Wow! What a week in terms of school news. Two Modern Orthodox Schools on two different coasts are making some major restructuring moves based primarily, if not solely, on financial issues.
First up is Yeshivat Rambam in Baltimore which sent a letter to its parent body to outline the issues and planned changes:
1. In the past 10 years, the school has accrued significant debt. In each of those years, the school has spent more money than it has taken in. Financing that debt has negatively impacted the school, stripping resources from the current mission.
2. Payroll (80% of budget), will be cut 14% or $550,000 through reductions and restructuring. This is "in line with industry best practices." I'm not quite sure what that means, but my best guess is that most private schools do not expend 80% on staffing. I'd be very interested to know what best practice is because the 80% figure continues to appear in nearly every article on Yeshiva tuition. Note that earlier in the letter, it was noted that staff and administration believe they do not have the tools and resources to attract and maintain staff, as well as effectively do their jobs and procure supplies.
3. Occupancy cost per student at the current campus is double industry norm. As such, the Yeshiva plans to sale its current main campus, liquidating equity dollars and freeing up resources. It would be very interesting to know what industry norm is for expenses so Yeshivot/Day Schools could compare their costs to median costs.
4. Baltimore's Associated will be lending funds to the Yeshiva until the campus is sold.
5. Tuition at Yeshivat Rambam will be lowered by 5% next year to bring the price within range of the rest of the Baltimore day school market.
I think there is a lot to learn from this letter: debt will eventually catch up, you can't always run in the red, dramatic change is sometimes necessary, and industry norm provides a "reality check."
Moving to the West Coast we visit the Shalhevet Day School. The school was founded in 1991. It is intersting to note that the Rambam school featured above is also 19 years old. The school has annouced that as of the end of the current school year, the school will be closing its early-education, elementary, and middle school divisions. [Taken from the Q&A] The school, in conjunction with the PEJE, hired an outside consultant Measuring Success LLC, a firm that reportable specializes in Jewish Schools, a curious statement at best, to conduct a review and make recommendations.
The school learned that the lower divisions of the school were costing the school dearly as they were operating at a deficit. The lower divisions are much newer than the original high school. The middle school is 10 years old, the elementary school 4 years old, and the preschool one year old. There are 121 students in the lower divisions and all grades will be closed with the exception of maintaining the 8th grade for one additional year. The Board of Directors has decided to concentrate its efforts on the high school which is "already operating within a manageable deficit range that is on par with other schools." (Oy! A normal deficit range.) Donors have committed to funding the high school. Tuition will be increased for the coming school year. It had been frozen for the current school year.
The Jewish Journal article gives some more interesting insight including these money quotes [highlights mine]:
- "[BOD member] said that the large number of existing Jewish elementary and middle schools in Los Angeles created a situation where there was not enough of a customer base for Shalhevet’s lower schools. There was no need to fill, she said, and the board felt that the community had spoken through the low enrollment numbers."
"[Another BOD member] said that there have been signs of financial problems in the past, but that the nature of Jewish schools led to attention being focused on daily operations and the students, and no one knew exactly how deep the problems ran. Every school runs on a deficit, he said, and every school requires donations to close that gap, so the lack of funds didn’t set off alarms at Shalhevet until now."
"[BOD member quote above] attributes the lower schools’ final demise to a devastating drop in enrollment in the middle school – he said 40 children dropped out last year – and the fact that Shalhevet overextended itself in terms of awarding financial aid during last year’s recession."
"Approximately 120 students and 35 staff and faculty members will be displaced as a result of the closings." [Orthonomics note: that 1 staff member for every 3.4 students!. The ratio sent me searching for a similar ratio and I found it in my report regarding the fiscal problems of Bais Yaakov of Boro Park].
- "Shalhevet’s head of school, Rabbi [EJW], said that there are enough seats in local schools to accommodate all the displaced children . . . ." Later, "A system of support has also been put in place to help Judaic and general studies teachers find employment."