How Annual Tuition is Determined

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.