1. NBOA Independent School Financial Sustainability: Past, Present and Future Independent Education Trustee Workshop Washington, DC September 30, 2014

2. NBOA Today’s Speakers Jeffrey Shields, FASAE, CAE President and CEO Genevieve Madigan, Vice President, Professional Development and Research

3. NBOA Program Goals Discuss the financial climate for independent schools leading up to, and including, the economic downturn in 2009 Explore current data specific to the Washington, DC, region from the most recent NBOA Business Office Survey, in addition to other sources Share insights on future challenges facing independent schools

4. NBOA Before the Economic Climate Changed…(circa 2008) Tuitions up 30% (real dollars) over 10 years Overall staff up 32% over 10 years Student: teacher ratios getting smaller Financial aid grant dollars up 38% Enrollment up 20%

5. NBOA “New Normal” Charge only what people can pay Design your program to that revenue number “Full Steam Ahead” Charge what it costs CPI + 2 or more when needed Different Ideas

6. NBOA  Increase enrollment without increasing staff  “Sunset” an old program for every new one  Right size: re-think class size, workload, # of teacher specialists, assistants, school size  Devote 1/3 rd of each fundraising dollar raised to endowment NAIS: The New Normal

7. NBOA  Decide whether you are a price, product, or process school (you can’t be all 3!)  Acknowledge that the 20 th century “factory” model of education will not prepare students for the 21 st century  Design a 21 st century school that individualizes learning using technology  Dedicate 2% of your budget to faculty professional development ISM: 21 st Century Model

8. NBOA 26.4% were going to increase the average class size but only 11.7 % did. 58.8% were going to decrease planned salary increases but only 32.3% did 2013 NBOA Business Officer Survey: In response to the economic decline, what strategies did you implement? Most popular Strategies- Increase average class size Increase teaching loads Increase employee contributions for benefits

9. NBOA Strategic Reactions Increase Number of Students Per Classroom PlannedImplemented ‘ 10 Survey26.4%11.7% ‘11 Survey19.9%10.7% ‘12 Survey16.2%11.6% ‘13 Survey17.9%9.9%

10. NBOA Strategic Reactions Increase Teaching Load PlannedImplemented ‘10 Survey26.6%12.8% ‘11 Survey18.4%10.9% ‘12 Survey14.2%8.1% ‘13 Survey14.8%9.1%

11. NBOA Strategic Reactions Increase Employee Contribution for Benefits PlannedImplemented ‘10 Survey17.5%11.7% ‘11 Survey20.7%12.7% ‘12 Survey13.5%13.2% ‘13 Survey18.1%8.3%

12. NBOA Strategic Reactions Same goes for: Reduce Faculty FTE Reduce Staff / Admin FTE Decrease Planned Salary Increases Reduce Salaries Reduce Benefits Source: NBOA Business Office Survey 2009-12

13. NBOA 13 Years of Tuition or…?

14. NBOA There is NO Silver Bullet

15. NBOA The Future…?

16. NBOA Source: NAIS and US Bureau of Labor Statistics Average yearly CPI increase for the past 12 years is 1.96%. Has your school had a tuition increase in any given year that was less than 2%? It’s not just about affordability, but about managing expectations. Tuition Increases: CPI versus Reality

17. NBOA Increase in FTEs Source: NBOA Business Office Surveys 2008-12

18. NBOA Independent School Revenue Streams In general, all operating revenues fall into one of four buckets, and you only have direct control over one of them- tuition. 1.Tuition 2.Fund Raising 3.Endowment 4.Auxiliary Services

19. NBOA Independent School Expenses Greatest % of your budget, in descending order (typical school) 1.Compensation and Benefits 2.Facilities 3.Financial Aid (actually a revenue offset, but for our purposes we will discuss it here) 4.Technology 5.Equipment and Supplies

20. NBOA AN OVERVIEW OF DATA FOR YOUR SCHOOLS Demographics Tuition Enrollment Financial Aid

21. NBOA Demographics- An example Source: NAIS Demographic Center What are the trends in terms of students for your market? “Kindergarten bust or Middle School explosion?” What are the income levels for your market? Where are the families who are most likely to attend your school?

22. NBOA Source: NAIS Facts at a Glance Tuitions Continue to Rise NAIS Average Median Boarding tuition, 12 th grade: $46,775 Median Day Tuition, 9 th and 12 th grade median: $22,700 Median Boarding Tuition, 12 th Grade: $48,825 Median Day Tuition, 9 th and 12 th grade median: $33,128 IE 2013 AveragesNAIS National Averages

23. NBOA Tuition Reliance: National Perspective

24. NBOA Tuition Reliance: Washington, DC, Metro Area

25. NBOA Trend is going in the right direction, but…..

26. NBOA The total number of students in independent schools remains unchanged.

27. NBOA US Schools 35.9% Remained the same 47.3% Increase 9.1% Decrease Financial Aid

28. NBOA Financial Aid: How has the 2013/14 financial aid allocation ratio changed compared with prior years?

29. NBOA Financial Aid Metrics

30. NBOA Financial Aid: Mid Atlantic Region Source: NAIS Facts at a Glance National

31. NBOA Do you offer Full Financial Aid Awards?

32. NBOA Highest Value of Partial Award (if full awards are not provided)

33. NBOA Merit Based Financial Aid Enrollment

34. NBOA Tuition Remission Enrollment

35. NBOA Remission: The Details

36. NBOA Financial Aid: Allocation

37. NBOA DEBATE THE PROPOSITIONS

38. NBOA Debatable Propositions Purposely Controversial Can take a stand: for or against Spark new thinking around both long-held beliefs or revolutionary concepts Eradicate “cherished theories”: things you believe, but have no evidence to support

39. NBOA For example… 1. The value of the smaller class experience is not as great as the cost.

40. NBOA or… 2. Financial aid should only be used in service of mission, not to increase enrollment.

41. NBOA 3. Online learning can replace the personal connection between teacher and student in the traditional classroom. and…

42. NBOA how about… 4. Fund raising activities should be strictly for capital improvements only – not to close the gap between operating revenues and expenses.

43. NBOA HOT TOPICS IMPACTING INDEPENDENT SCHOOL FINANCIAL OPS Value Added Costs Role of the Board Full-Pay International Students

44. NBOA Added Value Costs How do we add value without adding expense? Read More About It: The value question for independent schools by Terry Armstrong www.claytonchristenseninstitute.org

45. NBOA Role of the Board What is the role of Trustees in enrollment management? Read More About It: Boards and Enrollment Management In Schools: Interview with Dr. William Mott by Rick Newberry enrollmentcatalyst.com

46. NBOA Full Pay International Student Enrollment Implications from mounting pressure to enroll more full-pay international students? Read More About It: What China Means to American Boarding Schools by Trip Darrin admissionsquest.com Net Assets Magazine May/June 2012

47. NBOA Is your school tracking these FIVE financial indicators? The gap: the cost to educate a student at your school and net tuition as well as Gross Tuition vs. Net Tuition (NBOA Financial Position Survey) Financial Aid and Tuition Remission as a % of gross tuition revenue (NBOA Business Office Survey, Financial Position Survey and school’s own data) Expendable Financial Resources: the “reserve” which a school has on hand to cope with a short-term financial shock. Expendable financial resources provide a way for a school to invest in new programs or facilities. (NBOA Financial Position Survey) Market Demographics (NBOA and NAIS) FTE / Student Ratio (NBOA and NAIS)

48. NBOA Over 1,150 US member schools – and growing! + Canadian schools + For-profit companies + Other non-profit groups + Retirees Headquartered in Washington, DC 13 FTE (distributed staff model) www.nboa.org Who Is…

49. NBOA Tuesday, October 7, 2014 – 8:30am – 3:00pm Holton-Arms School, Bethesda, MD Register at: www.nboa.org/events/business-office-now/

50. NBOA Business Office NOW from NBOA Tuesday, October 7, 2014 – 8:30am – 3:00pm Holton-Arms School, Bethesda, MD Register at: www.nboa.org/events/business-office-now/ In ONE DAY your business operations staff will have the answers to the following questions for your school: How can my school develop a more sustainable financial future? What will our school’s financials look like in 10 years? How do our investments in IT compare with other schools with the same budget size and enrollment? How can we recoup more of our costs from our facilities rentals? What are the most pressing legal issues that my school should be aware of in human resources? What is the future of online learning for independent schools?

51. NBOA Jeffrey Shields, FASAE, CAE President and CEO 1400 I Street, NW p 202.407.7141jeff.shields@nboa.org Suite 850 f 202.354.5040Twitter: @shieldsNBOA Washington, DC 20005 c 202.253.7290 www.nboa.net Genevieve D. Madigan Vice President, Professional Development and Research www.nboa.net 1025 Shadeland Ave. Drexel Hill, PA 19026 1400 I Street, NW p 202.407.7144 genevieve.madigan@nboa.org Suite 850 f 202.354.5040Twitter: @GenMadigan Washington, DC 20005 c 716-998-8130 www.facebook.com/NBOAnet www.twitter.com/NBOAnet www.bit.ly/NBOALinkedIn www.plus.google.com/+NBOAnet www.pinterest.com/NBOAnet