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Financial Challenges and Opportunities for Jewish Day Schools in Small Communities

Posted by: dperla

June 10, 2014

This post was first published in RAVSAK’s publication – HaYidion.

By: Daniel Perla

Small schools often find themselves in an economic bind, having much less revenue and comparable expenses compared to larger schools. Here is a diagnosis and some suggested remedies.
Size Matters

As part of a national day school conference nearly three years ago, I agreed to participate on a panel dealing with day school finance. The panel included a small group of colleagues who, like me, spent their days thinking about day school affordability and sustainability. As a panelist, I spent most of my time sharing details of a series of communal programs and collaborations that had the potential to improve the financial lot of day schools across the country.
Immediately following the session, I was approached by three women who had been in the audience. Each of them was a leader (lay or professional) of a day school in a small or intermediate-sized Jewish community. Each explained to me that the programs that I was advocating for inadvertently excluded them since they lacked other schools in their communities with which to collaborate. In other words, they were usually the only school in town.
While schools in small and intermediate communities typically receive meaningful support from their local federations, their ability to obtain foundation funding for collaborative programs is indeed diminished due to their geographic constraints. As one day school head from a small school said, “The next closest day school is 150 miles away.” While fully acknowledging the demographic and enrollment challenges facing these small schools, many of these schools have educated the young men and women who have gone on to become Jewish lay and professional leaders in large cities. The closing of these schools might leave local Jewish children without an immersive Jewish education. It might also shrink the future pool of Jewish lay and professional leaders.
Small schools face some unique challenges. They are typically the sole day school in a community with a flat or declining Jewish population. The failure to attract a growing pool of new students leads to small class sizes in upper grades and this tends to lead to higher attrition rates in the upper grades. According to a report prepared by The Jewish Federations of North America (JFNA) and JData, the retention rates at these schools in small and intermediate sized communities are below those found in larger communities. In fact, two thirds of these schools have posted enrollment declines. Regardless of the cause of the enrollment declines, JData reports that these schools are now running at approximately 68% of their capacity, a rate which is appreciably lower than that of schools in large communities.
Notwithstanding a declining enrollment, cost per student at small schools is relatively comparable to that at larger schools. What is not comparable is the percentage of budget captured by tuition dollars. According to a report on small schools by PEJE’s Harry Bloom, small schools typically offer a lower gross tuition and offer more financial aid (as a % of budget) than do larger schools. This can lead to a noticeable difference in net tuition as a percent of total budget between small and large schools.
While Bloom’s study included small schools in large communities, it appears that smaller schools generally have a tendency to offer proportionally more scholarship than do larger schools. Bloom reasons that smaller schools may attract less affluent families or feel that they need to offer a lower price to attract families due to their more limited programs, smaller peer networks and riskier financial conditions. Regardless of the reason, it is hard to imagine that such a tuition structure is sustainable over a long period of time.
While a sizable endowment would certainly ease some of the financial pressures on these schools, it is hard to imagine how even a large endowment could fill the funding gap in a school that has a third or more of its available seats unoccupied. It would seem that a first step in addressing the financial challenges of small schools would be renewed focus on student retention and some innovative thinking around enrollment growth. PEJE’s Recruitment and Retention Academy aims to tackle these issues head on. The PEJE academies began with a two and half day conference (the first conference having taken place in Chicago in mid-May) where schools of all sizes are exposed to school marketing and enrollment experts from around the country.
PEJE hopes to have a dedicated track for small schools at its future recruitment and retention academies. The academies would be coupled with follow-up coaching from individuals with proven expertise in small school student retention and enrollment growth. In addition, PEJE hopes to tackle the issue of small class sizes though a creative approach to educational staffing. Based on prior relevant experience in the YU benchmarking program, it is believed that a combination of these efforts can lead a school to a 10% or greater improvement in new student enrollment growth and in student retention within 18 months of the program’s completion. This combined impact can add hundreds of thousands of dollars in net tuition revenue over the lifetime of these students within the school.
While recruitment and retention programs such as this one will not solve all the unique challenges of small Jewish day schools, they represent an important first step in moving these schools toward a more sustainable financial future. Recruitment and retention programs such as this one may also represent an opportunity for small and geographically diverse schools to learn from each other’s successes and failures. It is possible that meaningful collaborations between small schools will emerge.
One thing is certain. The failure to act will almost certainly leave these small schools in a precarious financial situation. If clusters of small schools can stabilize or grow their enrollments, there is good reason to believe that these schools will continue to provide the broader Jewish community with its future lay and professional leaders.♦
Daniel Perla is a program officer in day school finance at the AVI CHAI Foundation in New York. dperla@avichaina.org

Gross Tuition Revenue/ Student ($k) Net Tuition Revenue/ Student ($k) Operating Expense/Student ($k) Hard Income Ratio
Smallest Schools $10 $7 $15 49%
Largest Schools $17 $15 $18 81%
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