TIDINGS J A N U A R Y
"The
State
of
Lexington
Christian
2 0 1 9
Academy"
LETTER FROM HEAD OF SCHOOL
Dear LCA Family and Friends, Greetings and welcome to the third issue of Tidings. This month of new beginnings is an ideal time to reflect on Lexington Christian Academy’s incredible journey thus far and to look forward to the next exciting chapters. God has immeasurably blessed us for three decades, yet we have only begun to taste the riches of His good plans for this school. Our focus in this edition is on the financial affairs of LCA and those considerations uniquely related to Christian schools. Independent Christian schools by nature are really a mix of three often quite different types of entities with seemingly very different missions:
Ministry
School
Business
Ministerial organizations rely heavily on volunteer resources and funding, usually expecting extraordinary sacrifices of time and treasure from their employees as part of experiencing mission fulfillment. Educational institutions historically operate quite bureaucratically, are typically slow to innovate and not often incented for efficiency. Commercial enterprises, by their very nature, have a for-profit motivation that frequently overrides other altruistic considerations. Despite these ostensibly contradicting styles and missions, LCA must strive for excellence in every area. We certainly will never turn from our sacred mission or fail to provide world-class education, but we will strive to do all things with exceptional acumen. Like any great business, LCA will steward our brand, maintain a superb culture, rightly manage finances and build trust with each constituency group. As you explore the following pages, your enhanced understanding of Lexington Christian Academy’s fiscal operations will hopefully bring a greater appreciation for the professionals in our Central Business Office and their strong support from knowledgeable and interested parents serving on the Finance Committee and Board of Directors. Let us know if you feel called to contribute in this area or have suggestions on ways we can continuously improve. Grace & Peace!
Mark Mr. Mark D. Sisk Head of School
"For which of you, wanting to build a tower, doesn't first sit
BASIC BUDGETING PRINCIPLES
down and calculate the cost to see if he has enough to complete it?" Luke 14:28 HCSB
LCA’s Board and Leadership Team relies heavily on a rigorous budgeting cycle to ensure great accountability and stewardship of every dollar invested in our mission. The overall process is fairly straightforward with three key interrelated assumptions predominantly dictating the outcome:
Enrollment x Tuition - Compensation Enrollment projections involve both art and science, affected by many variables which have a massive impact on bottom line results. Over the past decade, student levels in Kentucky private elementary/secondary schools have dropped 11%. Nationally, Christian school enrollment for several years has been declining annually about 3-4%. After peaking in 2005, LCA experienced similar decreases, most notably in preschool and the elementary grades. Though enrollment has remained steady the past few years, current year enrollment is down 6.7%, generating a sizable budget hurdle. Tuition rates should be set each year sufficient to cover the expected ‘hard’ costs of educating our students. However, to keep published rates as low as possible, most schools budget a ‘gap’ and then seek to augment the difference with development, fundraising and other income. The result can often lead to a false understanding of the actual costs required to educate our students. Compensation is by far the biggest cost incurred in schooling and its very nature actually makes the model inherently unaffordable. Unlike most businesses, there are few opportunities to leverage this expense with technology or innovation, meaning that cost will inevitably rise each year. The Association of Christian Schools International accurately states, “The long-term result is that many of those schools thought to be in good financial condition, significantly underpay their people to meet their budgets.”
Teacher Compensation Percentage has remained fairly consistent through the years at LCA and most Christian schools around the country.
BASIC BUDGETING PRINCIPLES
Public schools draw revenue from a broad general population tax base. In the larger states and major metropolitan areas, salaries for these teachers are considerably higher than national average. Kentucky public school teachers are close to the mean, but Lexington-Fayette County is substantially above these norms. These factors further challenge us to be competitive in our market area.
Public School Teacher Pay
One other important aspect of the budget cycle to consider is the impact of timing. Educators in both the public and private arena generally work from contract cycles coinciding with the school year. Thus, before we offer employment agreements each spring, it is imperative to undergo a scrupulous re-enrollment process to gauge headcount needs for the upcoming year. That is why our families sign a Statement of Financial Agreement, reserving a seat for each returning student while binding commitments from families to ensure that tuition revenue will be sufficient to compensate faculty and staff. While there are a few unusual circumstances that release the obligation, our Central Business Office must strictly adhere to school policy on the types of withdrawal exceptions that are allowable.
REVENUE
Tuition and fees make up more than 90% of LCA’s revenue each year. These are augmented by other income from extended care programs, the Spirit Store, facilities rental, etc. Athletics fees and related auxiliary income are generally planned at levels that offset direct program costs, minimizing the overhead burden impacting the school’s operating budget. Finally, advancement activities (Annual Fund, Development, Business Partners, etc.) help close the ‘gap’ each year as we strive to balance the budget.
Revenue
Advancement
Auxiliary Income
Tuition & Fees, net
Through the years, setting tuition rates has been one of the greatest challenges for our leadership. Like any business, we must be cognizant of market conditions and recognize there are more alternatives today for families than ever before. We must also appreciate our heritage and culture shaped by parents that sacrificed to prioritize instilling Christ-centered education into their children. Ultimately, though this choice may not be ‘affordable’ to everyone, our goal is to make it as accessible to as many like-minded families as possible.
REVENUE
Strategically, LCA desires to enhance certain pillars of sustainable revenue:
C harge What it Costs
When we underprice the great education LCA provides, the subtle message is that it is of less value. We should not apologize for charging what it costs when we are delivering our services efficiently. Luke 10:7 reminds us that the worker is worthy of his wages and we must be committed to bolstering pay for our educators.
Fundraise for Specific Projects
We have been blessed each year with partners and patrons generously supporting the school in many great ways – the 6th Grade Academy, transportation vehicles and athletic equipment are just a few recent examples. While those initiatives have helped the school tremendously and tend to happen each year, they should only be counted upon above and beyond the regular operating budget.
Capital Campaigns for Major Long-Term Initiatives
Ongoing, steady budgeting excellence is primary but will not enable us to pursue all of the dreams and visions God may have in store for Lexington Christian Academy. Certain large projects under discussion warrant a multi-year funding approach based on the commitments of our various supporters. Many of these initiatives have focused on our Rose Campus including athletics fields & infrastructure, safety & security, and architectural enhancements. Programmatic endeavors considered include a Digital Education Institute and dedicated centers of excellence (e.g., law, engineering, biomedical, etc.). Certainly debt retirement and major expansions to our endowments would generate much-needed funding in perpetuity. All of these depend on regenerating long-term commitments that exceed current annual operating requirements.
Foster a Culture of Giving
We must always show gratitude for our material blessings through our benevolence toward others less fortunate. This is not only good for us personally, but sets an indelible example in the hearts of our children. We stand out in a dark world as they see this ministry aspect of LCA, especially in the substantial tuition assistance we provide. Our hope is that LCA’s faithful stewardship inspires generations to support the school through planned giving programs and with their estates.
EXPENSE
As already noted, Personnel costs are by far the most substantial expense incurred in the school, representing about three-fourths of total expenditures. These include salaries for our employees as well as the related payroll taxes, medical insurance, and other benefits. Like most other organizations, LCA has struggled in the last few years to provide economical, high-quality healthcare coverage for our people at a time when those costs are rising dramatically.
Facilities
Operations
Personnel
The most significant expenses in Operations include: • Instructional Materials & Supplies • Information Technology • Professional Development/Accreditation • General & Administrative (e.g., insurance, printing, etc.) While LCA is nationally known for its incredible Facilities, it takes a vast amount of resources to properly steward a 200,000+ square foot building situated on 75 acres. Our long-standing partnership with Immanuel Baptist Church for a consolidated preschool through elementary campus provides not only missional harmony but also excellent economies of scale. Nevertheless, annual obligations require funding for ongoing depreciation and capital expenditures, as well as varying levels of expense for repair, replacement, maintenance, safety and security.
"You will be enriched in every way for all generosity, which
SUMMARY
produces thanksgiving to God through us." II Corinthians 9:11 HCSB
Just as with our personal budgets, everything ultimately comes down to how much cash flow is available at any given time to pay for large outflows. LCA holds segregated funds for tuition assistance and teacher compensation endowments, and also must maintain substantial cash reserves to satisfy debt covenants. The school’s total longterm debt of nearly $9 million is only a fraction of the value of our total assets but nevertheless requires about $1 million in debt service each year to cover the principal and interest payments. Taking into consideration all of the above-mentioned factors, the initial budget projections for next year currently reflect revenue and expense in the range of $12-13 million with a small surplus in cash flow.
Managing the finances for Lexington Christian Academy is a challenging but important task. While the fundamentals of budgeting are simple, creating and executing the budget is hard. Fortunately, as families in support of LCA’s noble mission, our charitable actions have a direct impact on our ability to attract and maintain outstanding educators while keeping tuition at the most economical levels possible. Thank you for taking time to understand these principles and for your continuing support of His school.
HOW CAN I MAKE A DIFFERENCE?
Every gift to LCA makes a difference. Your support fuels LCA's mission and you will see your gift making a difference each day in blessing the lives of our students and teachers. We offer a variety of ways to give of your time, talent, and financial resources in order to manifest your passions; but undergirding all of that, we ask you to continuously pray for the school, its administration, faculty, students and families. Volunteering LCA is committed to involving parents, grandparents, and guardians in their child’s school experience. Our school would not function without your faithful giving of your time and we are so grateful for your willingness to serve as a volunteer. We believe this gives you an opportunity to teach your child—through your example—how to love and serve the Lord, as you volunteer in your child’s school and classroom. There are so many events, activities, and functions that occur throughout the school year, and we need people to plan, coordinate, and staff them. No matter how big or small, every volunteer position is important. Whether you have a lot of time to give or just a little, there is a way to be involved in the LCA community. For more information, please contact your child’s principal. Annual Fund As already outlined, the purpose of the Annual Fund is to help LCA cover the gap between tuition and actual costs. In addition, these funds provide resources for program enhancements, facility improvements, and technology infrastructure. Endowment An endowment is a donation of money or property to a non-profit organization, which preserves the gift for posterity and uses the resultant income for a specific purpose. LCA endowments presently generate income and investment gains to support teacher compensation and tuition assistance. Planned Giving Many people who have given to Christian organizations throughout their lifetimes want to make sure that part of their estate will continue to support these causes when they are gone. To learn more about LCA’s planned giving program, please contact the Advancement Office. Partners & Patrons Program LCA is pleased to offer the “Partners and Patrons” program, which allows businesses or families to support the school’s mission and programs. Donations can be applied to the area of greatest need or designated toward specific programs. We are deeply grateful for those entities that have participated for many years and our Advancement Office would welcome the chance to meet and discuss these possibilities.
HOW CAN I MAKE A DIFFERENCE?
Matching Gift Program Many organizations have corporate matching gift programs that can double and sometimes triple the value of your gift. If your company has a matching gift program, please ask your human resources representative for a matching gift form to submit with your gift. The LCA Advancement Office will take care of the rest. Methods to Give: • Mail a donation (check or cash) to the Advancement Office • Call 859-422-5721 and donate via credit card • Donate via the school’s website at www.lexingtonchristian.org • Text 859-600-6625 to give by mobile device • Securities (stock) donations for great tax benefits • Schedule an appointment to meet with the Head of School or a member of the Advancement & Development Team
We appreciate the support you give to LCA. Our desire is that you will be blessed in your giving as Paul said to the Corinthians, “Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that in all things at all times, having all that you need, you will abound in every good work.” 2 Corinthians 9:7-8