Susan Abelein, PhD
For decades, Catholic schools and dioceses have relied on tuition, fees, fundraising, subsidy, and, or philanthropy to sustain operations. Given the current circumstances, school budgets are effected, at a minimum, by the loss of tuition income and fundraising revenue; though, some are taking advantage of the $2 trillion stimulus package’s Paycheck Protection Program and Economic Injury Disaster Loan. It is imperative that leaders and stakeholders in Catholic education act now by evaluating their existing approach to school finances and considering alternative approaches and their possible application in their schools in order to ensure operational vitality for the decades to come.
Rather than developing an annual budget that uses simple percentage-based increases, consider a zero-based budgeting approach. Generally, the budgeting process for an average school involves a modest percent increase in tuition on the revenue side balanced with a modest percent increase for salaries and benefits on the expense side of the budget. Throw in some fees with nominal increases and fundraising to cover educational materials, technology, co- and extra-curricular activities, insurance and utilities, and you have created the budget for next year.
Zero-based budgeting entails - you guessed it - starting from zero. You build the budget based on whole-school design, including your mission, vision, values, goals and the programs and resources needed to fulfill it; you build the budget based on the job you are hired to do. “Customers don’t buy products or services; they hire them to do a job.” What’s the job your school is hired to do?
Conceptually, zero-based budgeting is not complicated but it does take a lot of worthwhile effort. Of the many benefits, it ensures spending is aligned with your school’s mission and vision; it ensures you have the right programs in place with regard to academic excellence and any other marquee programs that define your school; and, it ensures a structure for annual and long-term (3-5 years) evaluation. Overall, this approach requires your finance team - “team” includes principal, pastor, finance council at the elementary level; includes: principal, president, business office, board at secondary level - to evaluate your expenses (if using your preliminary budget) or define your expenses (if starting the budget process from scratch) and determine their monetary worth against your mission and vision. In addition to the process and additional guidance found in this document, Zero-based budgeting, ensure your budget accounts for an investment in exceptional human capital (employees with energy and expertise) and quality resources in order to deliver on your defined mission, vision, values, and goals.
A final note on budgeting: whether you continue with the percentage-based increase approach or you move to a zero-based budgeting approach, ensure you include an annual investment in building an endowment. Work with individuals and foundations to, at a minimum, match your school’s annual contribution to the endowment. In this way, you are ensuring their financial support and partnership in the belief and long-term sustainability of your school and the job it is doing.
Rather than standard tuition rate-setting methods that use simple percentage-based increases or round numbers as increases (e.g. $100/year), consider a Cost-based - Needs-based approach. Dr. Kevin Baxter offers a concise description, “In this model, the school charges the actual cost to educate a student and then negotiates with families who are not able to pay the true cost to educate.” It is important to highlight that charging the actual cost to educate does include financial assistance; an outlined and transparent process for applying and awarding aid should accompany a move to a cost-based – need-based tuition model. Adoption of this approach takes courage and excellent communication skills as the, likely, “sticker shock” reaction could lead to anxiety among parents and significant loss of enrollment. However, it could also educate the community on the value of receiving a Catholic education, as well as, the quality of staff and programming found at your school.
Another rate-setting option includes “freezing” tuition for a year. Freezing tuition means that the tuition rates you have in place for the current year are the same tuition rates you use for next year. As for those schools who annually negotiate tuition with families, and under normal circumstances, the school would work with the family to pay more tuition next year thereby increasing the amount to be collected. However, given Covid-19 and unemployment, principals should hold off on negotiating tuition for next year until the summer when, hopefully, more people are back to work and there is a more realistic picture of families’ finances. The pro’s and con’s of this “freezing” tuition approach are seemingly obvious. The #1 pro - parents will be thrilled that there is no increase and viewed as a compassionate response given the present circumstances. The #1 con - in order to balance the budget, you will also need to freeze salaries or have to come up with additional fundraising to fund the gap, which would essentially negate the pro for parents.
One more rate-setting option is the “milestone” tuition increase. Milestone tuition increases occur every 3-4 years; for example, the tuition is locked in for early childhood education (PS, PK, TK), or for grade bands (K-2, 3-5, 6-8), or for entering freshmen through their senior year. As such, parents know the expected financial commitment up front and for a chunk of time; this milestone approach to tuition increases requires long-term financial planning and would ideally coincide with a zero-based budgeting approach.
What are parents paying for? What is the job that parents are hiring your school to do? What matters now? As you consider or reimagine what your school’s mission, vision, values and goals are, ensure you have the right financial model – with the right approach to budgeting and setting tuition - to ensure you can deliver.
 Christensen, C. M., Hall, T., Dillon, K., & Duncan, D. S. (2016). Competing against luck: the story of innovation and customer choice. New York: Harper Business.
 Richland One. Zero-Based Budgeting. PDF. (n.d.). Columbia, SC. Available at: https://www.richlandone.org/cms/lib/SC02209149/Centricity/Domain/104/zero%20based%20budgeting%20overview.pdf
 Baxter, K. (2012). Financing for Success. In A practitioner's guide to Catholic school leadership: expert advice on practical topics from those in the field (pp. 53–66). Arlington, VA: NCEA.