Tuesday, August 22, 2006

Guest Post from a Former Executive Director

Like I stated in my last post, I'm not so sure that I can answer or even articulate an answer to my own question quite yet.

So, in the meantime, I want to present you with a response to the "The Minimum Tuition Debate" thread from a Former Executive Director. He has generously allowed me to post his response as it's own post. While we do not agree that minimum tuitions make good business sense, I find the post to contain so many interesting elements regarding tuitions, assistance, creativity, and more, that I thought I would post the response in its entirety. I like the professionalism to his approach on tuition and the trust that he believes should be extended to parents initially.

As his response is quite lengthy, I have numbered each paragraph for commenting ease. I will note that (paragraph 14), tht I especially like the idea of allowing parents to pay tuition over 12 months, instead of 10 and have mentioned that before in a past post. I believe that this should be an option, at least for those without emergency reserves. Cash flow is essentially to staying out of debt, or getting out of debt. Those who send their children to camps have told me that it really doesn't make a difference, but not all do send their children to camp or other summer programs, and I firmly believe that this little bit of flexibility is vital for many. And, while I cannot say with certainty, I do not believe that offering this flexibility would hurt the schools, as the major budget line item is staff, and I believe most staff choose to be paid over 12 months. Yet (at least in my neighborhood) paying tuition over 12 months versus 10 is not an option. And, some schools even charge more to those that extend their payments over 10 months (but, I will leave that for a future post).

Thank you to this Former Executive Director for his participation. The post follows the line:
(1) I’d like to side-step the current ‘flame-war’ and get back to basics, if possible. As a former Executive Director of a Yeshiva High School, I feel the need to highlight a few points about tuition assistance and Day School finances from the perspective of the school.

(2) As with any business, pricing yourself out of our customer base is a bad idea. I’m not talking about the common practice of setting tuitions insanely high as possible, offering tuition assistance to a larger segment of the population, and enjoying the income from the highest income families who pay in full. Regardless of the moral and ethical considerations of this practice, you have to admit that there is a certain business logic to it. Setting minimum tuitions prices has no business logic, even less if exceptions are the rule. If the minimum tuition is non-negotiable, you disenfranchise a whole segment of the community from Jewish Education. And if it IS negotiable, than what’s the point of setting it?

(3) Another common practice is ‘topping off the class’. Say a school intends to have a freshman (or kindergarten – whatever) class of 25 students. Applications come in from November through June, and 22 slots are filled, with mostly paying customers. Say 80% of what the full tuition would have been. Now in July, three more applications come in, or were at the bottom of the stack on a waiting list. The administrator thinks, “Well, I already have the teacher ready to teach 25, and I have to pay her the same regardless. The heating, electricity of the school, etc. are fixed expenses regardless. Whatever these families pay, its gravy – money in the bank.” Now, there are pros and cons to this philosophy, but again, there is a business logic to it. If these parents can pay $2,000 each, but not the $3,000 each minimum tuition, do you throw away $6,000 on principle? And if you don’t, and you would accept the kids to fill the class, then what IS a minimum tuition?

(4) I think it is a critical mistake to link the financial problems of many of our educational institutions with a lack of tuition. Sure – if there was an unlimited source of money, most schools could provide a quality educational product. But schools (on earth, without unlimited money) need to learn to live within their means, even as they seek to educate the community about how much a school really costs.

(5) All too often, serious budgeting, reporting, and other fiscal management and analysis do not drive decision making. Sometimes these processes are neglected entirely, and other times there are enough steps between the budget process and whoever actually authorizes salaries and expenditures as to make the budget process almost meaningless. How many schools publish annual reports? Post publicly the salaries of their top administrators? Tax the tuition breaks given to employees (or know the legal reasons why they don’t, if any)? How many board members can ask for and receive within a week, the amount the school has spent on office supplies in the past year? Is there even someone to ask?

(6) Tuition is the single greatest 'fundraiser' that schools have, but I have seen schools stubbornly spend much more time, energy and money on things more typically considered fundraising – lavish dinners and concerts, expensive and fancy Directors of Development (who rarely have, or are interested in obtaining, any actual training in fundraising), etc. – than on recruitment, retention, precision tuition assistance and collections. The entire net of ‘regular’ fundraising might be only 5-10% of a school's annual budget, while tuition usually accounts for 80-90%. Some might argue that the 80-90% is the ‘easy’ part, and the money and time spent on the 5-10% is well spent. I would submit that 5% (of the total budget) is quite low in terms of many school’s uncollected, bad-debt tuition, let alone the ‘fundraising’ done by cutting costs, increasing enrollment, and more closely scrutinizing and enforcing tuition assistance arrangements.

(7) (The way that dinner obligations have become a part of tuition fees, and, depending on the PR/fundraising need, are counted as “dinner revenue” sometimes, or “tuition revenue” other times is another issue. Did the dinner *really* make $100,000? Or did 200 families paying dubiously tax-deductible $500 Dinner Obligations make the “profit” and actual contributions covered only the cost of the lavish $40,000 affair?)

(8) In my opinion, a proper tuition assistance process provides anonymity for its applicants, investigates claims of need carefully, works creatively with parents on payment methods (more on this later), and provides as much information as humanly possible to a small, scrupulous, knowledgeable tuition assistance committee. The separation or connectedness of the educational and business sides of a school is a whole other topic, but suffice it to say that I don’t think it is healthy for educational administrators, such as roshei yeshiva, principals and the like, to get involved in this process, other than being a character reference as needed, and maybe handing out a form at an interview or open house.

(9) A business professional in the school (Executive Director, or what have you) should be the link between the family and the family’s financial history with the school, and the tuition assistance committee. Families should not be subjected to the demeaning ritual of having to appear before the committee to plead their case, and committee members need not be influenced one way or the other by the emotions generated on both sides but such appearances. The information collected and organized by the business professional and provided to the committee to make their decisions should minimally include: Occupations and titles of working parents, all current tax returns, debt information and documentation, what the family paid in tuition the previous year for all children at all institutions, how much tuition assistance they received in the past year, what percentage of the full tuition was paid, amount past-due (if any), and any additional important issues that the committee should consider (most often: medical, employment, and divorce issues).

(10) The tuition assistance committee should be made up of around five volunteers from within the school’s community. Too many more and the meetings can take forever or people become disengaged, to many fewer and there is a higher potential for group-think. A single person making the decisions is a bad idea for obvious reasons. The committee need not all be accountants or have backgrounds in business or finance, but having these skill sets on the committee is important. The critical requirements are discretion, dedication to the school, patience, attention to detail, evenhandedness, and availability for the meetings.

(11) In my case, I attended the meetings as a non-voting facilitator. Committee members often asked me important questions about how a given family had dealt with the school in the past, and what their intentions were for the future. Having spoken often with the families throughout the year and during the application process, I was often able to shed light on a situation from personal experience and knowledge. After the committee ruled, I sent contracts to the parents, which they could appeal (back to the committee) as long as they were willing to write a letter documenting specific things they felt the committee might not have taken into consideration at all, or enough, the first time. Appeals had limited success, though occasionally the committee had truly missed something the first time through. Often, the committee would offer a nominal compromise to show good faith. I was then responsible for getting the contracts signed and overseeing the payment plans.

(12) Meetings were long and draining, and would have seemed to many people the worst kind of torture. But to those of us who cared deeply about the financial robustness of the school, as well as being intensely aware of our tremendous opportunity for chesed, the importance of the decisions overcame all obstacles, and we were often still debating cases long into the night after the scheduled end of the meetings.

(13) The general attitude of the committee was to challenge parents to pay a larger percentage than they had in the past. Certainly, if a family’s financial prospects had taken a turn for the better, but even if not – if total tuition had increased by a few hundred dollars, perhaps they could pay that increase in addition to what they paid last year, for example.

(14) Innovation was the rule, rather than the exception. How about 12 monthly payments instead of 10, to lower the monthly payment? How about barter? Maybe a parent is a builder, a plumber, an electrician, a graphic designer, a photographer, a printer, an architect, a builder, etc. ? Certainly, they need to do quality work, and the amount of work needs to correlate with the amount of their benefit. But we do this with teachers, offering reduced tuition for their children, why not with other professions?

(15) How about interest-free ‘loans’? Perhaps a parent is out of work temporarily, but had a good job before, and is hopeful that they will find a similar job soon – why not give them a reduced amount due monthly through the year, but a $5,000 (for example) interest-free ‘loan’ that comes due or will be renegotiated upon the end of the year, or a defined time period after the a new job begins? Some may argue about present-value, inflation and the like. Our school board argued (wisely, I think, having seen it in practice) that we would gain far far more in the combination of goodwill, fewer man-hours chasing down past-due monies, and the actual paid loans than we would lose.

(16) As far as the school is concerned, it is in its best interest to be as flexible and creative as possible – as long as families are not taking advantage (more on this below). Anything it can do to increase its tuition revenue over a rigid system that forces families’ with financial situations in every shape under the sun into the same uniform pigeon holes is money the school was leaving on the table.

(17) The parents, by and large, appreciated what we were doing. They understood the financial strain the school was under, and how their inability to pay on time and in full might impact the education for their child, and for all the children. They understood the need to have a loan or barter system in place to make up for the shortfall. The goodwill generated by working with families going through hard times is hard to quantify, but it is an important aspect as well. There are certainly opportunities to build relationships with families, by having honest discussions and trying to work through the issues with them, relationships that can endure long after the hard times are in the past, to when they, or their family may be in a position to make significant contributions to the school.

(18) My attitude toward parents was to trust them until they gave me a reason not to. If a person has a cash or real estate business with sporadic cash flow, and they say they need tuition assistance unless they are allowed to come in with cash twice a year, why not give it a try? I might need the first payment – or a significant partial payment – to be the first week in September, so we aren’t waiting 6 months for a first payment, but why not get more overall for the school, rather than mandating 10 monthly payments and getting far less?

(19) If a parent betrayed my trust, however, I had no problem going after them for the money that they owed. If they agreed that they owed the money, but needed more time in which to pay it, the policy of the school was to work with them. But to be complicit in their denial that they owed anything more? It wasn’t my money to forgive, or be lax about, it was mammon hekdeish – it belonged to the school to facilitate the education of the next generation of Jewry. Who am I not to try to get it in any legal way possible?

(20) The best and most effective collections method begins months before the problem presents itself, by setting up a mutually agreeable set of obligations and schedule of payments. Most schools, though, do have situations where tuitions are past-due, and some schools have an inordinate amount. It is the responsibility of the school to accurately monitor their flow of tuition revenue month to month. If a family misses a payment, or a check bounces, the school needs to follow up with them right away in a courteous and respectful way (a business professional, not the rosh yeshiva). Waiting can only make the problem worse. Perhaps it was an oversight, perhaps the parents are trying to get away with something, but perhaps a more serious event has occurred – the loss of a job for example. In these cases, I tended to try to do some much-needed chesed, while protecting the interests (and PR) of the school, by implementing a reduced payment plan for the remained of the year, with a loan for the balance. In other words, a plan wherein the entire tuition allocated to the family at the beginning of the year would be paid by the end of the year, but would allow for the unfortunate event that had befallen the family with a reduced monthly payment in the interim. All past-due balances or loans needed to be resolved or renegotiated before a new application for assistance would even be considered for the following year.

(21) In situations in which a disagreement ensues, a signed contract that documents a family’s tuition obligation is critical. Without it, how is the argument not just the parents’ word against the school’s word? With it, the obligated amount in abundantly clear, and rarely needs to be arbitrated (or prosecuted) in a public forum, which is usually undesirable for both the school and the family.

(22) Parents who, despite a signed contract to the contrary, and without a legitimate life change to account for their inability to pay, refuse to pay their past-due balance, forfeit the privilege of having their child attend the school and receive grades and transcripts. I worked very hard not to let this happen, but at the end of the day, we cannot provide services without payment. Parents get livid about this sort of thing, but it’s really their own fault. We are not punishing their children, they are. If one does not pay their electric bill, eventually, the power is turned off. And you can bet that the electric company does not call and discuss and try to work creatively with parents as much as we did.

(23) Coming back to the issue of minimum tuition, I don’t see the point. If it is a one-size-fits-all approach to tuition assistance, it’s a bad idea. Exceptions are made (or should be, where warranted) on the one side, and people will take advantage of it to pay less than they should on the other. (After much hand-wringing: “I think I can pay the minimum,” and grateful administrators or committee members agree and hand over the paperwork so they won’t need to actually spend time and energy on the case.) If it is an attempt to save the tuition assistance committee time and effort, this too is a mistake, for similar reasons. Injustices and money left on the table will be the results.

(24) If the purpose is to educate families, to “push people to make different decisions, perhaps decisions that will allow for them to pay minimal tuitions,” as sephardilady wrote above, I would argue that this is not the function of the tuition process. If the school wants to offer seminars, or reach out to community rabbanim, or anything else to promote awareness of the cost of education, that’s fine. Ultimately, though, the school has control over whether a child is enrolled in the institution, or not. That’s it, really, but it is a powerful tool at the same time. If a school examines all of the information, and decides on a tuition amount for a family for the coming year, after all the negotiating is done, the parents can take it or leave it. I guess if you squint a little, I’m in favor of a customized, personal minimum tuition for each family. If the parents do take it, however, just as the parents are obligated to that amount by signing the contract, so too the school cannot expect to receive more. If one family owns a house, saves their money, and pays $X, while another family rents, spends beyond their means, and pays the same $X, what difference does it make to the school financially? I have heard of tuition assistance contracts that specifically bar the family from taking vacations, buying new cars and the like. If a family who signed a tuition contract and is paying on time chooses to take an expensive vacation or buy a boat, what right does the school have to legislate the family’s personal financial decisions?

(25) Now – if the school wants to reevaluate the tuition assistance (or lack thereof) offered for the following year, that the school can do. If there is actual fraud in the tuition assistance application, the school can take legal action. If the parents take a vacation – or do no such thing, it doesn’t matter – and are defaulting on their tuition obligation, the school can work to collect it, and hold up the education of their child in the process. But that’s really it. Does it drive administrators and board members absolutely out of their minds to see a family on tuition assistance take the whole family to Israel for a month, or to see the High School junior drive up in a nice car (car + insurance, mind you)? Definitely. But ultimately, it is an unproductive and impotent rage. The family has the bechira chofshis to spend their money however they please, even if it doesn’t make sense to us, or to the values of the community, or even to halacha. If the school has recourse, they can take it. If they don’t, then the only thing they can do is to look at their tuition assistance process and make improvements – generally speaking, more information, better people, more time and energy – for next year.

(26) Larger, successful, center/left institutions may have better systems in place, by and large, than smaller, less successful, right of center institutions, in general, and without offense meant. It was this inverse correlation between the ‘frumkeit’ of an institution and its professionalism and fiscal responsibility that got me into the industry to begin with, and ultimately, dumped me back out into the business world.


Ezzie said...

I'm a bit late to this whole discussion (this is what happens when you go away), but this poster makes a number of excellent points. Certain points are inarguable: Minimum tuitions are meaningless if they're negotiable.

My HS has a minimum, and without it they probably wouldn't have been able to run. They were non-negotiable on this minimum amount, which was basically the dorm fees they charged while charging $0 for the tuition portion. The message one can take from such an approach: We'll educate anyone as long as we can, but we can't be a charity and give him a free home as well. I think that's a fair expectation from a school (especially one in the debt mine was in... and they actually manage their money well).

As a quick thought... minimum tuitions make a lot of sense. There has to be some kind of cutoff: While we'd love to educate everyone, if we give it away for free we'll end up education nobody. We need to charge this minimum amount to ensure that we can continue to educate as many as possible for as long as possible. Just try and keep the minimum tuitions reasonable.

Anonymous said...

With regard to point 25. I have been a parent careful husbanding resources to pay full tuition, while watching families who will cheerfully tell me how much of a dicount they are getting afford luxuries I can't. I understand that the school can only do so much, and is in the business of educating kids, not turning them away. Although every person I know involved in these things from many schools tell me that there are parents who threaten to send there kids to public school if they have to pay too much, or spend at a level inconsistent with the income disclosed to the committee.

But it really galls me when the teachers and administrators, whose salaries I am scrimping to pay, tease my kids about arriving to school in an old, beat-up car.

Orthonomics said...

I will really throw a fit it anyone teases my children about our ancient cars (may they live to 120 years). Tuition or no tuition, I drive a car until it makes no sense to do so anymore.

Unfortunately, you touch on another issue which is the complete lack of middot that some of our children have. I have so many stories that if I had a few bucks for each story to invest, tuition might not be a concern.

Anonymous said...


A school has the responsibility to investigate any potential fraud in the tuition assistance process.

Often, a tip from a member of the board or other member of the community alerts the school to the possibility. (I am not qualified to speak to the halachic ramefications of this from a lashon hara perspective.)

That said, if a school is not careful, it is easy to get pulled into family feuds which have nothing whatsoever to do with the school, and may have been ongoing for generations.

Schools need to be just in their allocations, and vigilant for the few parents who do try to get away with something.

The threat that parents will put the child in public school unless they get to pay a certain amount and not a penny more never really bothered me.

All I can do is to make sure ahead of time that all the tuition assistance allocations are as precise and just as possible, and to adequately explain the school's rationale to the parents patiently, with dignity and respect.

If they had a question as to the value of Jewish education in general, I was not qualified to deal with it, and would refer them to the Principal, or to a local Rabbi. Similarly, the Principal or local Rabbi would not be qualified to discuss their tuition situation with them (and I had no problem telling them so, if they forgot).

And if despite all the time and patience and respect, the parents threaten to put the child in public school...?

I have never seen this threatened by calm and rational parents, but I suppose it is possible, based on some of the reasoned responses on this very Blog.

Certainly, if the parents are interested in providing their children with a Jewish education with tutors, etc. and they have come to the calm and rational decision that Day School education is not worth the price we have offered them, then what can I say, except kol tuv, and best of luck!

And if, as has been the case each time I've heard this threat, the parents are, shall we say, more excitable types?

The fact that in my personal view, a Jewish Day school education is vital to the knowledge, middos and aculturation of our children, does not make me into some deputized DCFS officer, that I should be SO horrified and handcuffed by the parents' threat, that I am compelled to do everything and anything possible to keep the child in the school, acquiescing to all the parents' demands.

If I've done my part up front, and spent the time and effort to really make sure that the allocation is fair and reasonable, and explained why it is so to the parents based on their income and situation, then in the aftermath I do not have to be held hostage by crazy people.

Schools need to network and reach out to the friends, family and professionals in the community who can possibly make a difference if parents seem to have truly lost their minds. Ultimately though, the parents get to decide where their children go to school. Period.

To the degree that school administrations convince themselves that it means life for a child to attend their school, and death for a child to attend public school, they empower parents to use this threat against them.

As far as respect goes, I had much more respect for the poor family who paid their small obligation on time and in full every month with no hassles or complaints, than I did for the wealthy, "important" family, who forced us to go after them each month and pull teeth to finally get them to cough up their full tuition.

Orthonomics said...

To the degree that school administrations convince themselves that it means life for a child to attend their school, and death for a child to attend public school, they empower parents to use this threat against them.

I wonder if the frum schooling system, especially the more right wing element of it, has already done just that already.

I know someone who was running a service business and offered certain customers who complained about their inability to pay, a lower rate. One by one, nearly every customer asked for a lower rate and she ended up making almost nothing. For other reasons, she closed up shop, but it was inevitable that the service business would become so un-lucrative that she would have closed up shop anyways.

While Jewish schooling need not be lucrative in the same sense as another business, the bills have to be paid and the viability must be kept in tact. Allowing parents to threaten a school, after a fair and impartial scholarship process, threatens the viability of the school as others jump on the same boat.

Like FmrExecDir, I believe it is imperative to be creative and flexible. But, it is just irresponsible to allow some parents to rule by "terror," which is what this scenario esentially is.