How to pay for Catholic schools

Commonweal, Oct 6, 1995 by Joseph Claude Harris

What has been happening to Catholic elementary schools doesn't seem to make sense. Although they are among the nation's most successful and efficient educational institutions, they keep closing their doors. The number of elementary schools dropped from 7,937 in 1983 to 7,114 in 1993. Why is this happening? What business discontinues a successful product line or service?

The gradual decline in the number of Catholic elementary schools in this country arises from a variety of factors. The traditional staffing model--where a cohort of religious sisters taught the sons and daughters of immigrants--is a thing of the past. Today, lay teachers instruct student bodies that include, on average, about 13 percent non-Catholic enrollment. This social evolution may have weakened the rationale for maintaining parish schools. Furthermore, the deterioration of urban centers and the flight of large numbers of Catholics to the safer, more congenial suburbs, caused many Catholic schools to close.

But the most telling reason for school closures is that the traditional economic model--where an individual parish subsidized a single school--no longer works. In 1969, individual parishes paid 63 percent of their elementary schools, bills. Today, they cover only about 33 percent of those costs. But shrinking parish support comes not from a lack of generosity on the part of pastors and parish councils. Rather, parish support accounts for less of the school budget because schools now cost more to run than all the other parish functions.

If Catholic schools are to continue to operate in this changed environment, a set of new funding approaches must be found. First, however, we need to analyze why Catholic elementary school costs have increased dramatically. In 1980, the average parish elementary school operated with a budget of $184,372. In 1993, the cost to run the same school was $547,838 (see, graph). The total cost increase amounted to $363,466. One-third of the increase ($138,950) can be attributed to inflation. But the other two-thirds or $224,516 was the result of growth in expenses.

Another way to look at the situation is to consider that, on average, parishes lack new revenue sufficient to meet the expanded need of school finances. Since 1980, school expenses have grown at an average annual rate of 8.7 percent. During the same period, however, total parish revenue grew at an annual rate of only about 3.1 percent (see, graph). Whereas the average parish's fiscal resources did increase by $169,538 between 1980 and 1993, school expenses shot up $363,466. As a result, the parish school subsidy, while it tended to increase as a share of the parish budget, decreased dramatically as a portion of the school budget. Simply put, to have kept pace with the subsidy it was granting its school in 1980, the average parish in 1993 would have had to provide the school with an extra $174,463. To date, no one has adequately addressed this shortfall in the traditional parish-funding model.

Rising prices in excess of inflation normally spell trouble for a business. For example, when health-care costs increase at about three times the rate of inflation, as they have done in the United States in recent years, businesses take money that would have been spent for other purposes and apply it to medical expenses. In the commercial world, this money can only come either from the profit margin or from customers in the form of higher prices. Squeeze the profit margin and the shareholders complain; but raise prices and you risk the loss of sales revenue. Catholic schools face a similar dilemma. While their aim is not to make a profit but to provide a good education, when the cost of doing so keeps going up and the parish subsidy is not able to keep pace, tuition prices are bound to rise. This forces some of those who would like their children to attend such schools to stop "buying the product."

A review of enrollment data in Catholic elementary schools indicates that these schools have been losing market share in recent years. The decline in market share for Catholic elementary schools has happened at the same time as enrollment in Catholic elementary schools has stabilized. There were 1.883 million students enrolled in Catholic elementary schools, K-8, in 1990. By 1993, enrollment dropped slightly to 1.859 million. Yet the total elementary population in the United States had grown from 31.99 million in 1990 to 33.42 million in 1993. The proportion of students in Catholic elementary schools relative to the total population has been gradually eroding. Had Catholic schools attracted the same proportion of the elementary population in 1993 that they had in 1990, there would have been an additional 107,854 students in Catholic elementary schools in 1993, enough to fill 413 average schools.

There is another important factor in why some Catholic elementary schools have been closing their doors and fewer new Catholic schools have been opening. Between 1980 and 1993, the average parish school invested $224,516 beyond the cost of inflation to fund program revisions and to pay for other expenses, many of which were unavoidable (energy, insurance, pension benefits, etc.). But others were by design.