Financial Health in Christian Schools?

One of the greatest challenges facing Christian schools today is ensuring income is at least equal to the operational costs of implementing the mission. It’s a simple equation:

Income – Expenses = Positive Number

Unfortunately, this challenge is not that rare in our world today. But unlike our nation, schools don’t have the luxury of incurring large deficits year after year. And while there are lots of tools and guidance to help schools deepen the Christian and educational aspects of their missions, there is little available to school leaders to help run the business of the school.

There are actually very few schools that can balance their budget with tuition income alone—fewer than five percent of private schools in the United States manage this feat. And most of the schools that do manage to balance the budget with only tuition income often do so at the expense of faculty salaries and/or vital maintenance to school facilities.

One solution frequently suggested by outside business leaders is to simply raise tuition to a level that will cover all costs. “Isn’t that what a business would do if costs were exceeding revenue?” Unfortunately, raising tuition usually results in the law of diminishing returns—as tuition rises, the cost of tuition becomes untenable for some families and enrollment drops off, resulting in a zero-sum gain. There is a threshold for tuition unique to every community that limits schools’ discretion with this revenue stream.

The only viable answer for most schools to achieve a healthy, thriving Christian school mission is to add a secondary source of income. This secondary source can be a variety of things. Some schools do things like leasing unused land to local businesses or operating resale shops. Many schools have begun building endowments that will generate interest income in perpetuity to support the school—a wise long-term strategy, but it requires decades to build.

The most common means for schools to address the additional finances needed for healthy operations is annual fundraising. And this is a reasonable and sustainable means to make the financial model work. So, let’s start with answering the question, “why should every school raise annual funds to support operations?” Aside from the obvious—because most of them need it—every school should raise annual funds because “THEY CAN!”

Christian schools are perceived to be a ministry by most families and churches within the school’s community. Nearly all Christian schools attempt to be accessible to families of all financial means by providing scholarships and tuition assistance. There is always an opportunity to make that simple, yet compelling case to Christian families who have discretionary means to give. And all schools should do this unapologetically—asking people to invest in the lives of young people who will grow into Christian leaders is a worthy investment under any circumstances.

Christian school leaders have some natural reluctance to jump into fundraising. To be blatantly honest, few people in this world long to ask others for money. But reluctance to fundraise also stems from the notion that fundraising income is not sustainable or dependable. There are some who label fundraising revenue as ‘soft’ income, as opposed to tuition revenue, which is labeled as ‘hard’ income. So, let me take a moment to clear up this colossal misconception.

Fundraising revenue is the most dependable and sustainable revenue stream that exists! How can I say this? Because facts and history support that statement. Philanthropy in the United States has been tracked accurately and consistently for the past 50-plus years. Since the early 70s, giving has increased year over year, outpacing inflation with only a few exceptions. Those exceptions were the market crash in the late 80s, the housing bubble crisis in ’07-’08, and the COVID-19 pandemic in ’20. And in all three exceptions, philanthropy declined only slightly (less than 4%). Moreover, these slight dips in philanthropy were largely the result of corporate and foundation giving. In those crisis years, giving from individuals did not decline. History has shown us time and again that, in tough economic times, people continue to support the missions that are important to them. The only organizations that experience a decline in fundraising revenue are those who stop asking.

In those same tough economic times, the so-called ‘hard’ revenue for schools is what proved to be ‘soft’ and experienced decline. Some families withdrew from private education due to job and income loss.

My point here is that fundraising revenue is ‘hard,’ sustainable income and should also be part of a healthy school’s operating budget. This then begs the next question: what is the best way to do it?

The quick answer is with honesty and sincerity. This blog doesn’t allow the space to delve deep into a longer answer, but the key is to adopt the following premise:

• To fully fund our school’s mission and ensure we are fairly compensating our faculty and staff, we require a secondary source of income.
• One secondary source of income available to all Christian schools is annual fundraising.
• If annual fundraising could cover 5-15% of our school’s budget, how much stronger could our mission be?
• That 5-15% of our budget represents our school’s “Margin of Excellence.” It is the difference between a bare-bones Christian education and a transformational educational experience for our students.
• That is the simple story that all Christian schools can tell. Nothing for which to be apologetic; rather, something of which to be proud.