Managing Budgetary and Enrollment Trends for Independent Schools

There are a number of steps that can be taken to ensure future success, and the time to take them is right now.

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There are a number of steps that can be taken to ensure future success, and the time to take them is right now.

The challenge of balancing the operating budget is nothing new for independent schools. Even in the Northeast, which is home to some of the finest private educational institutions in the country, there has been a consistent need through the years to adapt to and remain ahead of the newest budgetary trends.

In recent years and moving forward, those challenges have been increasing as the landscape of students enrolling in private schools has changed dramatically. The demographics make it clear—families are having fewer children, and many people are moving out of higher tax states like Connecticut and Massachusetts, diminishing the pool of students from which to choose. The resulting decline in enrollment numbers has made competition for those students greater than ever, placing added pressure on independent schools’ operating budgets.

In order to adapt to this significant demographic change, the path forward to sustainability for many schools will need to include right-sizing the organization to meet these new enrollment trends. Operating expense budgets have become outsized in comparison to the student populations they now serve and continuing down the same road on which they were 10 years ago is simply unsustainable.

There are a number of steps that can be taken to ensure future success, and the time to take them is right now.

Examine Everything

It’s not an easy task, but the Business Office and Finance Committee need to look closely at every line item in the budget, determine where adjustments need to be made, and then begin the process of financially right-sizing the organization. From compensation to workforce size and everything in between, all must be examined to accommodate a balanced budget. Many independent schools have allowed operating expenses to outpace net tuition revenue—this cannot continue. Some uncomfortable changes will need to be made if these institutions want to continue to thrive.

Leverage Data Analytics

Businesses and organizations are benefiting from access to more advanced data analytics, and private schools need to take advantage of this as well. Analytics can provide significant help to gauging many trends, especially around enrollment, donors, sources of revenue and expenditures and other less tangible elements that can have an impact on these institutions. If schools are not taking advantage of what advanced data can do for them, they should start immediately.

Scrutinize Tuition Levels

Are the institution’s tuition levels still competitive, or have they become outdated? Schools steadily examine tuition rates, but given the backdrop of stagnant or declining enrollments, this takes on heightened urgency. This is particularly necessary at the middle and high school level, where discounted tuition is often given to incoming students and, unlike traditional financial aid at the college level, these are not loans that need to be paid back.

Grow Endowments

Endowments are a large part of the lifeblood of these institutions, and they must be both protected and grown. We are in an era where we see unrestricted endowments starting to diminish at quicker rates than in the past, because too many schools have become dependent on additional draws from endowments to fund gaps in the operating budget. This is not what endowments are for—they are intended to supplement income and support programs as they grow, not be a revenue stream for ongoing operating expenses. A strategic plan to protect and grow endowments is essential.

Examine Capital Campaigns More Closely.

For many years, schools subscribed to the “if you build it, they will come” philosophy when it came to capital campaigns, believing that newer and better investments in bricks and mortar would help to draw more students. This has not necessarily happened, and with so many schools offering newer modes of learning—offsite classes, virtual learning, online learning and more—the purpose of capital campaigns needs to be scrutinized more closely than ever.

Remember The Mission

Lastly—and this is the most essential part of right-sizing an organization—the mission always comes first, and independent schools need to ensure they are still delivering effectively on that mission. Regardless of what budgetary or staffing adjustments are made, that core mission needs to remain if the future is going to be bright.

We live in a region where top-notch independent schools have produced incredible results over the years. They all want to continue that legacy and remain vital for generations to come, and to do that, they need to adapt to this new landscape.


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