In Catholic schools, like other schools affiliated with a religious congregation, revenue comes from different sources. Primarily, tuition supplies the cash needed to operate a school. For elementary schools in particular and some high schools, parishes affiliated with the school provide subsidy to cover the gap between expenses and tuition revenue. This is the traditional second source of revenue. A third source of funding came from various contributions, such as extra collections at Sunday Mass aimed at the school or annual fundraisers in which parents and neighbors were invited to purchase candy, pizzas, and wrapping paper.
In the past decade or two, tuition has been stretched to the limit of some parents and is causing questions related to the school’s value proposition, that is, Is the school worth the cost? Subsidy from parishes in many cases is being capped, reduced, or even eliminated because parishes themselves are experiencing financial restrictions. An unfortunate result of the limits of the first two sources of funding is a dramatic expansion of fund-raising activities. The extra work involved in supporting their child’s sales activities, from “inviting” co-workers to buy this event’s item to simply buying enough items themselves to reach the child’s quota, has the potential to dissuade some parents from enrolling their child in a Catholic school. And the extra work for the school staff related to organizing and participating in these fundraisers is often exhausting and, frankly, unrelated to educating our youth.
Third source funding evolved and expanded, initially at the high school level, to emulate the development approach colleges were using. Creating a “case” for additional funds, such as tuition assistance, technology, upgraded facilities, etc., and presenting that case to philanthropic individuals or organizations resulted in more money for the school and less work for the parents. Elementary schools soon joined in this move to development and began reducing the number of fund-raising activities.
All of this fund-raising is independent of capital campaigns. Those are large projects aimed at building, expanding or renovating a school building. The money collected is aimed at a project and not at the annual operating budget. But a piece of many capital campaigns might have the potential to be spun off and reformed into what we are thinking of as a fourth source of funding.
In the 1980s and 90s, Catholic high schools and elementary schools looked to colleges for new ways to increase revenue and found development activities. Perhaps we can look again at colleges and see that they have another source of funding for annual budgets – endowments. While endowment contributions are often added to the case statement of capital campaigns, it is usually considered a low priority, as in “If someone wants to contribute to an endowment, we won’t say no.” One reason for this is that an endowment is hard to establish and takes years, decades really, to grow to a point where it can help the school. Assuming a school had a $100,000 endowment and was allowed to take 3-5% out annually, that would produce $3,000- $5,000. A $1,000,000 endowment would produce $30,000 - $50,000. While helpful, these amounts will not take care of six-figure deficits. An endowment must total in the millions of dollars to be truly effective. At this point school administrators and board members throw up their hands and say it can’t be done. That is correct in the short term. Without an extraordinary contribution, endowments take many years to grow to a sufficient level to be effective. But if we don’t ever start trying to establish a functional endowment, it will never happen. If we start now, the next generation of school administrators might be able to maintain the school’s viability.
When we say that endowments, independent of capital campaigns, are potentially a fourth source of school funding, we mean for those who follow us in years to come. If we don’t act now to secure the future of our Catholic schools, our legacy to that future might be only photographs of what once was.
