New Habits for Financing Catholic Schools

Salaries, Raising Revenue, Cutting Costs--
For Presidents, Principals and Boards of Catholic Schools

My title is intended as a play on words. The sisters are by and large no longer with us, so we must find new "habits" for financing our schools, recognizing we can no longer rely on the heroic sacrifice of these magnificent women. Here, then, are some thoughts on how we might do that:

I. Salaries

1) Do away with salary scales. At my previous school I had them; at my current school I do not. Not having them gives me much more flexibility to go after teachers I need to get and keep the ones I need to keep. Our local Board gives me a “salary” total as a line item in our budget, and I have to stay within that. I believe Catholic schools have a misplaced sense of fairness that all our teachers must be paid the same, independent of degree or value to the school. The world doesn’t work that way. My roommate in college was a chemical engineer and I was a theology major. I had no doubt that he would make more money than I would when we both graduated (he did). The average kid graduating with a Physics degree can make $60,000 starting off, and the gap between what he makes and what our salary scales dictate widens over time. We have to recognize these realities when we hire. Salary scales guarantee we are under-paying some and over-paying others. If we are fortunate enough to get a maestro English teacher, we can give that person healthy raises over their tenure with us to keep him or her. But when we compete for teachers, if we are constrained by a salary scale for hard to get positions, we’re entering the battle with a self-inflicted wound.

If your diocese or board insists on salary scales, ask to design salary "bands" rather than exact salary charts, so that you retain some level of discretion over salaries based on the importance of that person to the school. 

Also, avoid a common and costly mistake that is true of too many salary scales: keeping the range from highest to lowest too tight. Our entry salaries, typically for first time teachers who are in their mid-twenties, are too similar to our 10, 15, 20 year veterans. Much better to widen the scale, with our entry salaries being very low, but then increase their salaries more generously, with, I'd argue, at least a twenty-five thousand dollar difference between starting and top-end. This has three positive effects: First, it saves us money overall,  because when the base salaries are relatively "high," the floor is raised for all employees, whereas if the bases are lower but the back end is higher, the higher salaries only apply to a limited portion of long-time, top end employees. But second, a wider distribution of salary scales, in my opinion, directs our limited resources the right way, to our longer term employees, upon whom we rely greatly and whom we need to stay with us, and who incidentally, have greater expenses. There's a big difference in household budgets between a 25 year old single person and a 35 year old mother of two! Finally, wide salary scales give our employees the satisfaction of improving their "standing" and salary more quickly,  giving them reason to stay with us longer. 

2) Consider signing bonuses or relocation stipends for newly hired faculty. This allows us to be competitive for new teachers while keeping first year salaries on the low side (see above).  Maybe I can only pay an incoming teacher $45,000 when a competitor can pay $50,000. But if I give that person $3,000 cash when they sign their contract, I’ve got a chance. Typically, teachers between jobs need cash right then, especially if they’re young teachers about to launch their careers. And because it’s a one-time bonus, I am not obligating our school for the future with the higher base salary. I’ve had success with this  in getting the persons we needed.


3) Consider joint-housing agreements. Likelier than not, there is empty rectory or convent space in your area. It sits there, empty, all year, even though the parish or religious order must pay to maintain it. Packaging a job offer with a low cost housing rental agreement could make your school a financially viable place to work, especially for a young, single person. It's a "win-win-win" for all those involved: the school pays nothing but offers a genuine "benefit", the parish/order gets some income whereas before they got none, and the young faculty member is able to save more each month from what is likely, alas, too puny a salary!

II. Raising Revenue:

1)  To raise revenue, raise prices. That may seem idiotically tautological, but it merits emphasis because we in Catholic schools often discount things that our families go right out and pay a higher price for elsewhere. To begin with, our tuition is typically too low. How can we compete with schools that are charging twice or three times what we are charging? We no longer benefit from being the lowest tuitions in town—people associate cost with quality. Would we feel BETTER about finding out our doctor charged half what the other doctors around town did? If we position ourselves in the market as the "K-Mart" of educational options, we're wasting whatever money we're spending on marketing to improve our public image. I think we need to adopt more of a college model, asking parents to pay for the true costs of educating their child, but also ramp up funding in financial aid. Over 80% of those in college now receive some form of financial aid.

Look at your second and third child discount rates. Many of us give half-tuition and two-thirds tuition off. Too much! If a large Catholic family struggles to pay tuitions, better to encourage them to apply for financial aid than to give an automatic tuition discount to the families who can afford to pay more.

Also, look at fee structures. Many Catholic schools treat their registration fees as down payments for next year’s tuition or deposits that will be refunded upon graduation. I would advocate that you lower the registration or deposit, but make it an annual fee that is added revenue. Most of our private school competitors do it this way.

Also consider raising prices for concession drinks, textbooks, gates to athletic games, cafeteria costs, the cost of school decals and spirit-wear. Our families don’t have to buy these things from us and if they do, they should have no expectation to pay less than market rates.

2) Institute a healthy financial aid policy—I anticipate most understand this already: If we have available seats, giving out more financial aid is not an expense but a revenue in the same way that discounting seats for airlines raises revenue. Better to get half fares for empty seats than no fare at all. If we have an enrollment problem, we have a real opportunity to make Catholic education more affordable to our families who believe they can’t afford us—make a negative into a positive!

The noble instinct in our schools is to keep costs down for the benefit of our poorest families. However, this in effect means we're subsidizing families who can afford to pay more and losing the revenue they'd willingly provide. It's better, I believe, to support our most vulnerable families through exceptional programs such as generous financial aid, rather than treat them as the base line for tuition setting. 

3) Encourage entrepreneurialism within your staff at school. Here’s a way to do it. Almost all schools zero out budgets for a new fiscal year. This virtually guarantees that those who are in charge of spending a line item in your budget will want to spend as much as you will allow them to, for fear of “losing” it to next year. It also means that unless you ride herd over them, they don’t care as much about generating revenue within their arena, either. Here’s what I’ve done with athletics, for example. I agree with our athletic director that he should raise X amount of revenue and have Y amount of expense for his budget that year. At the end of the year, if X minus Y is a positive number, I will place that amount in a designated fund—a savings account that he controls-- that doesn’t zero out. He loves that. But I also tell him that if X minus Y is a negative amount on any given year, I will withdraw money from that same account. The effect is this: Our A.D. is always looking for ways to add revenue and lower costs. Like many schools, doctors in our school donate their services on a particular Saturday morning to give free physicals to our athletes. Our A.D. decided to ask for a $20 donation for each physical, purely voluntary. Parents felt so good about how much that they were saving in money and time that they gladly gave up $20, and the athletic department made $6,000 in one morning for doing what they were already doing.

4) Never cancel debts from families for monies owed. Up to you as to whether you allow students to get report cards and even graduate, but always ask that family to pay the monies back when they can. Once a year, we send a letter to all those families with balances due on tuition who are no longer with us. And no, our return rate is not very high. But occasionally, just occasionally, a family responds and begins a payment plan. I don’t think that’s just good for the school—that’s good for our families, too, to provide them with an opportunity to make good on a debt they’ve freely undertaken.

5) Consider giving families the option of making an "annual fund" gift as an add-on to their monthly tuition payments. Typically, your monthly payers are not your biggest donors, so by providing this option, you're not undercutting your ability to ask for the larger gifts from others. You are, however, likely to get a larger annual amount from monthly payers if they can give $20, $50 or $100/month than if they make a single gift. And it should save significant staff and volunteer time soliciting through letters and phone-athons.

6) Advocate at the diocesan level that Catholic education is the responsibility of the whole Church, and not just those parishes with Catholic schools or those parishes with kids in our schools. I know that many dioceses link their subsidy amounts to per capita numbers of kids in a school. A parish without a school might be assessed 1,000 per child enrolled in another Catholic school, as an example. I am opposed to that method because it lets other parishes without a strong school population off the hook, and unwittingly discourages our pastors and finance boards from promoting our schools. Catholic education is an integral mission of the whole Church, a way of passing on our faith to our children. I believe dioceses ought to implement flax or progressive taxes on parishes across the board, independent of how many children attend schools in that parish, for the sake of supporting this broader mission.

III. Cutting Costs:

1) Consider alternative scheduling: We don’t often think of student scheduling as a way to cut costs, but there’s a room for saving money in how we do it. In my old high school, for example, we taught a traditional seven period day, and full time teachers taught in five of those periods (or 71% of the teaching day). We moved to a trimester schedule of five classes/day, of which teachers taught four periods (80% of the day). So each teacher, over the course of the year, went from teaching 5 credits (5 half credits in the first semester +5 in the second) to 6 credits (4 half credits in the fall +4 in the winter +4 in the spring). For every 20 full time faculty, that’s the equivalent of saving 3.5 teachers! But it was better than that: Since teachers only taught 4 periods each day, they averaged teaching  80-100 kids/day vs. 100-120 kids/day with five classes. Our kids went from juggling seven periods at a time to only five. We could insert remedial classes in the winter block if kids did poorly in English or Math in the Fall block. We could make some courses, like A.P. Calculus, a three trimester requirement.  Everyone was happier, and it was cheaper for the school—a rare combination.

2) Consider hiring part-time teachers. Two part time teachers are cheaper than a full time teacher because we don’t have to pay benefits. But I also believe if you find the right part-timers, they have more time for preparation for their one or two classes than someone teaching five classes and monitoring after school clubs or athletic teams. We are likely blessed to have among us very sharp, professional women who previously suspended full time work to raise their children, but may now be ready to work with us in a part time capacity. What is attractive about teaching with us is their work schedules mesh with their kid’s schedules: same days off, same hours and summer vacations.  Everybody wins.

3) Don’t rent or sell books, but instead, use an on-line vendor like Follet or MBS. Renting or selling books ourselves costs us in several ways: We must pay our bookstore manager, we must pay for significant trucking and mailing costs, we must find a place to store the books, we must secure books back and forth for students when they change schedules and most importantly, we must eat the costs of any unused inventory. We’ve started asking parents to purchase books using an on-line vendor, and all those costs and aggravations went away. With amazon.com now a way of life, parents are used to purchasing on line anyway.

4) Get out of the cafeteria business. It’s almost impossible for schools to make any money in the cafeteria, and more often than not, we lose money. And that doesn’t count the H.R. problems! There are two other possibilities: either contract with a professional cafeteria company, or if you’re too small, hire a part time mother to “run” a delivery service whereby the school imports food from local food vendors, pre-ordering each morning in homerooms. We do the former in my current school and did the latter in my old school. In both cases, we make (made) a little money. But I’d have been happy in my old school just to break even.

5) Re-think current hours for staff members of school. I know a school that lost 40 students but still wanted to retain its “specialty teachers” (art, music, etc.), yet there wasn’t enough money. At the same time, the school had a poorly regarded after school care program—not enough curriculum and too much day care. They decided to make the specialty teachers part of the after-school program and offered them a contract from 10-5:30. It worked for both teachers and school.

6) Re-think administrative structures. A principal and his or her secretary are no longer enough to run a school. The needs of students and their families are too great for one person, and the school can no longer rely on a cadre of mothers to serve as quasi-administrators for support and free labor. Rather than hire additional staff or administrators, consider creating "unit teams" of teachers.  An elementary school I know divided its K-8 school into three units: K-2, 3-5, 6-8, with a "lead teacher" of every unit in charge of the unit. The lead teachers' role is to coordinate and monitor curriculum within their unit, mentor new teachers, and be the "second line" of communication (after the child's teacher) for parents who need help. Each lead is given a significant stipend to recognize their administrative role and an additional free period, but the three stipends amount to much less than additional staffing. Plus, it's a way of giving our best teachers more money and responsibility.

IV. Concluding thoughts:

We in Catholic schools get uncomfortable talking so directly about money, preferring to focus on our mission. I think that is admirable! However, on average, our faculties are getting paid about 70% of what their public school counter-parts are getting paid. There’s an issue of justice there, and if we want to do better, we have to be very wise stewards of our school’s finances. We are not for profit institutions and no one is lining his or her pockets. Whatever margins exist go back into our school programs. "Without margin,” the saying goes, “there is no mission.”

May God give us the grace and wisdom to lead our schools well.