The Day School Financial Enterprise and Its Systemic Underfunding
By: Dan Perla
A traditional Shabbat lunch is usually book-ended by well- established rituals—kiddush and motzei at the beginning of the meal and birkat hamazon at the end of the meal. These days it appears that a new “ritual” is emerging as a focal point for the middle of the meal—the discussion about day school affordability! To aid you in your conversations, here is a brief primer on the financial context in which most Jewish day schools operate.
There appear to be approximately 400 Jewish day schools in North America that can be classified as Community, Orthodox (modern or centrist), Reform or Solomon Schechter (Conservative). Based on data compiled by AVI CHAI in collaboration with YU’s Institute for University-School Partnershipand JData, these 400 schools have approximately 120,000 students in them and have a cumulative operating budget of approximately $2 billion annually. Net tuition (tuition net of scholarships and teacher discounts) typically covers only 75%-80% of the $2.0 billion cumulative budget.
This has led to a systemic underfunding of $400-$500 million annually, absent any fundraising, endowment income, government funding and federation or foundation support.
Of this $400-$500 million of under-funding, approximately half ($250mm) is mitigated through normal fundraising and annual endowment income (primarily the former). Federation and foundation support provides another $100mm, though this support in highly concentrated in cities like Baltimore, Boston, Chicago, Cleveland, Detroit and Los Angeles.
This leaves an overall budgetary shortfall of about $200-$250 million.
It is important to understand that while the vast majority of Jewish day schools face some level of under-funding, the shortfall is highly uneven among individual schools and communities. Nevertheless, it is still instructive to look at the under-funding on a per school level. On a per school basis, the funding shortfall boils down to this. Of the average school’s $5 million budget, net tuition typically brings in just $3.75-$4.0 million. A combination of fundraising and endowment income often closes about 50% of the gap. The remaining 50%, or approximately $500k-$600k per school, represents the current funding crisis.
While certain communities of day schools receive per student annual Federation allocations of $500 or more, the vast majority of New York day schools receive only nominal per student allocations from their local Federations. Similarly, while Jewish day schools in communities such as Philadelphia and Seattle receive significant funding from local foundations such as the Samis and Kohelet Foundations, the vast majority of schools receive very modest sums, if any, from local foundations.
The amount of public funding available for day schools is similarly skewed toward day schools in certain states. While New York and New Jersey provide mandatory services and other funding which typically amounts to a couple of hundred dollars per student, day schools in Pittsburgh and Philadelphia can receive $1,000 per student or more through a business tax credit program offered by the state of Pennsylvania.
The lack of a homogeneous Jewish day school system suggests that financial interventions will not be in the form of one size fits all. Therefore, understanding the financial context in which day schools operate will ultimately help to determine the different courses of AVI CHAI’s future work in the day school finance arena. Currently AVI CHAI is considering a series of targeted, contextually-appropriate financial interventions for Jewish day schools. These may include initiatives around enrollment growth (increased enrollment typically leads to greater financial sustainability), communal funding and middle income affordability/tuition setting. Much more will be said about these initiatives in future blog posts. For the moment, let’s hope this primer on day school finance will aid the discourse around the Shabbat lunch table.
This is the first of a series of monthly articles on day school affordability and sustainability by Dan Perla, AVI CHAI’s program officer for day school finance.