School Boards Facing Financial Challenges
As They Prepare Budgets
 

The four regional boards that govern the Diocesan Catholic school systems are confronting serious challenges as they prepare the operating budgets for the next school year.

Under the bylaws for the new governance structure that was implemented for the 2007-08 school year, the boards are responsible for developing balanced budgets and setting tuition rates for each of the systems: Holy Cross, Holy Redeemer, Notre Dame and St. John Neumann.

The system boards are comprised of clergy, laypersons and the Episcopal Vicar for the particular pastoral region. These are boards of limited jurisdiction, with delegated authority and responsibility.

They are assisted by Diocesan officials, including members of the Schools and Finance offices.

“The boards are working diligently on the budgets. As you can imagine, this is not an easy task. School financing presents a challenge, now more than ever,” said Joseph Casciano, Diocesan Secretary for Catholic Education and Superintendent of Schools.

The boards are using the current budgets as a baseline, and are reviewing the revenues and expenses, according to James Quinn, Diocesan Secretary for Financial Services.

“As it stands now, we are facing a significant operating deficit for the current school year,” he said.

The Diocese, he noted, has committed major resources to fund the schools. These include: 

• $1,000,000 from the Diocesan Annual Appeal (23 cents of every dollar donated to the Appeal)
• $15,163,184 from the parishes in the form of subsidies (25 cents of every dollar in operating income for most parishes, and 10 cents for those parishes with smaller incomes)
• $972,148 in the form of tuition discounts
• $567,930 in tuition assistance
• $127,000 through the Bishop McCormick Scholarships

In addition, parents are paying $24,767,761 in tuition and contributing another $3,805,950 through fundraising activities. However, on average tuition covers only about half of the actual per-pupil educational costs. 

Average Tuition    Average Cost Per Student

Elementary Schools                     $2,321                             $4,576

High Schools                                 $4,415                             $8,575

The projected school income for the four systems for the current year is $46,128,133. Total operating expenses are projected to be $48,545,998. Salaries and benefits for administrators, teachers and other school personnel make up 72 percent of these expenses.

The projected deficit is $2,417,865.

Mr. Quinn said some of the deficit can be attributed to the circumstances of the school restructuring.

The final plan was announced early in 2007. The system boards were not in place yet, so the Diocese had to establish budgets and tuition rates to enable families to make decisions about enrolling for the next year.

A new system of parish subsidies was also developed whereby all parishes share in the support of Catholic education, whether or not they had previously operated a school or had parishioners who attended a school. Every parish now pays a subsidy for Catholic schools, including those parishes with no school in their geographic area.

These parish assessments were set at 25 percent of gross operating income for parishes with income over $150,000 per year, and 10 percent for parishes with income of up to $150,000 per year.

After these decisions were made, however, a review of school financial records revealed additional operating costs at some institutions. This review was a follow-up to the information gathered during the Meitler Consultants study, which involved data provided by the schools to the consultants.

Mr. Quinn said some schools were operating on a cash basis accounting system, which means they could take revenue for the upcoming school year (such as registration fees and early tuition payments) and instead use it to pay bills from former years.

For the current school year, all revenues and expenses are accounted for using the accrual method, which provides a more accurate means of accounting in determining the financial condition of the schools. Under the accrual method, revenues are reported as they are earned and expenses reported as incurred. This allows management to establish budgets based on sound financial reports.

Although some savings have been realized because fewer buildings are open this year, the staffing has remained relatively stable because programs were added. Therefore, personnel costs were not reduced significantly. And investments were made in technology and facility upgrades to make the schools more competitive.

“We tried to be very sensitive to what parents can afford to pay, and how much the parishes can realistically contribute,” Mr. Quinn said. “It’s difficult to balance those considerations with the true costs of operating the schools. As the year has progressed, we see that revenues are not sufficient to cover expenses.”

Mr. Quinn said it is essential that all tuition is collected and all fundraising activities are completed before this year is concluded.

Registration continues for the 2008-09 school year, so tuition revenue can not yet be projected.

Meanwhile, the four regional system boards are exploring options for increasing revenue, decreasing expenses or both.

“There is no doubt about it, they have some difficult decisions to make,” Mr. Quinn said.

The regional boards will submit budgets to the Corporation Board for review and approval. The members of the Corporation Board are the Bishop, the Vicar for Administration, Chancellor, Episcopal Vicar for the Pastoral Region (in which a given regional school system is located), the Diocesan Secretary for Financial Services, and the Diocesan Secretary for Catholic Education/Superintendent of Schools.

     SDACT’s continued opposition to the program is pointless and will not change the decision.