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Tuesday, July 7, 2015

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Separating affordability and sustainability

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Day school is the gold standard of Jewish education. Across multiple metrics, day school graduates have broader and deeper Jewish knowledge bases and stronger Jewish identities. Day school graduates disproportionately constitute young Jewish leaders, shaping communities today and the face of Judaism into the future.

Notwithstanding their success, I am concerned for the future of day schools.

Often conflated, there are two interconnected crises: sustainability and affordability.

Let’s begin with sustainability.

Day school financial sustainability necessitates a long-term plan to ensure that revenue – from all streams – covers costs.

Across North America, there are approximately 300 day schools ranging from Reform to Centrist Orthodox (including Orthodox schools farther to the right doubles the number). These schools have a combined annual budget of approximately $1.5 billion. On average – and there is a significant range – 80 per cent of this budget is covered by tuition.

A long-term sustainability plan must develop new revenue streams while controlling costs. Developing revenue streams includes creating endowments, increasing annual fundraising and increasing revenue from ancillary services such as rentals.

To examine one area, only half of Jewish day schools have endowments, with a combined total of slightly over $250 million. In comparison, the top 10 American independent schools each has more than $200 million in its endowment. Through matching grants and concentrated fundraising, in recent years the Federations of Los Angeles and Metrowest have significantly increased day school endowments, lowering the schools’ annual financial burden.

Initiatives to decrease costs include “right sizing” to operate at capacity, collective purchasing, combining back-office operations and introducing blended learning through technology. While some efficiencies can be found, 70 per cent of the average school budget is allocated to human resources. But without significantly reducing the school’s core – the teaching staff – little can be achieved.

While sustainability is about the long-term viability of the school, affordability is about the individual parent’s perception of cost and value. A school can be affordable at $500 tuition but not sustainable. Conversely, it can be sustainable at $40,000 tuition but unaffordable.

On a relative basis, day school is more expensive than it was five years ago, with tuition rising an average of three to six per cent per year for the last decade – an increase far in excess of wages. Compounded by the economic downturn, in the last eight years, day school subsidy requests have doubled across North America.

Schools and communities are combating the issue of affordability in a variety of ways: capping tuition at a percentage of gross annual income, developing subsidies for middle-income families, and building community funds for Jewish education to shift the burden away from parents.

Notwithstanding these multiple efforts, providing children with a day school education will always come at an opportunity cost. Parallel to financial interventions, schools must work to increase the perceived value of their services. Studies show that day school enrolment is more strongly correlated to parents’ perceived value than to tuition, making the parents’ perception of the school, community, and education key determinants in the affordability puzzle.

There is no silver bullet. The financial cost of educating children in day schools is high. The communal and social cost of not sustaining the schools, however, is even higher.

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