Four or five years ago, when I read the first draft of the manuscript that would become the recently published book, Mind the Gap!, by Richard J. Soghoian, head of the coeducational K–12 Columbia Grammar and Preparatory School (New York), I was so taken by his unique financial management philosophy that I had visions of connecting Soghoian with leaders in the independent school world to spread his message.
In the years since, I had forgotten all about the possibility of the actual book. I had also moved away from the independent school world through retirement. So this fall, when Soghoian contacted me with news of the publication of Mind the Gap!, I was thrilled all over again — and read the book in two happy sittings.
Although Soghoian started to write this book simply as a guide for his future successor, he passionately sells his financial management philosophy as far superior to those traditionally practiced by independent schools. As he articulates his budgeting process and fiscal management philosophy, he methodically explains how the school he assumed the leadership of in 1981 was in huge debt with dwindling enrollment, and how it was turned around through his nontraditional financial management principles.
Mind the Gap! is divided into three parts. Part I is devoted to detailing the process of ensuring his school’s financial solvency, while Soghoian presided over the ongoing expansion of its physical plant.
In Part II, he makes the case for the importance — and possibility — of operating independent schools without an annual fund. His school, by way of example, offers highly competitive faculty and administrator compensation; this academic year, the beginning teacher salary is $70,000 with full benefits. Using a lean administration and streamlined structure for efficient and effective operation, the school avoids layers of bureaucracy and is able to compensate the administration well. Soghoian accomplishes this without an “annual fund,” operating on tuition income alone, without incurring any operating deficit. On the other hand, all capital improvements in his school — facility renovation and new building construction — have been realized through fund-raising targeted to specific projects.
Soghoian laments that most schools — for that matter, even most colleges and universities — operate with the notion that tuition income cannot meet the needs of operating expenses; therefore, X amount of dollars must be raised through an annual fund to close the gap between tuition income and operating expenses. He warns that the larger the budgeted annual fund income, the more likely the school will eventually face the equivalent of long-term debt when the annual-fund goal goes unmet.
Unlike most leaders of schools, colleges, and nonprofit organizations, who believe in endowment and feel financially secure with substantial savings, Soghoian thinks contrarily. He believes that schools with endowments, rather than saving more, end up spending more money than they would have without the endowment. Endowment funds can hinder a school’s financial footing and invariably drive up the tuition rate as operating expenses of endowments outpace endowment income over time. He is emphatic that the long-term financial security of any school is always based on operating with a balanced budget — based solely on tuition income without a so-called “gap,” which must then be closed through a combination of annual giving and endowment income.
In Part III, Soghoian concludes by listing and explaining his 12 principles of financial and school management, pitching “A New Paradigm for Private Schools.”
Without question, Soghoian, throughout his 31-year tenure at Columbia Grammar, has been successful in applying his 12 principles. This academic year, Columbia Grammar’s operating budget is $54 million, which is solely based on tuition income from 1,290 students. He is in the midst of soliciting $16 million over the next two years to fund a building project to create a self-contained middle school. The school today has a physical plant valued at over $250 million, with no debt and the highest starting teacher salaries in New York City, public or private, and it operates a balanced budget on tuition alone — without charging any more than the average K–12 New York City independent school (currently from $38,190 per year for preschool to $40,140 for 12th grade) — supported by $5 million in financial aid.
Could other schools practice these 12 principles and achieve similar results: financial solvency and fully funded capital projects? Could private schools manage their operating budget with tuition income and a lean administration? Columbia Grammar, located in the heart of a booming West Side Manhattan neighborhood, draws on an affluent parent body that is able to contribute $7 or $8 million towards capital projects. What about the majority of independent schools whose parent income levels are such that the full tuition payment is just about all they can afford? Could those schools manage their finances by following Soghoian’s principles?
Mind the Gap! is a must-read book for school heads, business managers, and boards. It deserves the attention of all independent schools and should generate serious discussions about our approach to school financing.