Life-changing events dot history's pages. Wars, hurricanes, tornados, terrorist attacks - the list goes on and on. Just when we thought that we couldn't imagine anything worse, in early 2020 along came the COVID-19 pandemic. It has brought our economy and our lives to a screeching halt. Will life ever be the same?
Now, if you are thinking about private school for your child in the aftermath of the 2020 COVID-19 pandemic, you should exercise even more due diligence than you usually would. After all, sending your child to private school is a major expense for most families.
Note: The information that follows does not constitute financial or legal advice. Always consult your financial advisor and attorney when making any significant expenditure.
How private schools operate
Most private schools have one major revenue stream, namely, tuition fees. If that revenue stream is compromised, the school's ability to survive will be doubtful. Essentially, if a school cannot fill its available seats, its financial future will be bleak. It will be on life support before much longer and may have to cease operations. Sadly, most schools have had to cancel their summer sessions. Summer sessions have traditionally been reliable revenue producers for schools. Some schools have rented out their facilities during the summer to outside organizations such as computer camps or soccer camps. That revenue stream will not be available during the summer of 2020.
The other factor to consider is that the pandemic may require schools to remain closed into the fall. Many schools may begin the 2020-2021 academic year with online instruction, much in the same way they concluded the 2019-2020 academic year teaching online. They will do that because the safety of the entire school community is always the most critical consideration of a private school administration. Until schools have reliable testing available, detecting who has the virus or who has had it will be problematic. That increases the risk of infection to the entire community. On the plus side, most private schools are relatively small communities. That small size can help them control access to school grounds. It also makes simple tests such as taking temperatures easier to do on a daily basis. In any case, as you ponder the situation, be flexible and vigilant.
Established schools often have substantial assets such as real estate, plant, equipment, and endowments. Their ability to draw on these assets varies from school to school. However, assets can provide a financial cushion in the short-term. The downside is that most established schools have significant operating costs. And endowments are usually restricted by the donors, meaning that there are limits to how much a board of trustees can draw down endowment principal.
Your next step is to investigate the school or schools in which you are interested. Start by Googling the school's name and location. Then filter the results by clicking on "news." Bad news will always surface before good news does. If the school is a not-for-profit organization, review the school's Form 990. That tax return is public information and will disclose the income and expenses as well as any assets which the school has. If you are not comfortable reading the Form 990, ask your accountant to assist. What you want to determine is whether the school has the financial strength to weather this severe economic downturn. While the Form 990 is a snapshot of the school's condition a year ago, it will give you a reliable indication of revenue and expenses, as well as assets.
This video offers an overview of the Form 990.
When you discover that a school has been drawing down its endowments and/or is running a deficit, find out why this is happening. Is there a fix? What is the fix? If you decide to send your child to a school that is facing financial storms, you may find yourself looking for another school earlier than you had planned. It makes sense to avoid financial risk.
Another useful source of information
Your professional educational consultant is another source of information about private K-12 schools. He knows his schools. While he will be discreet and professional when you ask about the financial condition or leadership of a school that is facing financial challenges, she will guide you to look at other schools that will better suit your needs.
Other reasons schools are in trouble
There are many reasons why schools get into financial trouble. Usually, the root of the problem is ineffective marketing and changing demographics. Private schools serve a specific need through their curricula and how they teach it. If the potential clients don't know about the school and what it offers, they will look at other schools. Implicit in marketing a school is the word on the street. If parents say good things about the school, their implicit recommendation will fill the admissions office inboxes with inquiries. When schools were having trouble filling places or having financial difficulties due to mismanagement or unexpected expenses, then a disaster like the COVID-19 pandemic is their death-knell. Be alert. Be vigilant.
This video from John Hopkins University discusses the economic impact of the COVID-19 pandemic.
Professionally designed websites and a strong social media presence are prerequisites of any serious private school marketing program. Virtual tours and clear descriptions of what the school offers will help cinch the deal. Incredibly, there are still schools that lack those marketing essentials. In tough times like these, every school must make the best impression possible in order to attract families.
Static leadership is another reason that private schools fade away. The head of school who stays on past her expiration date can be another reason why parents look elsewhere to educate their children.
Why should I consider sending my child to a private school in these troubled times?
Assuming that the financial situation of the school you are looking at is sound, you should be in good shape. Why? Employee layoffs and furloughs have severely weakened the revenue streams upon which state and local governments can count. As a result, public schools will soon be facing some very unpalatable, drastic budget choices as they seek to have their budgets for the 2020-2021 year approved by the voters during May. Once schools can reopen, reduced staffing will require larger classes. Non-essential activities and programs will be eliminated. While private schools will adjust their programs to fit the situation, those changes will not likely impact their core teaching mission.
Support your new school
After you settle on a school, and your child has been accepted, please do everything you can to help and support your child's school. Ask the head of school what you can do. Then be a good team player and do what they ask you to do.
Questions? Contact us on Facebook. @privateschoolreview