How Annual Tuition is Determined February 2016
Tuition is set each year after significant discussion and evaluation of a variety of metrics by Collegiate School’s Board of Trustees and administration. When setting tuition, we are mindful that a commitment to an independent school education comes with sacrifice and that our families find it increasingly difficult to plan when tuition increases are unpredictable. We take the tuition-setting responsibility seriously, and decisions around tuition come after several months of analyses and deliberation. Our tuition setting efforts are guided by three commitments: to examine carefully school operations, including tuition and expenses, while remaining steadfast in supporting our strategic priorities; to provide our families with more predictability by utilizing an overall tuition pricing approach more closely linked
Phyllis Palmiero, Vice President for Finance & Administration
to inflation; and to minimize the use of new tuition dollars to fund new initiatives by working to reduce current program and other expenses, and to use these savings, together with funds from other sources, to fund new strategic initiatives. Here’s how the tuition process works.
TUITION SETTING PROCESS Each fall, the School’s administration and Board of TrustCOMPENSATION BENCHMARKS
ees work together to identify the School’s needs for the next
MARKET POSITION
academic year. These discussions are guided by our strategic plan. As we consider school needs and their potential impact on tuition, we study carefully several factors, including infla-
STRATEGIC GOALS AND INITIATIVES
TUITION
NON-TUITION RESOURCES
tion, compensation and tuition levels at local and national peer schools. After considering these factors and before setting a tuition increase, we analyze diligently our internal op-
INFLATION
OPPORTUNITIES FOR COST REDUCTION & EFFICIENCY
erations looking for opportunities to reduce current program and other expenses and re-direct those savings. Finally, we thoughtfully consider other funding sources, such as donor funds, that could be used to minimize the impact on tuition. After all of these steps have been taken, tuition is set.
Factors Influencing Decision-Making Around Tuition INFLATION
dustries. In projecting the CPI-U for the period
although recently it has run, on average, about
One factor in the tuition setting process is
covering the 2016-17 school year, we have
.36 percent more than the CPI-U.
inflation. There is no one ideal measure of
used several recognized sources. ISM’s 2 Percent Factor.2 Independent School
inflation that captures well the independent school sector. Therefore, the School uses three
Higher Education Price Index (HEPI).1 The
Management (ISM), a management-support
inflationary indices:
second inflation index used is called the Higher
firm for private-independent schools, believes
Education Price Index or HEPI. Unlike the
tuitions must rise faster than the CPI-U because
The Consumer Price Index – Urban. The most
CPI-U, the HEPI measures a fixed selection of
of what is called, “Baumol’s cost disease.” 3
common inflation index is the Consumer Price
goods and services that typically contribute to
William Baumol, a renowned economist at New
Index - Urban (CPI-U). The CPI-U, while valu-
college costs. This index tracks college faculty
York University, developed data that showed
able as an inflationary metric, is not necessar-
and staff compensation; salaries and benefits
costs in service-related businesses rise faster
ily a perfect match for inflation for indepen-
for nonprofessional personnel; contracted
than those in product-oriented industries
dent schools. The CPI-U is based on prices
services; library acquisitions; and utilities
because service-related businesses are heavily
contained in a market basket of goods that are
– similar in ways to many of the goods and
labor-intensive with little opportunity for growth
production-oriented. Costs in service-related
services purchased by independent schools.
in productivity. Thus, to maintain an equivalent
organizations, like Collegiate School, tend to
Over the past few decades, the HEPI has been,
operation, year-to-year, ISM recommends that
rise faster than those in product-oriented in-
on average, 1 percent greater than the CPI-U,
schools use a factor that is at least 2% greater
Inflationary Factors Over Time
Inflation as a Factor in 2016-17 For 2016-17, the CPI-U is pro-
6.00% 2% FACTOR PROJECTED
5.00%
4.00% HEPI PROJECTED
3.00%
CPI-U PROJECTED
2.00%
jected to be 2 percent. The HEPI
0.00% 07
08
09
10
11
12
13
14
16
17
$24,000
$22,000
$20,000 $18,000
higher than the CPI-U, or 2.36
$16,000
percent and the 2 Percent Factor
$14,000
is therefore projected to be 4
$12,000
percent. Using these inputs as
$10,000
the goal is to attempt to keep the 15
$26,000
is estimated at about .36 percent
factors in our decision-making,
1.00%
$28,000
2016-17 tuition increase within these inflationary ranges.
than inflation (CPI-U) to cover the additional inflation that comes with schools.
We study carefully these three indices, and it is our goal to keep tuition increases within these inflationary ranges.
COMPENSATION Another factor that is important in setting tuition is compensation. Our school has long been committed to attracting and retaining the very best educators to work with your children. It is one of our most important strategic
Market Tuition at Entry Points 2015-16 Collegiate
School 1
School 2
School 3
School 4
$28,000 $26,000 $24,310
$24,000
$22,750
$22,000 $20,000
$20,460
$18,000 $16,000 $14,000 $12,000 $10,000
goals. As highlighted in the recently
Kindergarten
Grade 5
Grade 9
issued report Collegiate School’s Operating Budget: Where the Money Comes
independent school market. Finally, Collegiate
strategic objectives, competitive compensation
From and Where It Goes, published in January
studies data collected by INDEX4, a national
remains a high priority and is an essential fac-
2016, you will recall that nearly 70 percent of
benchmark group of 50 co-ed day schools. In
tor when considering tuition levels.
the School’s expenses are for the salaries and
our analysis, cost-of-living adjustments are
benefits of our faculty and staff; thus, compen-
made where appropriate.
sation is our major budget driver.
MARKET POSITION We are very deliberate in ensuring that Colle-
We consider all of this benchmark data when The School uses local, regional, and national
giate School’s tuition, especially at entry points,
evaluating our faculty salaries, benefits and
benchmarks to make certain that our faculty is
is competitive relative to the local market. For
overall compensation. Using this approach, our
competitively compensated. We study carefully
example, the above graph depicts how Col-
efforts over the years to compensate Collegiate
the local market, ensuring that we are competi-
legiate compares in the current year relative
faculty competitively have worked well and in
tive with local public school systems. We utilize
to several local independent schools. We also
aggregate, our faculty is well positioned rela-
data from the Virginia Association of Indepen-
use our INDEX benchmark group to understand
tive to our benchmarks. Because attracting and
dent Schools (VAIS) to understand Virginia’s
tuition nationally, especially for those peer
retaining faculty is one of our most important
schools offering comparable programs.
1 https://www.commonfund.org/commonfund-institute/higher-education-price-index-hepi/ 2 Independent School Management, Ideas & Perspectives, Vol. 40 No. 11, “Appropriate Tuition Adjustment: Recasting Financial Figures, 2015–16,” Fall 2015. 3 Ibid. 4 Independent School Data Exchange (INDEX)
2016-17 Tuition Increases and Operating Budget With tuition increases of less than 2.8%, the 2016-17 operating budget earmarks 100% of those increases to support the important goal of attracting and retaining the very best educators to work with your children. In addition, the budget now supports several other important strategic initiatives, including: increasing JK-12 STEAM
Questions?
opportunities supporting the develop-
As always, we welcome ques-
ment of a capstone experi-
tions regarding the School’s
ence in all divisions
finances. Should you have any
developing a comprehen-
questions about this report or
sive JK-12 Responsible
about Collegiate School’s financ-
Citizenship curriculum
es in general, please contact Phyllis Palmiero, Vice President for Finance & Administration at ppalmiero@collegiate-va.org or 804.741.9799.
providing academic enhancements JK-12 including support for instructional technology, curriculum development, college counseling and the Outdoor Collegiate program, and providing for additional sections of foreign language developing an enterprise-wide, integrated data management system supporting the School’s 10-year reaccreditation improving campus safety and security enhancing cyber security
IN SUMMARY, WE BELIEVE THAT WE HAVE: examined carefully school operations, including tuition and expenses, while remaining steadfast in supporting our strategic priorities; provided our families with more predictability by utilizing an overall tuition pricing approach more closely linked to inflation; and minimized the use of new tuition dollars to fund new initiatives by working to reduce current program and other expenses, and using these savings, together with funds from other sources, to fund new strategic initiatives.