Proposed Budget 2009-10 and Forecast for 5 Years, 2010-2014 Board of Trustees Meeting January 28, 2009 The Westminster Schools
Dec 13, 2015
Proposed Budget 2009-10and
Forecast for 5 Years, 2010-2014
Board of Trustees Meeting
January 28, 2009
The Westminster Schools
Keep class size low
Planning by wish listAttract great students
Hire the best teachers
Keep morale high
Pay them wellKeep parents happy
Grow endowment
Increase financial aid
Be more affordableIncrease enrollment
Balance the budgetTeach
Chinese
Keep up with technology
Be more green
By Corey McIntyre, Chief Financial OfficerNational Association of Independent Schools
NAIS-Financial Sustainability
Generative thinking- How does a Board leave the legacy of a school “built to last?”
How would the School’s thinking about this question change as a result of the current, sustained economic downturn?
NAIS Financial Sustainability along five continua
Environmental Global Demographic Programmatic Financial
NAIS Ten Financial Planning Assumptions
Market Position and PricingAffordabilityTuition DependencyStaff SalariesProgram and StaffClass SizeFacilities, equipment, and technologyDebtGiving Alternative Revenue streams
NAIS recommends that schools have frank conversations around these 10 continua or position points.
Change in Budget Approach
Acknowledge the current economic environment,
Anticipate slow recovery
Thus budgeting needs a longer term view
Finance Committee goal for 2008-09:- 5- year Budget for 2010-2014
Budget Variables (Drivers)
Tuition Faculty Salaries Cost Reduction
Endowment Spending Rate Enrollment Westminster Fund giving Capital Maintenance & Reserve renamed -PPRRSM
Provision for Plant Replacement, Renewal and Special Maintenance Financial Aid
Proposal 2009-10: 1st of 5 years
Tuition 3.5 % Faculty Salaries 3.0 % Endowment Spending Rate:
-target rate move 4% to 5% -net of debt & land
5.3%-net of campaign & interest expense 6.2%
Financial Aid 5 % PPRRSM Add $100,000
Cost reductions $500,000 - $800,000 Enrollment Add 15 students (15 X $20,000 = $300,000)
Tuition and Faculty Salaries
Tuition: ( 1% = $330 k) Proposed increase 3.5% Prior two years: 6.5 % & 6% Remains with in range of peers
Faculty Salaries: (1% = $200 k) Proposed increase 3.0% Prior two years: 5% and 5.5% At or above cost of living Aligns with Teaching for Tomorrow campaign
Cost ReductionsPres. Clarkson met with faculty and staff in Dec. - explained financial conditions - goal: no employee cuts due to economy no salary freeze or reduced benefits maintain positive morale
Division heads in detailed search for savingsCampus wide reduction efforts in energy savingsAdministrative team leading:
- Sr. Admin team requested personal salary freeze
RevenuesRevenues Percent of AOB
Tuition 67%Westminster Fund & Restricted Gifts 7%
Endowment Support 18%Interest Income 2%Auxiliary Income 6%Total 100%
ExpensesExpense Categories Percent of
AOB
Instruction & student services – 85 % wages & benefits 57%Financial Aid 6%Institutional Support 16%Facilities 14%Auxiliary 7%Total 100%
ExpenseExpenses Dollars (millions)
Wages & BenefitsInstruction & student $25Wages & BenefitsAdministration & operations 10Instruction and financial aid 5General & Administration 4Plant & auxiliary 6Total $50
What are we already doing?
•supporting student initiatives to conserve energy, reduced: 8% to 18% over the past several months•streamlined and automated the application and reenrollment processes through our website•moved student account billing and payment on-line •improving operating efficiency of the energy management systems•renting facilities when appropriate•reduced dependency on and cost of water by digging wells that provide irrigation to all athletic fields•implemented campus wide ‘green’ cleaning, saving both time and money•reduced facilities grounds staff by one through attrition
Faculty WorkloadWorkload data is a moving target with many models for how faculty or administrators divide their time between teaching and non-teaching responsibilities.
Faculty workload in the different divisions is hard to compare, but it is necessary to understand and quantify with regard to thinking about a financially sustainable model and equity issues.
Class Size and Workload Study
Class size categories Number
# Students/ FTE in ES 5.7:1#Students/ FTE in JHS 7.2:1#Students/ FTE in HS 7.3:1
Ratio of Total Number of Std to Total Number of Class Sections (JHS & HS)
13.8
Do’s and Don’t s DOTake this opportunity to foster stewardship of resources
Reassure teachers and parents that your school’s mission will continue to be delivered at the highest level
Budget Variables (Drivers)
Tuition Faculty Salaries Cost Reduction Endowment Spending Rate Westminster Fund giving Capital Maintenance & Reserve renamed: PPRRSM -Provision for Plant Replacement, Renewal and Special Maintenance Enrollment Financial Aid
Endowment Spending
Spending at 4% using ‘Yale’ formula (10+ years)
Incremental 1% change = $600 k ( in 2010 only )
Recommend: temporarily move from 4% to 5%
20% market drop: 5% target = 6% net of land/debtReturn to 4% with economic recovery
Current draw appropriations above spend rate: - Campaign expense $ 500 k to $600 k - Bond interest $1,000,000Higher Ed and Schools stats average 4.6%
Westminster Fund GivingPropose no change in 09-10 budget (flat)
Remain at $2,800,000 in 5 year budget
08-09: $275,000 below YTD goal for cash & pledges
Cash collection behind as solicitation later in ’08
If goal cannot be met in 08-09, other cuts in 08-09
and may need to reduce budget for 09-10
No significant donor change since downturn
A few donors requested delayed payment schedule
Provision for Plant Replacement, Renewal and Special Maintenance (PPRRSM)
Higher education industry norms average 3% of replacement value ($132 million) to maintain facilities
Annual: avg. capital investment $ 2 million capital need at 3% norm $3-3.5 million avg. depreciation $ 4.5 million
Campus sf. grew 1/3 since 2000 (200,000 sf.) without increase in capital maintenance budget
Student tuition does not cover the use of the buildings and equipment.
EnrollmentRevisit strategic cap of 1825
Proposed budget includes: 2010 – attempt to add 15 students to 1830
2011 – attempt to add 15 students to 1845
Enrollment in ‘07, ‘ 08 and ‘09: at our 1815 budget
Anticipate meeting goal based on applications and inquiries received to date
Financial AidProposed budget increase 5% Incremental 1% change $30 kAnticipating much increased need:
- due to economic downturn- changes to standard aid formula- average increase $3,000/ recipient
projected by NAIS5- year budget increase: 4% for 4 more years
Budget ProjectionsCaution: 5 year model tool for forecasting less less precise for future years
1 Year budget approved annually year by year
Many thanks to Roz Brewer and Paulino Barros for assisting in building budget model
Find the optimal class size that is financially sustainable given the School’s model
Planning by wish listAttract great studentsHire the best
teachers
Keep morale high
Pay them well
Don’t fret if parents sometimes complain
Grow endowment
Increase financial aid to meet the School’s socio-economic diversity objectives
Be more affordable
Develop an enrollment plan that meets the School’s strategic objectives
Balancing the budget will be easier
Don’t teach ‘Chinese’ unless it fits into the school’s mission
Keep up with technology, but evaluate its effectiveness
Be more green
By Corey McIntyre, Chief Financial OfficerNational Association of Independent Schools
NAIS Financial Sustainability
Three essential questions from NAIS1. What key areas of the School’s financial structure
need attention?
2. What is the rate of change needed to solve the challenge in each area while remaining in financial equilibrium?
3. If financial equilibrium is not achievable, what other budget areas may require sacrifice in order to meet the desired future, or which revenue sources need to be targeted for growth?