How well would you do on a short quiz about independent school finances?
• What percentage of independent day school revenue comes from tuition: 59%, 69%, or 79%? 
• How about the percentage from gifts and grants: 8%, 12%, or 25%?  
• What about other programs and auxiliary services (campus rentals, summer camp, after school, etc.): 5%, 7%, 10%?
Now, let’s switch to the expense side. 
• ​What percentage of independent day school expense comes from faculty and staff salaries and benefits: 48%, 60%, or 72%? 
• How about instructional costs: 2%, 4%, or  8%? 
• And, finally, how about facilities: 10%, 14%, or 24%?
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If you are like the cohort of great educators who just took the course that Jeff Shields and I taught for NBOA & One Schoolhouse, “Budget Meets Mission,” the answers may surprise you.

79% of revenue in independent schools comes from net tuition, with only 8% from gifts and grants, and 7% from other programs and auxiliary services.  72% of that revenue goes to cover faculty and staff costs, with 4% to instructional costs, and 10% to facilities.  These numbers often surprise even experienced members of the independent school community.  Why?  There seem to be a few reasons:

• On the revenue side, most assume that development is a larger percentage of the overall revenue picture… in part because it used to be.  In the 1990s, advancement accounted for as much as 15-20% of revenue, or more.  What happened?  Even though we increased development efforts (and costs) and actual dollars raised increased, it became a smaller share of the revenue because of annual raises of tuition.  In other words, we became more tuition driven by increasing tuition so quickly.
• Looking at revenue, we’ve been led to believe -- through publications, blog posts, conference presentations, and the like -- that there is some magical silver bullet out there for increasing revenue.  “If only our summer camp was more successful.” “What if we started a micro school?” “Could we rent out our campus for lots of money?” As a result, administrative teams and boards spend a disproportionate amount of time on “alternate revenue streams.”
• On the expense side, most assume that facilities are a larger expense, especially considering the building boom on many campuses in recent years.  However, new and upgraded facilities costs (while significant) can’t keep pace with the number of faculty and staff that we’ve added over the last twenty years.  One study notes that between 1992-2013, the average number of students to faculty/staff dropped from 8:1 to 5:1.  We’ve added to program costs by adding people across all facets of our schools.
• In addition, on the expense side, educators are often led to believe that instructional costs are a much larger part of the school’s budget than they actually are. This can, unfortunately, stem from business offices focusing on “departmental budgets” rather than the true drivers of department costs: the number of teaching faculty.

These misconceptions about independent school finance have encouraged us to focus efforts on school sustainability in the wrong places.  We’ve cut and tweaked and gained at the margins rather than examining and challenging the big drivers: tuition and faculty/staff costs. What if we were to focus our energies there instead?  What innovations might emerge?  Would we be as willing to add new staff, or replace every leaving staff member with the exact same job and position description? Would we raise tuitions at the same rate? Would financial aid look the same?

Are there models we should be looking at to get at the these two main drivers?  Sure. I’ll explore some of those next month.


* Data accessed for 2017-2018 school year from NAIS DASL