How to pay for Catholic schools.

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.

Not too many years ago, eight teachers, a principal, and a secretary staffed the school. In many schools, one teacher instructed a class in all subjects. No longer. Over the years, the teacher-to-student ratio has fallen, from 1 to 23.56 in 1980 to 1 to 17.75 in 1993 (see, table). In pursuit of quality education, teachers have specialized and the number of courses offered has increased. Classes in computers and music are now mandatory. Academic test scores suggest that the strategy has been successful.

Despite these successes, Catholic schools keep closing. Smaller parishes especially can no longer afford them. The flaw in the present financial arrangement lies not only with its reliance on the parish subsidy but also with its dependence on tuition as a primary source of revenue. In 1980, school tuition represented 2.3 percent of gross household income (about $490 for the year) for a family with children in a Catholic elementary school. By 1993, the average Catholic school household paid $1,470 in tuition. or 3.6 percent of its gross household income. This increased burden has meant that fewer and fewer households have been able to participate in Catholic schools.

The present funding model for Catholic elementary schools needs to be fixed. Parishes can no longer keep subsidizing schools at historic levels and tuition increases are pricing out too many families who might send their children to Catholic schools.

Any new model for funding Catholic schools must include three basic elements: First, new funding appeals must seriously challenge all Catholic households; second, Catholic schools, particularly those in the inner cities, must seek support from the business community; and third, Catholics must actively seek government help for parents in the form of tuition vouchers.

The first step is for parishes to set goals to double their Sunday collections and to use at least 25 percent of the increased revenue to subsidize the school. This may sound like a pipe dream, but such a goal is realizable. There were an estimated 18.2 million households registered in Catholic parishes in 1991. Catholic household income, on average, was $40,879, and the aggregate Catholic household income was an estimated $744 billion. The total Sunday collection, however, was only $4.6 billion, or .6 percent of household income. By doubling the Sunday collection, Catholic parish finances (and schools) would get a tremendous boost. Yet doing so would only lift the Catholic giving rate to the level of most Protestant churches.

The second ingredient of any successful financial solution for Catholic elementary schools would include greater support from the business community. One such program exists in Kansas City, Missouri. It is called the Central City School Fund, and it helps provide funding for six inner-city elementary schools and one high school. The diocese annually provides $800,000 and a board of directors raises $900,000 from the local business community. The combined program provides for about 30 percent of the schools, budgets.

The final element in maintaining and enhancing the Catholic school system involves government support in the form of tuition vouchers. Vouchers afford an avenue to gradually restructure Catholic school finances to truly include all--both the poor and the wealthy--who want this opportunity for their children. Such efforts are making headway in some states, but church-state questions and court challenges are impeding movement on this front. State legislatures in Pennsylvania, Ohio, and Wisconsin recently considered and, in two states, Ohio and Wisconsin, voted to implement programs that could change the fiscal structure of Catholic schools.

Proponents of a successful voucher effort in Ohio targeted low-income students in Cleveland in a pilot project to give disadvantaged students an equal opportunity to participate in private education. Qualifying students will receive a scholarship not to exceed the lesser of $2,500 or the tuition of the alternative school. The Ohio state legislature allocated approximately $5 million for the program to begin in 1996.

A program passed this year by the Wisconsin legislature developed from existing voucher efforts in Milwaukee. The new voucher program differed from these previous efforts in that religious schools would be included. The new program was to expand coverage to about 7,250 students this fall and 15,700 students in 1996. Legislators allocated $19 million for the first year of the program and $38 million for 1996.

After Governor Tommy Thompson signed the legislation the American Civil Liberties Union filed suit, challenging the plan on constitutional grounds. In late August, the Wisconsin Supreme Court granted an injunction to suspend payments on the program until the court resolves the issue of whether such payments are constitutional. Dan McKinley, executive director of PAVE (Parents Advancing Values in Education), Milwaukee Mayor John Norquist, and a number of business leaders have challenged the community to raise funds to keep the voucher program afloat while the court test proceeds.

Catholic schools not only succeed where many public programs fail; they also provide effective religious education and impart both values and beliefs. All evidence points to the conclusion that Catholic schools will continue to be successful in these areas. But to maintain their strength and viability, the limits of the present parish-based funding model will have to be addressed and remedied. We need to consider new options that will allow as many Catholics as possible the opportunity to attend these schools.

    Staff Sizes and Pupil Teacher Ratios
       in Catholic Elementary Schools
             in the United States
              1980-81 & 1993-94
                        1980-81        1993-94
Religious Staff          24,898         10,982
Lay Teachers             71,841        100,400
Total Staff              96,739        112,199
Enrollment            2,279,639      1,992,183
                         (PK-8)         (PK-8)
Pupil-Teacher Ratio       23.56          17.75

Joseph Claude Harris is a research analyst living in Seattle, Washington. His work has been under written by a grant from the Lilly Endowment. This article is adapted from a chapter in his forthcoming book, The Cost of Catholic Parishes and Schools (Sheed and Ward).