Will Day School Be Affordable Again?

Rafi Eis

Introduction

In the decade since the Great Recession brought the day school affordability crisis front and center, we are nowhere near solving it. While some schools froze tuition for a few years, only one school significantly lowered its tuition. Every other school increased its tuition. Will we be able to solve the affordability crisis?

This distressing topic however, can’t undermine our primary principles. Oscar Wilde famously defined a cynic as ‘a man who knows the price of everything and the value of nothing.’ Similarly, when discussing the distressing topic of the high cost of Jewish day school, it becomes too easy to think that the whole Jewish day school endeavor costs too much. No matter the cost of Jewish day school, however, it is worth the price. No other institutional Jewish experience has anywhere near the same level of teaching, inspiring, and forming the next generation of committed Jews. Dr. Jack Wertheimer’s exhaustive study proves it. These formative years require the unique environment of Jewish day school. Literally, Jewish day school is invaluable.

The Rise of Tuition

In 1995, the average annual K-12 Jewish day school tuition was $5,700, which would be $9,100 today when adjusted for inflation. But other than most yeshivish and Hasidic schools, which have kept pace with inflation, day schools have generally doubled or tripled tuition! Why has tuition grown far faster than inflation?

At the most basic level, we grossly underfunded Jewish day schools in 1995. At that time, New York and New Jersey spent $9,000 per public school student, which is 45% more than the $5,700 previously mentioned! This discrepancy in funding becomes more pronounced when we realize that Jewish day school provides a dual curriculum with at least a 20% longer day and sometimes 50% longer, depending on age level and school type. The Avi Chai report from the mid-1990s decries the woeful state of school financing and the report’s primary medium-term goal is to infuse the day school system with additional funds. That has now been accomplished.

Already in the year 2000, Dr. Wertheimer writes about the substantial new investment in Jewish education and that it then cost $10,000 to educate a day school student. To understand the current cost of Jewish day school, we need to put it in context. New York and New Jersey currently spend more than $18,000 per pupil in public school. With its dual curriculum program, a day school tuition in the New York metropolitan area which is in the mid-$20,000 range is proportional with the geographic K-12 education industry. We are using the data for the New York metropolitan area, which has the highest geographic concentration of schools, but fully understand that the affordability crisis applies to day school families nationally. The context of day school affordability must begin by comparing the local day school tuition with the state’s public school cost per student.

The above history does not make day school affordable. Too often, however, people complain about the cost of day school without an appreciation of what their children are receiving. Solving the affordability crisis requires an understanding of school costs and revenues. Both of those likely need to change to make day school affordable again. To do this, we need to understand the reason for the increased costs.

#1: Schools are Better

Jewish day schools have gotten more expensive because they have also gotten a lot better. Schools offer much more individualized attention and opportunities through a wider range of course offerings, which means more teachers and smaller class sizes. An AP Calculus BC course or an advanced Talmud track, for example, only enroll a handful of academically elite students. Schools also provide more robust services for students with additional learning, organizational, or behavioral needs. To provide these opportunities and support, school personnel are now far more credentialed, with a much higher percentage having a Masters’ degree or PhD. Previously, much of the learning support staff acted as tutors by filling in the gaps in student knowledge and skill; now they tend to be trained specialists who can also address the underlying language acquisition and organizational issues. Many schools also employ full time mental health professionals.

Beyond classroom learning, schools also place great value on informal education like Shabbatonim, clubs, contests like color war, and increased competitive sports with destination tournaments. Some schools also offer adult education programs to bring parents and children together in a holistic way. For the stage after high school, schools offer robust college guidance and Israel guidance departments. These courses, programs, and services require expert staff.

All these additions also require greater direction, organization, alignment, and oversight. Schools have therefore hired more administrators to ensure that the right courses are being offered, are being implemented properly, do not conflict with other school offerings, and that the correct students are being properly serviced by these programs. Alongside increased individualized programs, parents also need personal guidance as to which programs and courses are best for their child. A basic principle of management is that the more an organization does, the more effort it must make to do it properly, including schools.

Twenty five years ago, Jewish schools fit into the parochial school model. As the overall day school community became wealthier and raised its expectations from schools, the schools instituted more robust programs—APs and course electives, informal education, clubs, sports teams, destination sports tournaments, college and Israel advising departments—and have entered the category of the independent school.

#2: Respectable Teacher Compensation

Growing up in the 1980s, my image of a Jewish day school teacher was of them driving around in a beat-up station wagon. Reports have their salaries in the $20,000 range with minimal benefits. That would be less than $35,000 in 2018. While we do not have public data about teachers’ wages over the past three decades, anecdotally, teachers now live much more respectably. They live in the communities they serve and they drive new-ish minivans. Simply put, schools have gotten more expensive because instead of being paid on the low economic end, teachers are now paid a middle-class salary, competing with the market rate for excellent teachers in that area.

Accompanying the rise in teacher salary is the offering of health and retirement benefits to teachers, which schools anticipated would add about 5% to their budget. Pension costs are capped and matched to employee contribution. That has therefore stayed the same and probably makes up 2% of a school’s budget. Health insurance premiums, on the other hand, correlate with our healthcare costs which have risen over 170% between 2000 and 2018! While we now know the increased cost of health insurance, schools did not anticipate this level of increase when they offered the benefit. This probably added an additional, unanticipated 10% to a school’s budget. It should be noted, that the Affordable Care Act, as of 2016, mandates schools with over 50 full time employees to offer health insurance.

# 3: Industry Trends

Jewish day schools are part of the education industry and are impacted by the trends of the industry. If we would adjust NY/NJ per student spending from 1995, NY/NJ spending should be around $14,400, yet it is over $18,000. The increased cost of university has far outpaced inflation. Many of these costs stem from the additional staff and services described above, but it also includes improvements to physical plants and increasing technology expenditures. In other words, the cost of all education has greatly exceeded inflation.

#4: Stagnant US Salaries

While the costs of day school have been rising significantly, the salary of the average parent has not risen in parallel. While salaries rose in the 1990s, since 2000 they have either stagnated or risen modestly, aside from the top 1%. The median salary just rose above its level in 2000. School budgets in, say, 2003 assumed rising wages like in the 1990s, even though that was no longer the case. Even moderate tuition increases of 3% per year makes day school unaffordable if wages stay the same.

The expenditures enumerated above explain the major rise of school tuition, as staff salaries and benefits make up about 75-80% of a school’s budget. With tuition being the primary and most stable revenue source of a school, schools collect these costs through tuition.

Where Do We Go From Here?

On the one hand, defining affordable day school can seem like a purely financial question about the relationship of family income, average family size, and the cost of day school. On the other hand, this can be hard to define since priority of values and other lifestyle choices—type of house and neighborhood, automobiles (number and vehicle type), travel, summer camp, and food all impact a family’s perception of their economic needs. Each family will answer these questions differently, especially since the cost of day school has led to more people entering high earning careers, with their immense time commitment and stress. As an example, a person stated to me that day school should be affordable enough to allow for an annual family vacation.

As the median salary is basically at 2000 levels and the upper middle class salary is moderately higher, we will define affordable tuition at an average of around $14,000, since that is basically the per child expenditure in 2000 adjusted for inflation. To reiterate, this is currently less than New York and New Jersey’s cost per student for a single curriculum education.

The above factors apply to every day school with an affordability crisis. The impact of each factor will differ based on location and each community will define affordable tuition based on local income levels and cost of living. Housing costs and quality of life are different, as are competitive teacher salaries. A state’s cost per student is easily found online. If a day school’s tuition is proportionate with the local public school’s spending per student, then only the solutions below will make the day school affordable, not “cutting waste” or “lowering costs.”

How do we get back to affordability while still compensating teachers in a respectable manner and without sacrificing attention to students with individual needs? It is easy to discuss these three issues in isolation, but any proposed solution will have to address them together.

Obviously, there are two ways to make day school more affordable: by reducing expenses and increasing non-tuition revenue.

Reducing Expenses

#1: Going Back in Time?

While it is critical to understand how we got here, the way down from high tuition is not necessarily to reverse our steps and become a parochial school again. Yeshivish and Hasidic schools have lower tuition because their costs are lower. They compensate their teachers poorly, have a high student-teacher ratio with fewer course options, and have much less individualized support. Their parochial school models stems from their communities expectations and quality of life. We cannot so easily mimic their low cost.

Schools, however, could instill more discipline in their budgeting process by incorporating Zero Based Budgeting, which assumes zero dollars in expenses and then each budget line item needs to be justified as if it were a new addition in each year. This prevents accepting the previous year’s expenditures as a basis for the next year’s budget, which leads to increased costs, by grandfathering in old costs.

#2: Paying off the Mortgage and Other Non-staff Efficiencies

In general, day schools have little waste, especially when looked at as a per student cost. Much effort has been expended to find efficiencies in Jewish day school: email instead of paying for postage, schools combining their purchasing power together, and running a capital campaign to pay off the school mortgage. These can lead to significant reductions in a school budget and lower tuition.

These efforts should be applauded, but only address the 20-25% of the schools budget that is not staff-related.

#3: Technology/Blended Learning

Blended learning, where classrooms combine teachers and virtual learning, can make school much more affordable, reducing costs by as much as 35%. On the technology side, much of a teacher’s job—recording attendance, disseminating and assessing basic knowledge, for instance, can be automated. This, in turn, frees the teacher to support more students than before. The student-teacher ratio can be increased and schools can reduce the size of their faculty. Students will have less time with teachers, but the quality of the student-teacher interaction is higher and more individuated, especially as the teacher receives continuous data in real time. The school can do the same with less.

One important caveat is that the data collected and reported back to the teacher by the online program needs to be based on standards, like Common Core, against which the data can be compared and analyzed. Second, online programs mostly teach and test for content at the lower levels of Bloom’s taxonomy, like memorization and description. Creativity and analysis are best taught by teachers.

Increasing Revenues

#1: Increasing Enrollment

It can seem very reasonable to assert that tuition will be reduced with more students filling empty seats. While it is true that many classes have empty seats, those seats are not easily filled. At least in the Orthodox community, day school attendance is about 90% of the available market, with the other 10% not attending due to specific circumstances. Some students need a level of special education that only public school offers, and some want the boutique academic programs of elite private schools. We should note that anecdotally it seems that there is significant enrollment at the less expensive, right wing schools that is not based on the espousal of a particular ideology but because they are simply cheaper. It will require significant resources to enroll these students in Modern Orthodox schools. In short, the pool from which Modern Orthodox schools can increase enrollment to significantly boost revenue is exceedingly small.

The Avi Chai report on the financing of Jewish day schools from 1997 emphasizes that larger schools do not save money per student. My experience as a school administrator during a period of 30% enrollment growth tells me as well that that remains true today. The programmatic additions to attract and accommodate those additional students often equal the tuition revenues they bring in. The empty seats that need to be filled are in already existing classes; the creation of new classes and programs offsets the additional tuition revenues.

Further, a school increasing its enrollment by adding additional segments of the population, whether to the right or left, will impact school culture. Dramatic culture changes to attract other student populations can also lead to the loss of the base population.

#2: Endowments and Mega Funds

Endowments and Mega Funds can also lower tuition. The amount of revenue needed to make tuition affordable is quite high. For instance, if a 400-student school wants to lower tuition from $25,000 to $14,000 without reducing expenses, it would need an additional income of $4.4 million per annum. Suppose the school has an endowment of $20 million earning 4% interest per year. The interest would allow a reduction of only $2,000 per year, and if the principle is used to defray tuition, the endowment would be depleted within a decade. For this strategy to be effective, much larger endowments are needed, like the Generations Fund in Montreal, which has raised over $80 million dollars, and offers income based tuition subsidies for middle class families.

#3: Other Revenue Streams

Schools are generally large and well-equipped facilities that stand empty for much of each weekend, the holidays, and the summer. Renting out school facilities during these times are another potential, albeit most likely modest, revenue stream.

#4: Vouchers and Tax Credits

Vouchers and tax credits have the potential to completely change the dynamics of Jewish school financing and solve the affordability crisis. A full voucher that will pay for all General Studies salaries and costs, including classroom usage, could reduce tuition by over 60%! Getting a voucher system implemented involves numerous political steps and depends on a particular state’s political climate. The amount of the voucher, who is eligible to be paid by the voucher, and who is entitled to receive the voucher will determine whether vouchers make a slight dent in the affordability crisis or solve it altogether.

The Orthodox Union has done incredible work in bringing millions of government dollars into Jewish day schools. The Great Recession first created a sustainability crisis, where many schools questioned their ability to stay open, and the OU helped save the day by guiding schools to receive the maximum of existing funds and advocating to maintain and increase non-public school educational funds. Their efforts, however, have not made schools affordable for many families, mainly because their successes were in areas of security grants and STEM education, not in securing an Indiana model voucher system in those states with the largest Jewish communities.

#5: Whole Community Dues

A repeated suggestion is the establishment of a communal super organization to collect school revenues from all community members. Instead of schools collecting tuition as a user pay model, where the enrolled family pays tuition, all community members would pay annual dues to support the synagogue and schools. The impracticality of these models should be obvious at two levels. First, we have no ability to enforce payment from individuals and families who do not have school-enrolled children. Communities want to invite new members in, not create financial barriers to entry. Families that have already paid tuition will want to accumulate their wealth for other reasons. Second, the disbursement of communal funds will invariably lead to infighting, as schools cost different amounts and every school has immense fundraising pressure.

More fundamentally, American religious communities are structured to offer choice of school and of place of worship. We pay to the institution that validates and promotes the values that we believe are right for our family and society. Developing a community-based model will limit people’s choice of school and synagogue, and it is precisely the American model of religious disestablishment and competitive marketplaces that has allowed our institutions to grow and thrive. Non-competitive communal institutions, like eruvin, mikva’ot, and bikur holim societies generally remain separate organizations that are not bound to particular schools and synagogues. Umbrella organizations, like Federations, have a broader, but looser community, whereas the community-based model outlined above would require a much tighter relationship between institutions. The most obvious way to share resources would be for synagogues and schools to share a building, as they both need a sanctuary and classrooms. Their main usage days do not conflict, and yet every community has its share of reasons as to why the synagogue and school do not share a property.

Results Matter

Communities and organizations have embarked on many well-meaning initiatives that have generated additional revenues for schools and created significant savings. They have not made tuition affordable, let alone lower. Significant energy has been devoted to solutions of limited or no impact, like obtaining security and technology grants. We have outlined eight strategies above, and none of them should be ignored, even if their potential impact is limited. Every bit helps. Three of them—return to a 1990s parochial education, blended learning, and vouchers—have the potential to make tuition affordable again in the long term, and only the latter two can lower tuition while maintaining educational excellence. Therefore, though we should take a multi-pronged approach, our primary efforts should be geared to advocating for vouchers and to implementing excellent blended learning tools in all subjects.