, what has been built. The new programs and increased capacity made possible by the new facilities, the strong staff, and small class sizes all have contributed to an all-time high enrollment with admission waiting lists in most grades.
How FCDS has been able to accomplish so much in terms of competitive teacher compensation, small class sizes, and facilities planning may surprise you. Increases in the overall tuition base caused by higher demand and enrollment have created financial stability and strength for the school. However, tuition income represents only about 80 percent of the average operating budget for an independent school. Independent schools rely heavily on annual giving in order to balance their budgets, so such giving indirectly funds all of the school’s initiatives and ensures quality programs. Although FCDS’s rate of annual giving has improved dramatically over the past several years (resulting in a substantial positive impact on its programs) the rate of annual giving lags behind that of most other independent schools nationally on a per-student basis.
Endowment is another resource the school relies upon to bridge the gap between tuition and the operating budget. Growing the school’s endowment while meeting the operating budget needs for annual endowment payouts is crucial to the school’s long-term financial strength. The value of FCDS’s endowment investments has increased from $699,000 at June 30, 1998 to more than $13 million currently, a more than nineteen-fold increase. An Endowment Payout Schedule that improves the endowment monitoring and management process at FCDS has also been developed. That schedule projects the endowment growth over the next 25 years, gauges conservative levels of funding from endowment to pay annual operating expenses, and helps guide the investment of funds, also based upon appropriate consultation with talented outside investment advisors. This approach will ensure that the endowment will be a reliable source of funding for the operations of FCDS for years to come and that it will positively impact the school’s ability to maintain its class size, gifted faculty, as well as its ability to continuously improve and strengthen its programs.
Consistent with the school’s full internalization of the concepts shared by James Collins in his book Good to Great, FCDS never stops challenging itself to be better than it is now. A review of our newly updated list of programs and other improvements available on the school’s website clearly shows that the school is in a mode of continuous improvement. In the quest for educational excellence, we can often feel constrained by the need to consider the “bottom line” when making decisions. We recognize that even though we would like to have no limits to the money that we spend to improve the educational experience of our students, even the wealthiest institutions have “wish lists” and unmet needs. In order to maintain competitive tuitions while accomplishing ambitious goals and implementing new programs, we are always looking for ineffective programs and unnecessary expenses to be eliminated. FCDS has dramatically improved its financial operations over the past several years by implementing a continuous process of expense reduction that has produced great results. In addition to eliminating that which is not working to supplement our operating budget in order to limit tuition increases, we look for alternative revenue sources whenever possible in areas such as facility rental to outside groups, summer camps, the parent curriculum, home schooling programs, after-school tennis programs, and others. These efforts to reduce expenses and increase non-tuition revenues that do not impact the overall educational quality have been critical to balancing our objectives and values while keeping tuition at a reasonable level.
Tuition is certainly the largest funding source for the school’s operating budget. The setting of tuition for an upcoming school year, however, is the last decision made and it is made only after expected annual fundraising levels, planned payouts from endowment, class- size projections, facility cost estimates, teacher salary decisions, and other planned programmatic changes have all been considered. Forsyth Country Day School must charge as tuition the amount that is required to balance the operating budget after complete consideration of the above factors. Through positive growth in annual fund, enrollment, and endowment, as well as efforts to eliminate costs that do not improve our program and new revenue sources FCDS has been able to keep tuition increases well below national averages. Among our peer schools in North Carolina, FCDS’s tuition is in the bottom third. Furthermore, average tuition increases over the last five years cumulatively have been 26 percent, while the average independent day school in the United States has increased its tuition by 35 percent.
Achieving the right balance between responsible management of school resources and the never-ending quest to be one of the best independent schools in the nation is no easy task, but it can be done without becoming a tuition-driven school. Despite what has already been accomplished, we should and will continue to look for ways to spend money more wisely, in the best interests of our students and the school’s financial strength. It is only by constantly challenging ourselves that we can hope to maintain the strength that we have obtained.